Harry L. Davis and Russ W. Rosenzweig

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Large companies struggle with innovation.
The cause is not a lack of resources or even a company’s commitment to innovation. The fundamental reason is that the requirements for successful innovation are most often at cross-purposes with those of the existing business. One approach has been to get out of the innovation business entirely--via acquisitions or equity stakes in strategically promising start-ups. Another approach has been to create "separate" innovation teams within the existing structure with the idea that one can manage two organizations in one -- i.e. one focused on today’s business; the other on future business.

In this article we use theater as a metaphor to present a new approach, which is to outsource certain components of the innovation process and at the same time to use the knowledge and skills of existing employees as part of a larger creative community. This approach avoids some of the downsides of the other approaches -- i.e. merging cultures, finding synergies, keeping talented people, obtaining fresh thinking, working on executable ideas, moving with haste, etc. This new approach is also event-based and calls for a series of tryouts, practices, rehearsals, and performances around new business strategies and business plans. We call this new approach the "Internal Venture Marketplace."

Running the core business well requires masterful performance: a well-written script that fits the strategy; directors who know how to stage the production; actors who are skillful in performing their roles; a known audience. In many ways, the core business is like conventional theater because it employs a known script, has a low variance across performances, and emphasizes predictable, well-understood themes.

The tension between the core business and the "promising startup within" (i.e., internal corporate venturing) exists because the two paradigms are very different and often considered unable to coexist. Continuing with our theater metaphor, the promising startup within resembles "Theater of the Absurd." Many people (especially business types) have difficulty grasping the concept of Theater of the Absurd and this is in a sense why internal corporate venturing has not enjoyed a successful track record in the past. Theater of the Absurd and new venture creation share the following characteristics:

• Neither a clear beginning or ending
  
• High variance from one performance to the next
  
• Incoherent dialogue
  
• Unrecognizable characters
  
• No clear story or plot
  
• "Writers" who view themselves as outsiders
  
• Out of harmony with conventional assumptions and certitudes
  

Much of the dotcom-era management literature on corporate venturing describes the need to "recast" the organization and create a new, more venturesome climate that is more like Internet startups and resembles Theater of the Absurd. In our view, the new agenda is not about a permanent change from one state (conventional theater) to another (Theater of the Absurd) and it’s not about eliminating current strengths, policies and people. Rather, the new agenda is about expanding a company’s performance repertoire and learning how and when to shift among alternative identities (i.e., becoming "street smart.") The two states (retaining operational excellence in the core business and embarking on venture capital quality corporate ventures) must peacefully co-exist and honor each other.

We believe there is a better, less dramatic and more achievable approach to internal corporate venturing. In fact, we believe that the firm should reconceptualize itself as a "repertory theater" with its own permanent set of actors, directors and designers. The repertory theater performs both Shakespeare and Becket and is equally at home with each. This is done by 1) creating new spaces that encourage new perspectives, 2) creating new events that bring new organizational scripts to life, and 3) creating new roles that can mount new productions.