Agile enterprise… Outside-in innovation… Disruption… Business Model Innovation… Corporate Venturing… These buzz words pop up everywhere, in the media, in research articles, during conversations and so on. However, how do you create an “agile” company? How do you transfer external knowledge inside your corporation? How can you spot disruption? Where do you get an innovative business model? But most importantly, why is corporate & startup collaboration beneficial and how do you ensure its success?
Fail alone Startups typically have flat structures, increasing the speed and efficiency of technological or business model development. However, they lack capital, human resources and market reach. As a result, many projects never reach a product-market-fit or even see the light of day. In contrast, corporations have access to a large pool of resources, customer knowledge and accumulated cash reserves. Nevertheless, risk aversion and bureaucratic structures hinder innovation and market responsiveness. Consequently, several companies have missed profound industry transformations; some traditional players disappeared while new ones entered the market. Succeed together Yet, tapping into the complementarities of each player brings unprecedented benefits for both. On the venture side, founders get access to new markets to find an optimal solution for their product and receive capital to grow. On the corporate side, innovation initiators can forego the long and cost-intensive internal developments, thereby increasing market entry speed and flexibility. In fact, firms can quickly test uncertain concepts through startups, observe the market response and internalize successful ideas. Flexibility and speed are crucial for finding new revenue streams and driving sustainable growth, especially in dynamic environments.
Corporations have four ways of engaging with startups.
Despite the CVC’s popularity, it is not appropriate for every case. The choice of the tool depends on the company’s innovation goals, internal set-up, types of technologies and desired outcome. Moreover, the degrees of corporate involvement and capital expenditure vary from tool to tool. A corporation’s innovation strategy, based on an assessment of the company’s internal capabilities and external environment, guides Corporate Venturing activities.