Why is it that we are NOT in awe of the corporate venture arms of multi-billion companies? Yet we remember large venture firms and what they have done! In my work with large enterprises and ProVoke, I am stunned as to how underutilized, over-protected and cautious the Corporate Venture arms of my clients are. Why not use your capital to achieve a ton more, innovate and inspire your staff? My role is to disrupt the current ecosystem. I am a huge advocate of Corporate venture for the following 4 reasons:
1. To test the waters, experiment rapidly and proliferate in different areas of innovation at a hugely positive rate. Allowing companies to diversify at a very significant rate and helping nurture the external ecosystem.
2. To grow a hugely positive arm of the company by growing the corporate venture arm into a multi-billion enterprise within an enterprise.
3. To help seed and grow new areas of technologies , where their company can be leading force. While at the same time invigorating their internal staff. Instead of remaining as a ‘relic’ old enterprise, why not become a huge force of innovation!?
4. Instead of acquisitions as a segregated innovation-silo, why don’t we look at acquisitions as the path from disruption to innovation.
Hence I liked this month’s HBR article by Josh Lerner on Corporate Venturing. He and I share common thoughts around this topic and I have summarized Josh’s key points. Enjoy!
In his article, “Corporate Venturing,” published in the latest issue of Harvard Business Review, Josh Lerner makes a compelling case in favor of corporate venturing. In the tech field, a company’s success depends on its ability to move flexibly in response to rapid changes in technologies. This involves both knowledge of current innovations and trends, as well as effective adaptation to these transformations (by developing new technologies, etc.). Traditionally, this role has been left to R&D; yet corporate R&D is often limited by pressure to narrow its project focus and cut costs. As a result, companies often lack the wide perspective (beyond their area of expertise) required to deal with competitive threats effectively.
According to Lerner, investing in start-ups offers companies an alternative way to learn and innovate.
- (1) Corporate venturing enables faster response to market transformations by giving parent companies an inside glimpse into groundbreaking areas as well as possible ownership of new ideas. This takes some of the pressure off of corporations to develop capabilities on their own (very costly in time and money).
- (2) Corporate venturing offers a better view of competitive threats by allowing companies to stay abreast of potentially disruptive changes outside the company. By investing in competing technologies, companies can better keep up with them and avoid being blindsided (a role which R&D often fails in).
- (3) Corporate venturing offers easier disengagement from fruitless investments, because it’s easier to let go of outside investments than internal projects that have bogged down. This is critical because it frees up resources for more promising projects.
- (4) Venture investments can lead to increased demand for the corporation’s own products when the corporation invests in the development of technologies that rely on their own platform. Thus, corporate venturing can be used to shape and create market ecosystems in their interest.
- (5) Corporate venturing often leads to higher returns because corporate-backed start-ups tend to outperform those backed solely by independent VCs.
Despite these benefits, corporate venture funds often run into problems. Companies have wasted billions of dollars trying to invest their venture funds successfully, partly due to the very different mind-sets of the parent company and the venture fund. Lerner offers several recommendations for how corporations can make their venture capital funds work.
- A) Alignment of the goals of the venture fund and start-up with corporate objectives promotes better investment decisions and more successful start-ups. According to a study by Lerner and colleague Paul Gompers, corporate venture funds are more successful when the focus of the corporate parent and their portfolio firm business overlap, and start-ups that are aligned with company goals outperform those that are not.
- B) A streamlined approval process helps facilitate fast-paced and flexible investment into potential opportunities. Companies with convoluted approval processes force their venture funds to try to satisfy many different interests, so that they wind up with too many divergent goals.
- C) Strong incentives improve recruitment, retention and performance of corporate venturers. This includes making compensation in a corporate VC fund comparable to that of independent VC groups, as well as linking pay to proven investment success.
- D) An experimental mind-set that tolerates failure can help circumvent the pitfalls of a risk-averse fund. Punishing failure and playing it too safe can lead the parent company to miss vital opportunities.
- E) A high level of corporate commitment to promising projects can help prevent the damaging consequences of being seen as an unreliable investment fund, and also keeps high-caliber outside investors interested in joining.
- F) Finally, gathering knowledge from the start-up is as important in the venture fund’s role as acquisition deals. Knowledge transfer from start-up to parent company is a difficult but hugely important task, critical for the success of both the venture fund and the corporation.
In sum, corporate venture funds can be as successful as the top private VC funds and can even outperform them. When internal research no longer satisfies the critical need for insights into new disruptive technologies or market movements, a well-managed venture fund can help a corporation discover the next game-changing idea.
Would love to hear your thoughts!
Often there is a misconception that business plans are for entrepreneurs only! Wrong! A business plan is a way to crisply and concisely communicate one’s idea with others, especially when the idea is about an innovation, a new product/service or a new concept. Over the years, whether I am sitting in a large company meeting evaluating new product ideas, or listening to pitches by entrepreneurs, a brief one page business plan is the best way to not only learn about the merits of the idea, but also to get to know the person behind the idea. You!
