The ultimate ambition of Corporate Venture Building (CVB) is to create a new engine for sustainable and profitable growth ("Engine 2", Bain & Co) by bringing together the best of both worlds between David (agility of the startup) + Goliath (assets of the established company).
Example for a bank with SME customers:
Core business: traditional banking services in branches
Adjacent innovation: neo-bank subsidiary
Engine 2: a micro-ERP for SMEs which, in addition to its own business model, also provides the bank with visibility into its customers' operational data, enabling the bank to create new business offers.
"CULTURE EATS DIGITAL"
The CVB promise looks good on powerpoint, but when theory meets practice, the slides fade away.
If there is one risk factor to highlight, it is the cultural gap between startups and established companies: traction vs. quarterly profit; week vs. month; "think different" vs. minimum risk; agility vs. Excel predictability; "coffee machine" decision vs. multiple meetings; test - measure - learn vs. business plan - macro design - micro design - build - test - pilot - launch; bootstrap vs. millions in advertising...
Established companies need this rigour for their core business, but it implies a very strong resistance to agility and "Think Different".
We often hear "digital eats strategy", but we forget that "culture eats digital".
In CVB, however, the alliance between the startup's teams and those of the established company is key in order to benefit from the leverage effect enabled by the latter's actfis.
BUY-IN
There is no miracle solution to this challenge: changing mindsets requires patience in CVB, open innovation, post-merger integration or ERP implementation.
But to facilitate the buy-in process, some good practices have been identified, including the following:
Understand: communicate the "Why" of a decision so that teams feel its rationality
Accept: create a collective sense of ownership ("we are doing this together") and eliminate employee fears (e.g. losing their job)
Be able: allocate time, budget, tools, training....
These buy-in levers can be exploited throughout the four-stage CVB journey (Deal > IdeaUp > StartUp > ScaleUp).
Example in the IdeaUp phase
(which has a strong impact on downstream take-up).
The first step for entrepreneurs is to find "a key problem to solve in a market that is attractive because of its size and/or growth", and to imagine a "distinctive value proposition".
The governance of a CVB often gives the entrepreneur a great deal of autonomy. He can therefore in theory decide relatively autonomously on the target problem & solution by focusing on the hypothetical end users.
However, his chances of success will be multiplied if he has broad access to the company's resources (R&D - intellectual property - purchasing - production - logistics, marketing - sales, etc.).
And this requires obtaining the support of the operational teams and their reactivity (vs. obeying a top-down order); the latter have indeed multiple reasons for not working with the startup (they did not expect to be busy).
Approach: get the key players on board very early on.
Understand: As with any change, the ExCom should have first explained the rationale for the CVB in a (repeated) communication exercise.
Accept: As soon as the problem & solution phase is underway, the entrepreneur can propose to the sales & marketing teams to brainstorm together ("What problems do your customers have that are around your core business?", "What would you like to offer them that doesn't fit your business?"....).
In addition to contributing to CVB buy-in ("I have participated", "This idea will not jeopardise my business"),
entrepreneurs will benefit from their knowledge of the market (including data),
and they will foster the expected behaviour: "Would you like to meet my customers to check the relevance of the problem?"
Be able: The Executive Committee should allocate time for the operational teams to participate in the exercise.
This approach is in a way Double Design Thinking: the discovery phase does not only focus on the startup's end user, but also on its future commercial deployer.
*******************
Again, there is no magic bullet to solve the membership problem. Moreover, this approach requires more patience in the early stages than in an autonomous entrepreneurial venture.
But in the end, it can be "profitable" to lose a few weeks in the start-up phase to gain months of deployment when scaling up.