How do we choose where a new venture sits in its value network?

When a mature company starts a new venture, one of the most consequential strategy choices is often made before anyone notices it is a choice. The venture takes the same place in the value chain, or more accurately the value network, that the core business occupies. It is assumed to sell to the same layer of customer, through the same kinds of channels, with the same sales model, against the competitors the company already knows.

Nobody decided that. It was assumed for the venture, because that is how the core business works and everyone unconsciously assumes it is the only option.

A position in the value network is not a single choice. It carries a set of other choices with it, and each of them can have significant implications for both the potential of the venture and its chances of succeeding.

A value network position is a bundle of choices

Where a business sits in its value network determines who it sells to directly, which is not always the end customer. It shapes which channels are worth considering, which companies it competes with head to head, and what sales model fits. Change the position and most of those change with it.

Earlier in this series we described how a new venture unwittingly inherits strategy choices from the core business: built in house, carrying the company brand, sold through the existing channel to something like the existing customer. Several of those are not independent defaults. They hang off one upstream choice, the position, which is why they tend to arrive together and go unexamined together.

Consider a company that makes a component used in other manufacturers’ equipment, and a venture that would sell a complete system built around that component directly to the businesses that operate the equipment. The end user may be exactly the same. Almost everything else moves. The direct customer is no longer an equipment maker’s engineering and purchasing team but an operator with a different buying process and different priorities. The competitors are no longer only other component suppliers. They now include the equipment makers who are the company’s current customers. The channel has to reach many more buyers than a set of direct accounts, and the sales model changes with it.

None of that makes the move wrong. It makes it a different strategy and a different business, and each of those differences deserves to be chosen and considered rather than discovered.

The same logic runs in reverse. A venture that stays in the core’s position by default may never consider a position that fits its customers, its economics or its solution better, including business models the core’s position rules out.

Staying close or moving away: both have costs

There can be good reasons to keep a venture close to the core business’s position. Existing customer relationships, channels, sales teams and brand are real assets, and a venture that can use them starts with advantages a standalone startup would have to build.

Staying close can also make things harder. A channel built for the core’s products may not know how to sell something new, or may have no incentive to. Selling to the same layer can confine the solution to what that layer is able to buy, when the real problem sits somewhere else in the network. And a position chosen because it fits the core can put the venture up against competitors who are better placed, or keep it away from where the value is actually created.

Moving away has its own cost, and it falls inside the company. Each element a venture changes from the core’s position is one the company’s resources, processes and priorities were not built for. A different customer layer needs different sales skills, a different channel needs different partner management, and a different business model can conflict with the metrics the core business is run on. One or two departures can be absorbed. Many at once can leave a venture misaligned with the organization that is supposed to support it. We call this company fit, the alignment between a company’s resources, processes and priorities and what a new venture needs, and a later post in this series covers how to assess it.

How much of the core’s position transfers well depends largely on how far the venture sits from the core. Ventures close to the core legitimately share a great deal with it. The further out a venture sits, the less of the core’s position is likely to fit, and a transformational venture may share almost none of it. Our post on classifying innovation explains why that distinction changes how a venture should be run.

The point is not that moving away from the core is better or worse. It is that keeping or changing each element should be a conscious decision, made with the trade-offs visible, including the internal cost of each departure.

Start with the actors and their roles

The information that informs these choices sits in the value network itself: the key actors around the offering, the role each one plays, and how value, money and information move between them. That includes suppliers, channels, complementors, integrators, influencers, payers, competitors and substitutes, not only the end buyer. Each of those actors also has its own jobs to be done, which the whole solution may need to satisfy.

The roles in that network are not fixed. The actors are the same whatever the venture decides, but the role each one plays depends on where the venture sits. In the component example, the equipment makers are customers from one position and competitors from the other. Move the position and some actors change roles, some drop out of the picture, and new ones appear. So the network has to be read from the position being considered, and read again for each alternative.

This is an important and often overlooked step. Teams tend to know the parts of the network the core business touches and far less about the rest. Laying out the actors and their roles shows which positions are available, who controls access to the customer, who would gain or lose if the venture succeeds, and which parties the venture would depend on.

That can surface risks the team would otherwise meet late, such as a channel partner that is also a competitor, or a buyer whose purchase depends on someone else’s approval. It can also surface opportunities: a layer nobody serves well, or a position the incumbents have no reason to defend. Our case study of NVIDIA’s CUDA platform is an example of the second.

