Corporate venture building can be an effective strategy for established companies to drive innovation and growth. Read this article for what CEOs need to consider, including examples.
Corporate venture building is a strategy for established companies wanting to drive innovations and new business development and generate long-term growth. With the resources available, the expertise in the organization, and the company's own network, start-ups are founded that have the potential to change existing markets or create completely new markets.
This approach differs from conventional corporate venture capital, in which there is no active participation in the establishment and management of the new companies, just investment in start-ups.
The advantages of corporate venture building
Corporate venture building as an innovation strategy allows revenue streams to be diversified, reducing dependence on one segment or market, for example. New technologies, business models, and markets can be explored beyond the core business. In doing so, the company benefits from existing resources and expertise. New ventures can scale faster than traditional start-ups; ideally resulting in breakthrough innovations.
Overall, corporate venture building can help companies stay competitive and relevant in a rapidly changing business environment – a "VUCA world". At the same time, it promotes a culture of innovation and entrepreneurship.
Corporate venture building as a catalyst for open innovation
Open innovation involves working with external partners to bring innovative ideas and technologies to market. For established companies, it can be difficult to integrate external stakeholders into their innovation strategies. Corporate venture building can create dedicated units or teams to bridge the gaps between open innovation and the core business.
Example: Siemens next47
Siemens established next47, a venture-building unit, in 2016 to create new business opportunities. next47 operates independently and focuses on areas such as AI, blockchain, and advanced manufacturing. Through strategic partnerships, new technologies and business models enter the Siemens ecosystem in this way. With access to Siemens' resources and networks, next47 is able to scale its projects quickly and bring new products and services to market.
Further reading: For those who want to learn more about open innovation vs. closed innovation, here is an article that discusses the advantages and differences.
Accelerator and incubator programs
Types of venture building include accelerator or incubator programs. These are programs that support start-ups in the initial phase. The companies provide funding, mentors, office space, and other resources to help the start-ups succeed.
Example: BMW Startup Garage:
The BMW Startup Garage is an apt example. The innovation unit works with start-ups developing breakthrough technologies for the automotive industry. Through access to BMW's resources, expertise, and networks, as well as financing and mentoring, the BMW Startup Garage works with start-ups to develop new solutions. One example is the collaboration with Seoul Robotics and Embotec on "automated driving in-plant".
What does a venture-building strategy need?
Implementing a venture-building strategy can be a complex process for CEOs, requiring careful planning and execution.
Here are some strategic considerations you should keep in mind for implementation.
- Define your objectives: Before starting a venture-building program, you should clearly define your objectives. This may include developing new products or services, exploring new business models, or opening up new markets. By clearly defining your objectives, you can ensure that your venture-building program aligns with your overall strategic objectives.
- Identify market opportunities: The success of a venture-building program depends on the identification of promising market opportunities. As CEO, you should work with your team to research market trends, identify emerging technologies, and assess the competitive landscape to identify the most promising opportunities. An innovation roadmap helps the entire team to get a clearer view of the relevant innovation fields.
- Build a strong team: Setting up businesses requires a diverse team of entrepreneurs, investors, designers, and developers. You should focus on building a team with complementary skills and expertise. Remember to also provide them with the resources and support they need to succeed.
- Establish clear processes and metrics: To ensure the success of a venture-building program, you should establish clear processes and metrics for evaluating the success of new ventures. To do this, set goals together with the team and define reporting and feedback mechanisms (e.g., innovation KPIs) to track progress.
- Manage risk: Building businesses involves significant risk, as new ventures may not always be successful. Identify potential risks and devise a risk management plan.
- Emphasize culture and values: Successfully establishing a venture-building program requires a culture of experimentation, risk-taking, and innovation. You should prioritize creating a culture that promotes these values and provide the necessary support and resources. At Lead Innovation, our approach to projects for developing a culture of innovation is to foster the 'can', 'want', and 'may' within the organization.
Conclusion
Overall, the goal of venture building is to create new companies and products that can generate significant value and growth. By bringing together experienced entrepreneurs, investors, and other resources, venture building can help identify and exploit new market opportunities and technologies.
The implementation of a venture-building strategy unconditionally requires the following:
- A clear understanding of the market opportunities.
- A strong team made up of a variety of skills.
- A resilient culture of innovation.
By focusing on the aforementioned strategic considerations, you can use corporate venture building to promote new business development in your organization.
