Large companies tend to consider new products and services through the lens of their current business model. For projects that align well with the current business model, this works well. However, many of the Xerox spinoff projects were only able to create value once their founders moved away from Xerox’s copier and printer business model. Venture Capitalists do not have a dominant business model, because they don’t make anything (except investments). This frees them to evaluate new technology projects from a business-model-agnostic point of view.
When supporting the success of their individual portfolio companies, VCs conceive a diverse set of models and ultimately adopt one that aligns the venture’s capabilities with the market’s demand. By contrast corporations search for projects that fit with the logic of their current business model, and discount the value of projects that don’t fit with that model. For such projects, companies should adopt a more VC-like perspective. Only when organizations use a broader mindset in developing business models, will they be able to fully realize the potential of the technology and products developed by their employees.
For more information, see chapter 3 in Open Innovation (HBSP, 2003) by Henry Chesbrough.