Situation: A company is launching a new service – using existing technologies to address a new market. The CEO is curious as to whether it makes more sense to create a separate firm or corporation, a division within the current structure, or a new brand to take advantage of this opportunity? Do you launch a new brand or a new company?
Advice from the CEOs:
- Because you are utilizing an existing process in a new market, don’t create the additional conflict or complexity that you might by splitting this into a separate entity just yet. Utilize the collaborative talent within the company to create a new brand rather than a new division or corporation.
- Adding the additional overhead, accounting and other complexities of a separate entity is overkill – start it as a division or a brand.
- Use this as an opportunity to grow your overall company brand. Create a series of icons to represent the company’s various capabilities. The icons will also help you to describe the range of capabilities of the company to prospective clients.
- The market which you are addressing is early stage. By developing this new market as a new capability of your current well-respected brand, you have the opportunity to become the category leader.
- When another CEO created new capabilities as extensions of existing technology he followed the following route:
- Create a sub-brand as you develop and start to develop the new capability;
- If it is successful and grows, develop it into a division;
- If the capability grows to the point that you attract and decide to take outside funding to accelerate growth, create a separate company so that you don’t give away ownership of the parent company.
- Think “effective vs. efficiency.” Start with efficiency. Add effectiveness (dedicated people) as opportunity proves itself out.