It is now widely recognized that building high-potential business ventures is a very specialized field that utilizes unique knowledge.

Through the generous support of American Express Centurion Bank and GE Capital, we are pleased to provide you with this in-depth study of the Fundamentals of a Well-Built Venture, part of a broader set of competence-based evaluation tools called the New Venture TemplateTM, developed by Ronald K. Mitchell, CPA, Ph.D.

These tools utilize a sample set of "viable venture attributes" (Mitchell, 1995) combined into venture viability "templates" to identify and observe necessary venture characteristics. Like the forensic evaluation of a partial strand of human DNA that supports a legal judgment, the assessment of a partial set of venture characteristics such as those found in the New Venture TemplateTM--as a sample of a venture's genetic material--can provide entrepreneurs and investors with the capability to make the business judgments that distinguish viable from less-viable ventures.

This approach to new venture formation is similar to the model used in the medical world through the years. During the past few centuries, the medical community has consistently identified known causes of disease and death and systematically developed cures, immunizations and treatments to prolong life and alleviate suffering. From a business perspective, similar preventive care and ongoing maintenance are required both in the formation stage and on-going operation of new ventures.

Background

When undertaking new ventures, a degree of luck is involved in the ultimate success or failure of the business. Although the luck factor cannot be totally eliminated from any venture--thus guaranteeing venture success--a systematic process can be applied during the evaluation and development stage of the venture to increase venture potential and improve the probability of ultimate success. The approach that enhances venture potential most effectively during the formation stage of a new venture is to prevent venture failure by elimination (or mitigation) of the known causes of venture failure.

Over the past 25 years, two disciplines: (1) the discipline of business planning, and (2) the discipline of business strategy have developed a set of concepts that when combined, offer a powerful template to help BUILD A BETTER BUSINESS. From "business planning" we can compile a list of criteria that answer the question: "Is it a business?" The field of "business strategy" contributes criteria that answer the question: "Can you keep it?" Together these criteria form a venture "template" that is especially useful to new ventures because of the step-by-step ordering of the questions. It can also be a very powerful tool to help to diagnose and improve ongoing or troubled ventures.

To know whether an idea will support a "Business," (or if already operating whether the "business" is being optimized) you should ask the market-based questions:

  1. Is the venture Innovative?
  2. Does the venture Create Value?
  3. Will the venture Persist Over Time?

To determine whether you can "keep" the fruits of your labors, you should ask the competitive-based questions:

  1. Can the venture Maintain Economic Scarcity?
  2. Can the venture Prevent Appropriation of Created Value (protectable)?
  3. Is the venture Flexible?

The key to understanding the impact of these questions on a new venture is implementing a consistent, systematic and integrated process to address and answer these and their fifteen (15) related sub-questions. In a perfect world these fundamentals of a well-built venture would be in place at the outset.

In a practical application, a venturer and investors should put substantial effort in addressing these fundamental variables prior to the investment of significant financial and human resources. If not, then additional risk is inherent in the venture. Venturers and investors should understand these risks and their potential negative consequences prior to taking action. Ultimately a script can be developed for the venture, outlining what actions will be taken in the event that these consequences begin to become evident in the venture, from launch to maturity.