The Corporate Venture Building (CVB) discipline is too young and with not enough case studies yet to have a recognized standardized methodology. Therefore, the following elements will for sure vary cases by cases.
CULTURE EATS DIGITAL
The ambition of CVB is to create a new sustainable and profitable growth engine (“Engine #2” as stated by Bain & Co) by succeeding in the David (startup) + Goliath (corporate) relationship.
How? By creating its own David with external aspiring-entrepreneurs (this being complementary to working with existing Startups, eg. outside-in Open Innovation and Corporate Venture Capital).
The promise is beautiful, but when theory meets real life, the challenges appear.
If there is only 1 to be stressed, it is the Culture gap between the StartUp philosophy and the Corporate practices: traction vs quarterly profit; week vs months; out of the box vs minimum risk (or not invented here, or we-didn’t-ever-dit-it-that-way); agility in the frog vs predictability in excel; coffee machine decision vs powerpoint meeting; test - measure - learn vs opportunity study - plan - design macro - design micro - build - test - pilot – launch; bootstrap vs millions in advertising…
Even if a bit caricatural, this is real life in Corporates from ExCom to operational teams. We are used to hear that the “the world is eaten by digital”, but it often appears that “digital is eaten by Culture”.
However, Corporates do need this heavy operating model; they indeed operate worldwide, manage thousands of people, serve millions of clients (or other large companies), have a duty of providing safe offerings (ex. in food) and must ensure business perenniality. They therefore need processes and management layers, cross teams coordination and cannot afford to continuously make back & forth decisions.
But this impedes agile innovation.
There is no miracle to solve this challenge: bridging cultures takes time (whether in CVB or Open innovation, Post merger integration…). But to facilitate the buy-in process, academics identified some good practices, among which:
Understanding: communicate on the “Why” of a decision to get teams to feel its rationality
Agreement: create a collective sense of belonging (“we do this together”) and avoid fear (of losing one’s job for instance)
Resources: provide time, budget, tools, trainings....
These levers can be leveraged along the CVB four stages journey (Deal > Idea.up > Start.up > Scale.up). Let’s see illustrative ways to apply the buy-in practices in the two first stages, since they have strong buy-in impacts downstream.
1. DEAL stage
Open door foreword: it is easier to discuss with Corporates which have strategic challenges requiring a CVB-like approach than with some without disruption, experience or innovation issues. However, in any cases, as for any complex sales, this requires a deep “why does it matter?” discussion before introducing the proposed solution.
The macro principles of a CVB deal are:
The Corporate invests in an almost blank page* which is to become a Scaleup (*or in a Corporate Startup Studio whose role is to open several blank pages at once).
It shares equity with the Entrepreneurs of the future Startup (and the Studio if there is one involved)
The Entrepreneurs are to innovate around the Corporate’s activity: not too close to avoid duplicating and conflicting with Corporate’s own innovation initiatives; not too far to motivate the Corporate to make it one of its new perennial growth engines
The Entrepreneurs (or the Studio) are the ultimate decision maker when it comes to strategy and operations.
Challenge: But for the Executive Committee of a Corporate this is completely new, even crazy: when it invests in R&D or a new Offering, it owns it 100%.
This is the very first (and understandable) cultural gap to be filled; and it is imperative to be fully aligned (beyond legal paperwork) before moving forward.
Line of approach: put the Corporate in the position of an (operational) investor.
Understanding: It is common practice for Business Angels to invest in an almost blank (risky) page with a minority stake and no ability to decide. They indeed know that they have 100% of a 0 ROI without highly motivated true Entrepreneurs. True Entrepreneurs need both owning the mission/dream, having freedom of decision and sharing the risks and rewards.
Agreement: - The page will be blank, both for the Corporate and the Entrepreneurs; it is very risky. If the Startup fails, the entrepreneurs get nothing (while intrapreneurs find their job back and consultants get their fees); meanwhile, the Corporate will just test other ideas. Therefore, it is relevant to share risks and rewards - While the Entrepreneurs have freedom, they anyway are accompanied by a Board, with some Corporate's representatives. The Board can have some vetos on some decisions (ex. by level of spendings, type of alliance...) - The equity is shared, but the Corporate can have a priority right to keep funding or to buy the future Startup if it wants it.
2. IDEA.up stage
The very first step for Entrepreneurs is to find “a big problem to fix on a big market”.
According to the governance, the Entrepreneurs can work on this alone. But, to turbocharge their chances of success when they will move to Start.up (build) and Scale.up (deploy) stages, leveraging the Corporate’s capabilities (R&D - intellectual property, purchasing - production - logistics, marketing - sales…) is a key acceleration factor.
Challenge: But accessing these capabilities require to have the buy-in of operational teams. The latest indeed have multiple good* reasons not to work with the Startup, given that they did not expect it to be occupied (* and sometimes more questionable ones).
Line of approach: embark stakeholders who will be key in the future, as of the very upfront.
Understanding: As for any changes, the ExCom has to explain the rational in a (repeated) communication exercise
Agreement: As of reflection about the problem to fix, the Entrepreneurs could propose at least to sales and marketing teams to brainstorm together. In addition to contribute to foster buy-in (“I took part to it”, “their idea will not endanger my activity”), Entrepreneurs will benefit from their market knowledge (including data). Furthermore, they could find the perfect fit: “My clients have this big pain, which we cannot solve with our core business activity; do you want to meet them to double-check?”.
Resources: ExCom is to ensure the proper introduction of Entrepreneurs to the teams, and allocate the latest a little time to take part to the exercise.
Again, this will not be miracle to solve the buy-in challenge; moreover, it may take more time upstream than building a standalone entrepreneurial adventure. But at the end of the day, it may be very (very) valuable to test & learn at Start.up stage, then deploy quicker and stronger at Scale.up stage.
And this is the ultimate goal.