Optimising risk/reward in high-ratio relationships: Jumbo Bonsai meets Pocket Battleship
This paper examines an increasingly important mechanism for exploring and delivering new sources of revenue that we have dubbed 'high-ratio relationships'. These relationships involve connections between very large and very small companies that are more complex and creative than the usual supplier–buyer relationships. For managers, high-ratio relationships present a new challenge as they strive to select the optimal connections between companies and create new sources of revenue. Some preliminary ground rules provide useful guidance, but more professionalism in managing high-ratio relationships is an inevitable requirement, given the high stakes. Models are introduced for the roles that large companies need to assume in high-ratio relationships (Jumbo Bonsai) and the behaviours of the small firms with which they need to link (Pocket Battleships). By assuming these roles, firms increase the value of their new revenue portfolios. The paper also explores how larger firms can become more professional in 'Enterprise Venturing', ie managing a number of high-ratio relationships successfully.
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