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Why big firms fail in new ventures: The case of NMG

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This week on STRATEGY TUESDAY our management expert unpacks the strategic dynamics behind the recent closure of TV and radio stations by Nation Media Group (NGM), Kenya’s largest media company by both revenues and market share.

When I read the memo of 30th June 2016 from my friend Clifford Machoka to Nation Media Group (NMG) staff, the first thing I said to myself is, ‘I saw it coming, but not so soon.’

Three years ago Nation Media Group launched the Nation Hela payment card in collaboration with its sister company, Diamond Trust Bank (DTB). Somehow it didn’t pick up. It would later launch Nairobi News newspaper and Nation Courier and they, too, didn’t pick up.

So why did all these fail plus some of its oldest brands like Nation FM?

Established businesses often have a challenge managing and growing the core business while concurrently nurturing and supporting new opportunities.

Fostering a culture of innovation in such organisations is a give and take. Mature organisations are very hostile towards internal new ventures.

Among the challenges that new babies face in existing organisations include limited resources and rigid infrastructure and support structures. It is, therefore, tough for the leadership of such organisations to focus on the core business while at the same time looking forward to newer products that will shape the future.

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This mental balancing act can be one of the toughest of all managerial challenges and the leadership must be prepared to handle it. No wonder the blood of redundancy that has been shed at NMG as a result of the balance tipping against the new ventures.

Executives are required to explore new opportunities even as they work diligently to exploit existing ones. It is no doubt that most successful companies like NMG falter when it comes to pioneering radically new products and services. And there are cultural and structural reasons behind this.

So did NMG falter in coming up with new products? Absolutely not!

By 2008 the future of radio was already a topic of discussion and in 2011. Due to the digital media revolution, advertising rates and revenue had come under attack. In 2015 when Kenya moved from analogue transmission to digital, most TV stations lost viewers and it was expected that advertising rates were to be revised. None of the media stations did that and so most of organisations have turned to social media to advertise, leading to the current fall in revenues for most broadcasters.

To nurture new ventures, the first process should be crafting the right leadership style by shaping innovation, learning, and change by cultivating the right behaviour from the CEO down to the supervisors. The organisation then will need to conduct a self-assessment to understand the levels that can shape organisational capabilities and how to use them.

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The leadership is then supposed to create distinct units that have their own unique processes, structures and cultures that are specifically intended to support the new babies in the organisation. These units should be set up to support the unique approaches, activities and behaviours for these new babies in the organisation to grow.

The Board and the CEO can use the ‘ambidextrous organisational model’ to create segregated business units for exploring and developing the new ventures while at the same time keeping existing business units intact. Project teams within the new venture are encouraged to form their own processes, structures and cultures but they are still connected to the rest of the organisation through the parent company who ensure that no conflicts or competition for resources threaten the viability of the venture.


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GODFREY ETTAHhttp://www.businesstoday.co.ke
Godfrey Ettah is a Management Consultant based in Nairobi. Twitter: @EGtwits Email: [email protected]
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  1. There isn’t enough meat on the ‘bone’ of this story. You just scratched the surface and didn’t explore more.

    The lean start-up methodology can also be used to further build the spin-off businesses.


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