For many years, Corporate Venturing has been a trendy topic for companies looking to finance their innovation.
Grasping new business model, obtaining competitive intelligence… This kind of method shows many advantages and is attractive for companies wishing to implement innovation in their traditional markets.
In 4 years, these investment funds have more than doubled, from 85 to 188. A stunning growth indeed, which reveals a new investment trend in big companies: investment at “low” risks.
Corporate venturing can sometimes be a great win-win development trigger for promising startups and big companies, that’s a fact.
However, this practice can leave corporate groups in front of an important question (the one that is worth 2.7 billion dollars!): are startups ready to handle innovation’s responsibility within major groups?
Corporate Venturing: Innovation by Acquistion
More and more companies “relocate” innovation by buying or partially investing in promising startups. The benefit is more strategic than financial for big companies: taking a step forward your competitors, capturing new technological progress…
Corporate Venturing has the wonderful advantage of enabling major corporations to preserve their hegemonic power. No need to involve a large range of contributors, no need to waste a precious time into validation delays… Happiness seems to be all along the way!
New investment form implies a new innovation governance: through this practice, big companies grasp breakthrough innovation in their traditional market and that they couldn’t spot only in an internal way.
A solution to keep by your side, no doubt about it. However, if Corporate Venturing is a new organizational form which can complete other ways to source innovation, it doesn’t absolve companies to engage their own organizational transformation.
Indeed, when not associated to another practice, Corporate Venturing can show some weak signals.
First of all, startup and big companies’ relationship isn’t always a wonderful love-story once the deal is set.
Some companies experienced a clash of cultures on two different level: structurally at first, because merge leads to an organizational change, but also culturally, as a gap can happen between management approaches.
Let’s take a look at Charp’s case: this prospection’s solution for companies was redeemed by MixData in 2016.
A clash of culture occurred in no time. The loss of charismatic co-founders coupled with internal organizational change caused an employees’ suffering (with its consequences).
To remedy this situation, some companies such as AXA (France) developed a less “interventionist” strategy. By promoting the development rather than the startup’s absorption they won the bet by. They have diversified their portfolio without reducing the flexibility or disturbing the independence of the startup.
Personally, I wonder if innovative startup’s potential is a sustainable solution for companies?
Indeed, startups bring innovative and disruptive offers on their respective markets at first. But what happens when their business model is all set up?
No cutting-edge features from Airbnb for years. No radical change in the Ventes-Privées (French Company) model. In other words, once their business model is determined for good, it seems difficult to expect a great innovation ability from startups.
Successful Open Innovation Approaches
The main point to be successful in your open-innovation strategy is all about clearly determining and understanding your company issues. Using random methods and hoping for the best is pointless and inefficient.
Obviously, there is no miracle recipe. Corporate Venturing is a new organizational form but shows difficulty to transform existing practice if not coupled with another Open Innovation method.
Take a deep breath and listen up:
Stay open to new growth opportunities, take advantage of new experiences and collaborations can be considered with a hackathon too. What a great news!
Development of collaborative methods and decision-making acceleration are considered as the two main managerial practices to survive in a digital transformation context.
But here’s is the thing: achieving these objectives isn’t an easy thing with Corporate Venturing alone for structural reasons previously mentioned.
Do we need to hide and cry for that matter? Not so sure…
As we are fundamentally good people, we already shared you an article on how to go digital and how to do it the right way. This is a good start in picking the best practice according to your current issues.
Last but not least
To sum up, Corporate Venturing is a great complementary method to drive innovation within your company.
Before taking the great leap, you’d better have a deep understanding of markets in order to optimize your results. Which sector? Which startup? Which maturity stage?
My best advice: don’t hurry when it comes to choosing an open-innovation practice! Clearly determine your expectations and objectives so you can get the most of it.