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10 Reasons Corporate Venture Building is Unlocking Growth at Modern Organisations

10 Reasons Corporate Venture Building is Unlocking Growth at Modern Organisations
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In today's relentlessly evolving corporate landscape, mere sustenance isn’t a viable strategy. The urgent call to adapt is echoing louder than ever, compelling corporations to either advance or face the risk of becoming redundant. In PwC’s recent 26th Annual Global CEO survey, it was found that 40% of global CEOs think their organisation will no longer be economically viable in ten years’ time, if it continues on its current course. 

Amidst this shifting landscape, a solution is crystallizing: corporate venture building. In a recent report from Mckinsey, 74 percent of companies that chose business building as their main strategy grew at rates above the average of their industries. Corporate venture building involves the ideation, nurturing, and scaling of new business ventures under the sheltering umbrella of an established corporation. 

Here are 10 reasons compelling corporations to embed this transformative paradigm into their strategic plans.

1. Accelerated Corporate Innovation

Traditional research and development channels in corporations, often trapped in layers of bureaucracy, can hinder the pace of innovation. Enter corporate venture building, the modern-day answer to these challenges. This approach brings a paradigm shift, radically transforming the way corporations conceptualize and implement new ideas. Unlike traditional methods that may take years to go from an idea's inception to its actual realization, venture building accelerates this journey, ensuring that innovative concepts rapidly materialize into market-ready solutions. It's akin to having an in-house startup incubator that operates with agility, yet is armed with the resources and expertise of an established corporation.

The advice of Peter Drucker offers a fitting perspective, "If you want something new, you have to stop doing something old." Corporate venture building encourages corporations to break free from outdated practices and embrace a more nimble, adaptive, and forward-thinking approach to innovation.

2. Maximizing In-House Assets

Well-established corporations, with their years or even decades of operation, resemble vast gold mines of resources and assets. These aren't just physical or tangible assets like buildings or machinery. More crucially, they encompass a wealth of specialized talent, proprietary data, institutional knowledge, and a web of established relationships with partners, suppliers, and customers.

The presence of such in-house assets is undeniably valuable. However, their true value is only realized when they're optimally deployed and harnessed.

All too often, these assets lie underutilized, failing to deliver the maximum value they are truly capable of.

Corporate venture building presents a compelling opportunity to change this narrative. By integrating venture building into their strategic framework, corporations can tap into these reservoirs of assets more holistically. For instance, proprietary data collected over the years can be analyzed and used to inform new product development or market expansion. Skilled talent, who might be working in siloed departments, can be brought together in cross-functional teams, fostering innovation through diverse perspectives. The expansive infrastructure, which may be underused in certain segments, can be repurposed to support new ventures, reducing the capital expenses that would otherwise be required.

Moreover, when these ventures are built leveraging the corporation's existing assets, they're not starting from ground zero like most startups. They're already a step ahead, benefiting from a foundation of resources and insights that independent startups might spend years trying to accumulate. This inherent edge translates into a swifter go-to-market strategy, better risk management, and a heightened chance of success. By unlocking the full potential of their in-house treasures, corporations can drive innovation that's not only groundbreaking but also deeply rooted in their foundational strengths.

3. Diversifying Corporate Revenue

In the fluctuating world of business, it's a well-acknowledged truth that over-reliance on a singular source of income can be a precarious strategy. While a single-point operational focus might bring substantial rewards in the short term, it leaves corporations vulnerable to market shifts, technological disruptions, or unforeseen challenges in that particular sector. Essentially, by placing all their eggs in one basket, companies risk significant financial turmoil if that primary source of income dwindles or faces setbacks. 40% of today’s businesses will fail in the next ten years, according to former Executive Chairman and CEO of Cisco, John Chambers.

Corporate venture building emerges as a strategic countermeasure to this vulnerability. By facilitating the development of multiple business ventures within the larger corporate framework, it inherently diversifies the revenue streams. Each venture acts as an individual pillar, collectively holding up the financial structure of the corporation. When one venture faces challenges, others can compensate, ensuring a steady flow of revenue and reducing the risk of substantial financial downturns.

Warren Buffet's profound observation, “Someone is sitting in the shade today because someone planted a tree a long time ago,” aptly captures the essence of this approach. By investing in venture building, corporations are, in essence, planting multiple trees today, ensuring that they have a canopy of diverse revenue streams to provide shade in the unpredictable future. 

4. Positioning as Industry Trailblazers 

Bill Gates once offered a candid observation, suggesting that corporations have a propensity to "overestimate the change in the next two years and underestimate the change in the next ten." In the fast-paced world of corporate dynamics, it's not just about staying afloat; it's about leading the way. The landscape of industries is constantly reshaping, and the line between being at the forefront and playing catch-up is exceedingly thin. For corporations, the difference often lies in their ability to not just anticipate the future but to actively shape it.

Many organizations become so engrossed in immediate goals and short-term strategies that they overlook the larger, more transformative shifts on the horizon. By the time they recognize these shifts, they are already playing catch-up, trying to adapt to changes that competitors have already embraced.

By continuously engaging in the ideation, development, and scaling of new ventures, corporations are not just passively responding to industry trends. Instead, they are actively setting them. 

5. Talent Attraction and Retention

In an era marked by rapid technological advances and the war for top-tier talent, a corporation's human capital has become its most valuable asset.

Renowned leadership consultant, Simon Sinek, once declared, "Customers will never love a company until the employees love it first." This sentiment accentuates the importance of drawing in and retaining exceptional professionals.

