Innovation unleashed.
Is a spin-off the right approach for a new business model?

Innovating through spin-offs: Cheat sheet and best practices for new business models

In a rapidly changing business world, innovation is the key to long-term success and growth. For companies that want to stay at the forefront of innovation, the question often arises as to how best to bring new business models to fruition. In addition to a spin-off into a separate company, there are other strategic options that companies can consider to drive innovation projects forward. One option is to further develop the new business model within an existing department while the new business model is still in its infancy. Another option is to set up a completely new department within the company that focuses exclusively on developing and scaling the new business model. However, a strategically smart option is also to spin off into a separate company – a process that combines flexibility with structural independence.

What does spin-off actually mean?

A spin-off is the spin-off of an organizational unit from existing structures. The original organization is usually a company, but the term also includes other units such as universities or research institutes. Specifically, in the case of a spin-off described here, a new company is founded. In addition, employees of the original organization become part of the spin-off.

Why spin off at all?

Spinning off a business unit into an independent entity allows companies to focus on their core competencies while the new venture moves forward with agility and innovation. This not only creates value for the parent company and the spin-off itself, but also attracts talent who want to work in a dynamic environment. Another tangible benefit of a spin-off is the improved ability to react quickly to market developments and iterate products or services efficiently. Without the often cumbersome structures and processes of an established company, the spin-off can operate more agilely and bring innovations to market faster. In addition, the structural separation from the parent company enables clearer risk segregation. Risks associated with the development of new technologies or business models can thus be separated from the main business and managed in a more targeted manner without jeopardizing the stability and security of the company as a whole.

How does the process work?

A decision on whether and how to spin off should be carefully considered. At the very beginning there are two concrete and simple questions:

What is the core of the spin-off in the first place?

What is the value proposition and how does it differ from the competition? Is there a product-market fit and do we believe in the success of the project?

What is the goal of the spin-off?

If, for example, the aim is a short-term exit to investors, there are completely different things to consider, such as the choice of legal form, than if the spin-off is a strategic long-term project for the parent company.

This gives rise to numerous questions that need to be considered in advance. The design of incentive programs for employees is one of many issues here.

Functionality Day 1

The operational implementation of a spin-off sounds trivial, but it is more complex, especially in the corporate environment. Typically, values have already been created before a spin-off, which must be properly accounted for so that the tax office does not come knocking and there is a nasty surprise. This is where topics such as an asset transfer agreement or the handling of existing customer data become interesting. Our cheat sheet also contains numerous tips for operational implementation in the form of a cheat sheet.

Tackle your innovation project

The decision to spin-off can pave the way for ground-breaking innovation and enable your company to enter new markets and create significant value. If you would like to learn more about whether and how you should successfully spin-off your next business model, we invite you to register and download our detailed brochure. Start realizing your full innovation potential today.