Week 6 CHAPTER DISCUSSIONS
What are the differences between corporate venturing and new product development?
The difference between the corporate venturing and new product development is that corporate venturing i
...
Week 6 CHAPTER DISCUSSIONS
What are the differences between corporate venturing and new product development?
The difference between the corporate venturing and new product development is that corporate venturing involves direct investment of corporate funds directly in external startup companies. (Chesbrough, Henry.2002) while New product development is investing the funds in producing the new product for the existing business via R&D in the company. New product development is described broadly as the transformation of a market opportunity into a product available for sale. The product can be tangible (something physical which one can touch) or intangible (like a service, experience, or belief), though sometimes services and other processes are distinguished from "products." NPD requires an understanding of customer needs and wants, the competitive environment, and the nature of the market (Kahn, Kenneth B.,2012).
There are also differences in both based on the stages of process: 1- stages for financing the corporate venture:
The Seed Stage
Venture capital financing starts with the seed-stage when the company is often little more than an idea for a product or service that has the potential to develop into a successful business down the road. Entrepreneurs spend most of this stage convincing investors that their ideas represent a viable investment opportunity. Funding amounts in the seed stage are generally small, and are largely used for things like marketing research, product development, and business expansion, with the goal of creating a prototype to attract additional investors in later funding rounds.
b. The Startup Stage
In the startup stage, companies have typically completed research and development and devised a business plan, and are now ready to begin advertising and marketing their product or service to potential customers. Typically, the company has a prototype to show investors, but has not yet sold any products. At this stage, businesses need a larger infusion of cash to fine tune their products and services, expand their personnel, and conducting any remaining research necessary to support an official business launch.
The First Stage
Sometimes also called the “emerging stage,” first stage financing typically coincides with the company’s market launch, when the company is finally about to start seeing a profit. Funds from this phase of a venture capital financing typically go to actual product manufacturing and sales, as well as increased marketing. To achieve an official launch, businesses usually need a much bigger capital investment, so the funding amounts in this stage tend to be much higher than in previous stages.
The Expansion Stage
Also commonly referred to as the second or third stages, the expansion stage is when the company is seeing exponential growth and needs additional funding to keep up with the demands. Because the business likely already has a commercially viable product and is starting to see some profitability, venture capital funding in the emerging stage is largely used to grow the business even further through market expansion and product diversification.
The Bridge Stage
The final stage of venture capital financing, the bridge stage is when companies have reached maturity. Funding obtained here is typically used to support activities like mergers, acquisitions, or IPOs. The bridge state is essentially a transition to the company being a full-fledged, viable business. At this time, many investors choose to sell their shares and end their relationship with the company, often receiving a significant return on their investments.
2- Stages for New product Development:
New Product Strategy – Innovators have clearly defined their goals and objectives for the new product.
Idea Generation – Collective brainstorming through internal and external sources.
Screening – Condense the number of brainstormed ideas.
Concept Testing – Structure an idea into a detailed concept.
Business Analysis – Understand the cost and profits of the new product and determining if they meet company objectives.
Product Development – Developing the product.
Market Testing – Marketing mix is tested through a trial run of the product.
Commercialization – Introducing the product to the public.
For example, Amazon Company has invested billions of dollars in entering in to the venture of selling grocery and its delivery Via acquiring Whole foods company. (Bhattarai, Abha,2017). While Apple company Invest Money or fund into R&D to develop new products which can give Apple market leadership.
References-
1- Chesbrough, H. (2014, August 01). Making Sense of Corporate Venture Capital.
Retrieved from https://hbr.org/2002/03/making-sense-of-corporate-venture-capital 2- Kahn, K. B. (2013). The PDMA handbook of new product development(3rd ed.).
Retrieved from file:///C:/Users/TEST/Downloads/18493199.pdf
3- Bhattarai, A. (2017, August 23). FTC clears Amazon.com purchase of Whole Foods. Retrieved from https://www.washingtonpost.com/news/business/wp/2017/08/23/ftc- clears-amazon-com-purchase-of-whole-foods/?utm_term=.e2b32e7266fa
4- Intelligence, B. I. (2017, February 17). Apple's CFO explains the company's $10 billion
R&D budget. Retrieved from https://www.businessinsider.com/apples-cfo-explains-the- companys-10-billion-rd-budget-2017-2
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