Why one page? The first pass of hearing an idea should not take more than a few lines. These lines not only explain the merits of the idea, but also the competitive differentiation the idea will give the company or the entrepreneur. It is not to ‘Wow’ the audience, rather to ‘convince’ the audience that the idea and the person or people behind the idea are golden and solid. This is an art which I think will benefit everyone. Schedules are busy, attention spans limited, and if in 1-2 minutes you can capture someone’s imagination, and convince them that you have the passion and can deliver, that is what is required to succeed. Whether in the boardroom, conference room or in an official funding pitch, this is an art to master.
The key elements which I propose you contain in your one page business plan include:
1. Your passion about the innovation which you are proposing. Yes, ‘passion’! If you are not excited and passionate, how do you expect the person hearing your pitch to be?!
2. Let your audience know your vision. Innovation is about having a vision and being unrestricted.
3. Why is your innovation important? Establish criticalness, reason and justification for your idea.
4. Resource and timing requirements to develop your innovation. Milestones are key. Nothing is done overnight, and interim deliverables are key. If you don’t have the resources, how are you proposing to get the resources?
5. What will your idea cost to develop? Initial funding?
6. What new markets will your innovation create? How will it increase or generate revenue?
7. How does your proposed innovation enhance competitive differentiation? In a large company, how will this set you apart from the rest?
To capture all this in one page, you need to think through your idea carefully and determine what facts you want to share with your audience. The depth and thoughtfulness of your one page business plan will also establish your credibility and passion with the audience. You may run into the key person to pitch your idea in a hallway. Imagine if you could deliver your pitch as you walk to the elevator or in the parking lot! Imagine how well the person will remember you, if you were prepared to do so. Generally, not only will they remember the idea, but also the person (and their passion) behind the idea!
A few pointers to consider:
1. Expect that your audience is very smart. This is not an arena to flex technical muscle or impress them with what you know. Rather, use this opportunity to ‘sell’ your concept. Yes, ‘selling’ is a reality.
2. Respect your audience and get the answers that you need in preparation for your business plan. Talk to sales and marketing and get answers. ‘I don’t know’ is a show stopper. Instead, consider: “This is what I have found out to date and I am looking into the following…” Do your personal market research. Know what else is out there and who is doing what. Be prepared. Step out of your comfort zone.
3. Vet the idea with some people you respect but who are not conformists. Be open to constructive criticism.
4. Be prepared for honest feedback. If you are truly passionate about your idea, you will be back pitching it for a second and third time. This is not a one time event.
5. Let your passion show. Smile when you are presenting and accept that how you are perceived is directly related to how your audience will respond to your pitch. They want to feel your energy and enthusiasm. Be infective not passive.
6. Once you have your business plan, you can share with your higher ups in electronic format. I guarantee you that they will be sharing it among the execs! Execs are always looking for the shining stars in their organization. You may not hear about it, but there is lots of traffic which goes like this: “Just got this business plan about an innovation idea from ‘John’. Pretty impressive. What do you think? How about we meet with him and review it in more detail!”
7. And most importantly: DO NOT ASSUME ANYTHING! Expect the unexpected and be super prepared.
You are brilliant and have great ideas! Let people know how great you are. If your pitch is presented really well, you may or may not get funded, but one thing is for certain: Everyone will remember YOU and YOUR IDEA!
Below is a page out of the ProVoke Methodology workbook: The ProVoke Methodology Business Plan.
Are you ready?
Sadly I missed this Enterprise 2.0 conference but wanted to share some thoughts with you. Here is a good quick summary from Information week. This was a gathering of many CIO and IT leaders. Clearly top on everybody’s mind is how rapidly and broadly IT is evolving. Gone are the days that the CIO was the gate keeper about what a company could buy (hardware/software/services/products/resource allocation) and how IT should operate. One the biggest changes in corporate IT has been the massive DEMOCRATIZATION of IT. I spoke about this on an earlier blog and wanted to revisit this topic in light of the recent conference.
With the advent of anything-as-a-service, the dependency of groups within a corporation to the IT group has and continues to greatly diminish. Today, I don’t have to submit a requisition, wait weeks or months, have debates in budget meetings and loose sleepless nights to have access to hardware, software and applications. In fact, I can provision the application and never worry about owning anything. This is key in prototyping (will tell you why in a minute) but also changing the mindset of groups on IT. Yes, when the corporation then wants to bring in a ‘service’ as a standard and costs come into play, yes, then the CIO might get involved, but not as much.
Take the case of Salesforce.com, prior to which, sales management software selection, evaluation, customization and provisioning was a nightmare and cost hundreds of thousands if not millions of dollars. Today, log onto a site, try it out, for free, see what you think? Get what you want, when you want and gone are the days of week long training classes to teach people the du jour product. I am sure you agree that this evolution is not only well under way but the new normal in many companies.
Hence, it is only rational the role of the CIO is changing in today’s new normal, specially that groups can utilize their own budget to provision applications and don’t have to be held hostage to the IT budget grind. So, this is changing the role of the CIO. Yes, we still need to be mindful about what we spend money on and make sure things run flawlessly, BUT, this is not longer the powerful position it used to be. By no means.
