A diversified chemical company had developed a new class of performance molecules with a wide range of applications. In an effort to approach commercialization with low risk, the company set up a small venture and worked with a few select customers that funded most application development. These customers were in market segments that were not considered core for the corporation. Thus, the corporation had little capital at risk. The corporation chose this low-risk approach because previous new technology commercializations had been less successful than expected.

SDG performed an extensive risk analysis of the venture. Analysis showed that the it was relatively low risk, with an upward value potential of 10 times higher than internal evaluations. Moreover, our analysis showed that doubling the investment in the venture could capture new customers faster and enhance the commercialization probability of success. We recommended stepping up the investment and, before deciding to sell the venture a few years from now, to consider this venture a real option for potentially much larger opportunities that had not yet been fully developed.