The competition follows from the position

Direct competitors are a consequence of position. That is why the competitive slide the core business already has is often the wrong one for a new venture: it describes the competition for a position the venture may not, or should not, occupy.

Once the position is chosen, the competing alternatives follow from it. Direct competitors in that layer. Substitutes that address the same job a different way. Potential entrants. And the status quo, meaning whatever customers do today, which rarely appears on a core business’s competitive slide and is often the alternative a new offering most needs to beat.

An earlier post in this series covered how to identify which requirements customers consider important and poorly served. Those requirements are the right basis for competition. Scoring each alternative against them, weighted by how much customers care about each one, shows where the venture can win, where it is exposed, and where nobody serves the customer well. A comparison against the features the assumed competitors promote, rather than the requirements the target customer cares about, shows none of that.

Why the usual tools leave gaps

Most teams already have tools that touch this work. Competitive intelligence tools track named competitors’ news, pricing and messaging. They are built around the competitors a company already watches, which for a new venture is usually the core business’s set. Battlecards and feature comparison spreadsheets compare offerings on the features competitors market, which is exactly the comparison the section above argues against. Ecosystem maps get drawn on whiteboards and slides, where they help a workshop but are not connected to anything that follows.

What is missing is a map of the actors and their roles that the competitive analysis draws from directly, scored against what the target customer requires.

There’s an app for that: how Growth Forge® Software addresses this

Growth Forge provides that connection in two tools, actors first and then the competition, with the first feeding the second.

Value Network is where the ecosystem around the offering is mapped. Actors are captured across eleven roles defined relative to the venture, including customers, channels, suppliers, complementors, competitors, substitutes, payers and potential entrants, either as named companies or as whole categories. The value, cash and information flows between them are recorded as relationships. The network can be viewed as a value chain, a schematic or a graph, filtered by role, so a missing role or an unconsidered dependency is easy to spot. AI Discovery Assistants can propose candidate actors for the team to review, and the AI Industry Analyst Agent monitors news about the actors that matter. Because each actor is defined once, the needs, competitive and sizing work in the other tools all reference the same ecosystem. The tool does not choose the position. It makes the consequences of a position visible, so the team can judge whether it is the right one.

Competitive Analysis takes the competing alternatives from the value network and scores each one, alongside your own offering, on the requirements chosen as the basis of competition, weighted by customer importance. Substitutes and potential entrants are scored along with direct competitors. Ranking, radar, heat-map and opportunity views show where you win, where you are at risk, and where the white space is. Scoring also distinguishes a competitor that could not deliver on a requirement from one that chose not to, which sharpens where a real, defensible gap exists.

The output is a value network position stated as a choice, the actors it depends on made visible, and a differentiation picture grounded in customer requirements, priorities and real alternatives rather than in reaction to direct competitor marketing.

What no software can settle

A venture that departs from the core’s position will be reviewed by people who know the core’s position well. Review templates can ask for a competitive slide in the core business’s format, a channel plan built on the existing channels, and a forecast built on the existing sales model. Where they do, a deliberately different position reads as a deviation to be explained rather than a choice to be evaluated.

Changing that is a governance decision: what a venture proposal has to show about its position, and who has the authority to approve one that differs from the core’s. It has to be defined and championed inside the organization, usually by the person running the innovation function. An outside perspective can help design those requirements and can sometimes argue for them more freely, but holding them in place belongs to whoever owns the function.

Putting it into practice

Before a new venture’s strategy goes to review, a few steps make its position a choice rather than an inheritance. Write down where the venture sits in its value network and which of the core business’s defaults it keeps. Map the actors and their roles from that position, and from at least one alternative. Build the competitive comparison on the requirements the target customer cares about, and include the status quo. These steps can be worked through with a framework, facilitated by an experienced consulting firm, or with purpose-built software such as Growth Forge, where Value Network and Competitive Analysis provide the guidance and the analysis. Position is one of several strategy choices a review has to examine, and often the one that shapes many of the others.

If the harder question is whether your organization can approve and support a venture that works differently from the core business, our Innovation Capability Assessment is a short scored read on where that stands.

Next in this series: defining the whole solution and deciding how to deliver it.

BRI Associates helps companies grow by drawing on decades of practitioner experience in corporate innovation and new business development — practitioners, not pundits or academics — through direct consulting, training workshops, and Growth Forge® Software, built for the unique requirements of corporate innovation and growth organizations.