Corporate venture building, with its promise of innovation and disruptive endeavours, offers a dynamic setting reminiscent of startups. For passionate professionals, this setting promises more than just a desk job; it offers a platform where they can bring their innovative ideas to fruition, make a tangible impact, and contribute to groundbreaking projects. The chance to be part of such transformative ventures, combined with the stability and resources of an established corporation, creates a compelling proposition that's hard to resist. It's not just about monetary compensation anymore; it's about purpose, growth, and legacy.

6. Elevated Corporate Branding

In the world of business, branding isn't merely about logos or advertising campaigns; it's about a promise, a commitment, and the perception stakeholders hold.

As Jeff Bezos once said, "Your brand is what other people say about you when you're not in the room." This emphasizes the organic and intangible nature of branding, rooted deeply in actions, values, and consistent deliverables rather than just visual representations.

Engaging in corporate venture building is a definitive move that signals a corporation's commitment to innovation, adaptability, and forward-thinking.

Such initiatives demonstrate that a company isn't resting on its laurels but is actively shaping its future, aligning with modern market dynamics, and anticipating tomorrow's needs today. This proactive stance not only attracts stakeholders but also generates respect and admiration from peers, competitors, and industry observers, elevating the company's standing in the global corporate landscape.

7. Wise Capital Allocation 

Emotional or poorly-informed decisions can divert valuable resources away from areas of genuine promise, resulting in missed opportunities and diminished returns. Corporate venture building offers a pragmatic and methodical alternative. By directing funds into creating and nurturing new ventures internally, corporations can maintain closer oversight and control, ensuring that every dollar is purposefully spent. This strategy allows for more flexibility, as internally-built ventures can pivot more readily based on real-time feedback and shifting market conditions, ensuring that capital isn't locked into stagnant or unproductive avenues.

Moreover, by allocating capital in this manner, corporations send a clear message to shareholders and potential investors about their commitment to innovation and long-term growth. It showcases a business model that isn't just dependent on external acquisitions or investments, but one that's organic, sustainable, and rooted in the company's core strengths and vision. 

8. Mitigating Market Entry Risks

Treading into uncharted territories is a gamble that every corporation contemplates at various stages of its growth. The promise of untapped markets and the allure of new consumer segments are often tempered by the very real risks associated with unknown landscapes. 

Corporate venture building offers an astute solution to this conundrum. By incubating new ventures within the protective framework of an established corporation, there's a unique blend of pioneering spirit and seasoned wisdom. These internal ventures, while breaking new ground, are armed with the corporate's accumulated knowledge, insights, and resources. They're not stepping into the unknown entirely blindfolded but with a compass prepared from years of industry experience. 

9. Instilling Operational Agility

In a world characterized by rapid technological advancements and unpredictable market shifts, operational agility is no longer a luxury, it's a necessity.

The most successful corporations recognize that the traditional, linear approaches to strategy and operations can often render them reactive rather than proactive. The slow and steady might have once won the race, but in today's corporate world, it's the agile and adaptable that take the lead. As Charles Darwin aptly said, “It is not the strongest of the species that survives, nor the most intelligent; it is the one most adaptable to change.”

Corporate venture building is an embodiment of this agility. By nurturing a startup-like culture within the vast framework of a corporation, there's a fusion of speed, innovation, and adaptability. Beyond the obvious advantages of being able to swiftly capitalize on opportunities and mitigate risks, there's a deeper, more strategic benefit. Corporations that cultivate agility foster a culture of continuous learning and evolution. They not only adapt to the world around them but also anticipate and shape future trends, positioning themselves as frontrunners in the ever-evolving corporate marathon.

10. Staying In Sync with Consumers

Companies that thrive are those that continually resonate with the changing beats of their consumer base, ensuring they're not just meeting but anticipating the needs and desires of their audience. Corporate venture building plays a pivotal role in this process.

Central to the approach of corporate venture building is a deep-rooted commitment to consumer-centricity. Unlike traditional corporate setups, which might take a top-down approach, venture building often starts with the consumer at its core, building outwards from there. This means every strategy devised, every product launched, and every service offered is with an ear to the ground, listening intently to the voice of the consumer.

By harnessing the resources and data analytics capabilities of established corporations, these venture-building initiatives can delve deeper into understanding consumer behaviour, preferences, and potential future trends. They're not just reacting to feedback; they're proactively gauging the nuances of their audience's behaviour and adjusting their offerings accordingly. This not only results in enhanced consumer satisfaction but also positions the venture as a forward-thinking and consumer-first entity. 

Maintaining the status quo is no longer sufficient. The business landscape is rapidly evolving, and corporations must innovate from within to stay ahead. The strategy of corporate venture building provides a pragmatic pathway to do just that. It's a simple equation: internal startups can harness the strengths of established corporations while being agile and responsive to market changes. For those who find the process challenging, seeking guidance or partnering with experts in the field is a logical step. It's an investment in expertise that can yield significant returns.

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Shay Namdarian

Shay Namdarian is GM of Customer Strategy at Collective Campus and the author of Stop Talking, Start Making - A Guide to Design Thinking. Shay has over ten years of experience working across a wide range of projects focusing on customer experience and design thinking. He is a regular speaker and facilitator on design thinking and has gained his experience across several consulting firms including Ernst & Young, Capgemini and Accenture. Shay has supported global organisations to embed customer-centric culture, working closely with law firms such as Clifford Chance, Pinsent Masons and ClaytonUtz.

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