The best way to think about the difference between business development and corporate development is that the former is mainly operational, while the latter is mainly strategic.
In this article, we expand on this description, providing background to each of the disciplines, and show how DealRoom can help companies excel in both.
What is Corporate Development?
Corporate development is strategic:
To that end, it refers to the development and implementation of a company’s strategic objectives. Often referreed to as ‘corp dev’, it is synonymous with activities such as mergers and acquisitions (M&A), divestitures, joint ventures, and other strategic initiatives. The centrality of this function to company strategy means that corporate development officers usually report directly to CXOs.
What is Business Development?
Business development is operational:
To that end, it refers to all activities whose principal aim is to generate sales from existing and prospective customers. Business development is synonymous with identifying and exploiting new business opportunities, and building and expanding relationships with partners and customers with the ultimate aim of increasing sales. This means that the term, ‘business development’ is often used interchangeably with sales and marketing.
What does Corporate Development Do?
DealRoom works closely with the corporate development functions of companies of all sizes, giving it insight into the role the function plays. The role involves:
- Strategic planning: Setting the company’s strategic direction, usually in conjunction with the department heads and relevant board members.
- Mergers and acquisitions: M&A is overseen by the corporate development team, which is responsible for managing the transaction process from origination to integration.
- Divestitures: Although technically part of M&A, divestitures can also involve split offs and carve outs, whereby non-core assets of the company are divested.
- Partnerships and Joint Ventures (JVs): Similar to M&A, JVs and partnerships involve identifying opportunities that involve other companies without M&A transactions taking place.
- Fundraising: Most companies, whatever their size, will need to raise debt at some stage, and the corporate development team will usually work on this task with the CFO.
What does Business Development Do?
As outlined above, the term ‘business development’ is often lumped in with sales and marketing, and that’s reflected in the responsibilities undertaken by the function, which include:
- Client acquisition: The principal task of the Business Development (BD) team is to increase the customer’s client base, usually in collaboration with the sales team.
- Market Research and Analysis: The BD team identifies and evaluates market trends, customer needs, and the company’s competitive landscape to understand where the sales opportunities lie.
- Partnership Development: BD team members, like their colleagues in Corp Dev, often seek to build relationships with other companies that enhance sales.
- Product development and diversification: The BD team will usually collaborate with product teams to relay findings on where market demand is, and what key clients are telling them.
- Company Promotion: Business development directors are often at the forefront of promoting a company and its products and/of services.
Key Differences Between Corporate Development and Business Development
Key differences between corporate development and business development can be summarized as follows:
While the focus of business development is on finding and exploiting opportunities within the existing business model, corporate development is more focused on transformative actions, that by their nature, change the company’s structure and strategy.
As the previous bullet point mentions, corporate development tends to focus on the transformative activities of a company – those that change its direction or structure. Business development activities, by contrast, tend to have a more localized impact, targeting sales-related aspects of the company’s business model.
Inevitably, given the different scales and scopes of business and corporate development, there are also different timelines. Business development tends to have a short-term outlook (working in tandem with quarterly budgeting), while the complexity of corporate development means that it takes an outlook based on the long term.
How do Corporate Development and Business Development Work Together?
By now, it should be clear that there are several areas where corporate development overlap, creating synergies between the two.
The ultimate aim of both is to create long-term value for the company, so its in everyone’s best interest if they can collaborate for better results. The following list of areas where they can collaborate is extensive but not exhaustive:
The feedback that BD teams receive from the market can and should have an impact on the company’s strategy. The BD team would inform the Corporate Development team of an exodus of customers into a new product line, for example, thereby enabling them to make more informed strategic decisions.
As deals evolve, it’s important that business development teams assist corporate development at all phases. This is particularly pertinent at the integration phase, where the BD team needs to work on integrating the entities an an operational level, maintaining client relationships, and that sales targets are met.
As mentioned in the sections above, both business and corporate development functions involve creating partnerships for a company. With business development, this tends to be earlier on in the relationship, but as the relationship grows, it can be forwarded to corporate development, who can discuss more transformative actions (JVs, for instance) with the partner.
What becomes clear when a deep dive is conducted into corporate and business development efforts is how complementary each one is to the other: Sales and strategy go hand-in-hand; the company’s long-term direction is dictated by its short-term performance; revenues generate the cash flow, which fuels M&A ambitions.
And so on. To maximize your corporate and business development efforts, ensure that both functions are in a constant state of collaboration.
Having worked as a catalyst for hundreds of deals, ranging in scale from tentative sales partnerships to billion-dollar M&A transactions, DealRoom has seen how collaboration between BD and Corp Dev can generate huge value for companies.
Maximizing your Corporate and Business Development Efforts
The DealRoom engine has been designed to accommodate this, enabling either side to take full control of a deal and call in the assistance of the other for certain tasks, or creating a solution of total collaboration.
Talk to us today about maximizing your company’s BD-Corp Dev paradigm.