Adding rocket fuel to corporate ventures

”Although large companies such as Hewlett Packard Enterprise, Intel and Apple were founded as nimble start-ups, it is more difficult to maintain innovation as a corporation grows.

“To drive innovation, corporations may set up an internal innovation organisation or a research and development group. While such methods are well-intentioned, it’s challenging to force innovation to happen within a large organisation.”

Corporates vs. start-ups

Compared to traditional start-ups, corporate ventures have the significant advantage of access to their parent company’s resources, including its customer base, distribution channels and industry expertise. In the finance sector, corporate ventures have a key advantage when it comes to support with establishing governance and regulatory compliance.

However, despite such benefits, the success rate of corporate ventures is little better than start-ups, with data suggesting a failure rate of at least 75 per cent.

“Going back to basics to rethink your initial assumptions about a corporate venture and perhaps redo things from scratch can be confronting, but that’s the kind of cut-throat approach that every successful start-up faced – it’s just as important to take that approach in-house if you want your corporate venture to achieve its goals.”

— Matt Davies, MakerX

Rather than outright fail, many corporate ventures simply fizzle due to the fact they did not undergo the rigorous early scrutiny applied to traditional start-ups, says Matt Davies, founder and CEO of MakerX.

One of the biggest mistakes they make is diving straight into the process of turning the idea into a product or business, without first validating the idea and establishing a strong business case, Davies says.

“While the idea behind a corporate venture might appear sound, it often hasn’t been battle-tested in the way that start-ups must endure in order to survive and get funding,” he says.

“Start-ups can fail due to loss of runway as they burn through their initial capital, while corporate ventures can keep taxiing but never get off the ground. Rather than quickly fail like a start-up, that lifeline of corporate support means an unviable corporate venture can drag on for a few years.”

MakerX specialises in digital product development for start-ups, corporates and venture builders. This includes bridging the gap between business strategy and technology implementation, including helping corporate ventures undergo the rigorous formative stages applied to traditional start-ups.

Those corporate ventures which find success often benefit from a significant advantage over the market which no start-up can match, whether it be the strength of their IP, the breadth of their customer base or the sheer might of their parent company.

But such advantages don’t guarantee success if the initial idea hasn’t been vigorously validated, perhaps due to internal preconceived notions.

When a corporation is struggling to make headway with their ventures, MakerX says it takes them back to the beginning by canvasing the assets of the parent company and then pitching back 10 new venture opportunities.

“Just like Shark Tank, we assemble a panel of judges, both internal and external, to take a brutally honest look at those pitches and see which ones should make it through to the next round,” Davies says.

“We then flesh out those ideas, perform market research and present back detailed business cases to validate the opportunity, before developing the proof of concept or minimum viable product.”

Success in corporate venturing is less about the strength of the business asset or intellectual property, and more about the execution. Forcing businesses to confront this can lead to some tough conversations, Davies says, but this is often the key to moving forward.

“Sometimes, the business initially asks us to just fix the problem, when the most effective solution is to help the business look at the problem in an entirely different way,” he adds.

To learn more, visit makerx.com.au/