The democratization of IT, is impacting all aspects of the company like a storm and the successful companies are those who recognize and embrace this. Now, on the point of prototyping, this warrants special mention. One of the biggest benefits of the democratization and decentralization of IT and the ability to provision what you need, when you need, is the ability to be very agile in prototyping. Rapid prototyping allows us to experiment on what-if ideas quickly and efficiently, allowing a company to explore many avenues of innovation.
So, why am I excited? Because given the massive technical talent in companies we need to pave the road and be far more innovative than we are today. Road blocks such as ‘this has to be approved by the CIO’s office ‘ OR, ‘there is no way I can build a prototype efficiently’ are huge obstacles that we have to remove. Let’s empower groups to be innovative and productive.
The real question is: What should the role of a CIO be in this new democratic IT landscape? Should there even be a CIO? What do you think?
Here are Gartner’s picks for the top technology trends for 2013, which among the regular set of suspects, brings in enterprise App-store and strong emphasis on Big Data. To be honest, I have yet not formulated my 2013 list yet and wanted to get your thoughts.
I hope in 2013 we are rising above analytics to ‘predictive and machine-driven big data analytics.’ How can data-driven systems change the business and structure new business opportunities? Maybe this is more of a 2014 and later phenomenon but as I have been enthusiastic and waiting for many years, I would like to think us getting there slowly but surely starting soon!
That is what is super cool about Big Data- the infinite possibilities. Let’s discuss.
I am thrilled to report that we are in the Beta test phase of ProVoke LiVe NetWork, PLN.
We live in a highly global and collaborative world. My work with ProVoke and Disruptive Innovation has me engaged with many global teams. At all times I need to communicate with these teams in parallel as we work on disruption, innovation, technology review and re-engineering projects. About a year ago I started looking for a communication platform which would allow me to have live, video/audio, highly interactive, real-time and content driven collaboration with my audiences. I wanted a platform (not a software package) that would absolutely resemble the experience that I share with live audiences. I had high expectations and did not find what I needed.
When I was not able to find one, that was gave rise to ProVoke LiVe NetWork, which we call PLN.
Necessity is the birth of great innovation and innovative approaches. We start asking enough ‘what-if’ questions, we will eventually build our dream platform. A few of PLN key features include:
1. Highly orchestrated: with a producer in the background running this virtual network, just as a real TV network does, we can produce flawless events, from invitation to final close. This is key to being able to bring multi-media in and to engage/excite audiences.
2. Live: I wanted an environment that I could be on video with participants and provide an experience very similar to one if we were in a room together. Highly interactive and participatory. Our unique multi-video sequencing allows us to truly make this a global collaboration platform.
3. We are truly multi-media: Our secret orchestration sauce, allows us to bring audio, video, presentation and other mediums in to enhance the experience of the participant.
4. We are the only collaboration platform to integrate “live animation”. I wanted to share the animation experience I bring to my audiences in our in person sessions to this platform. And we did it!
5. Network: we will have multiple channels running at the same time.
6. Content-Driven: In addition to being a live, multi-purpose communication platform, PLN will be focused on the ProVoke Methodology, helping folks disrupt and innovate. The ProVoke Methodology follows the concepts laid out by my book ProVoke, allowing small to large companies and individuals, to very methodically learn and practice how to disrupt effectively and increase the rate of innovation. Hence, PLN is not just another webinar platform, rather one which is content-driven and designed to be highly engaged with the participants. We are the first company to launch a content-driven collaboration platform.
Many of the existing technologies fell short of my expectations as they are designed as a tool and not apriori architected to be a true collaboration platform. I expect to be bringing virtual audience members onto our stage, collaborate in real time, and have an experience very similar to one where we were together. That is the key. A highly ACTIVE vs. a PASSIVE experience.
Friends, I am so delighted to share PLN with you. Gone are the days that many log in, or dial in and put the speaker on mute, do other things and the call goes on. To me that is just a call where folks are listening (fact is often they are doing other things and not engaged). That is not collaboration. I call that a phone call!
We need something much more sophisticated and designed to truly enhance the participant experience. I want to delight the participant as that is the only way to get them to participate, be engaged and energized. We need this in order to disrupt and innovate!
Yes, PLN is a disruption to today’s video conferencing tools and without disruption we don’t have innovation! The journey has begun. Stay tuned as we launch PLN! More coming soon!
Watch the video below for a quick look at PLN:
Below you can watch a video describing PLN, ProVoke LiVe NetWork
It is time we disrupted and innovated the world of global collaboration platforms! We are pleased to introduce ProVoke LiVe NetWork, PLN, our collaboration platform. PLN provides a real time, virtual, highly interactive, and collaborative experience to our participants.
PLN offers virtual network studios with producers to ensure successful end-to-end collaboration, and the incorporation of many different multi-media solutions to enhance effective collaboration.
We are delighted to share our PLN experience with you. Please visit us at www.ProVokeLive.com.