By Valerio Nannini, Founder & CEO, Nannini Partners Ltd.

Financial returns on innovation inevitably take time, given the degree of experimentation required, and have a different risk /reward profile than usual corporate investment decisions.

Here are three basics for a successful corporate venturing CVC.

1. Roadblocks to innovation

The business landscape is filled with cautionary tales of large incumbent companies going bust due to a lack of innovation — usually a failure to focus on their increasingly digital consumers — and the simultaneous effects of globalisation. (Big-name examples from the annals of history of course include Nokia, Kodak, Polaroid and Blockbuster.) John Chambers, the CEO of Cisco, predicted that 40% of the world’s current leading companies would also be dead within ten years. Unlike Kodak and its contemporaries, the majority of today’s companies are fully aware of the need to plug into new and emerging developments, and to bring the outside world in. However, knowing what needs to be done, and actually doing it are two very different things. The chasm that exists between intention and actual innovation capability is too great for many of today’s big businesses.. Despite the clear link between growth and innovation, organisations are indeed being held back by several factors. Oracle’s report also revealed that the tensions created by a range of innovation paradoxes are significant and have in part led to one-third of companies surveyed feeling simply ‘overwhelmed’ by many innovation projects. Today 5 years later things have not moved much with few exceptions, and growth remains still a challenge.

2. The big win — insulating R&D from the parent culture

For many corporations, the key to moving beyond this sense of powerlessness lies in embracing an ecosystem model, one that is characterised by collaboration, value co-creation, customer-facing solutions, platforms, keystones and hubs. Through corporate venturing (understood as all activities a corporation undertakes to interact with startups: buy, invest, partner, build), businesses are able to create much-needed space, at the same time as accessing distant innovation via dynamic startups, and inject that intelligence back into the parent organisation: traditional barriers to innovation are broken down, and a more comprehensive, more productive network of ideas, insights, talent, and technology is accessed.

Some of the most common pitfalls involve starting with a lack of clear strategy, often the result of ‘me too’ syndrome: (if all my competitors have an incubator or CVC program, I should have one too); neglecting the proven benefits of collaboration or the leveraging of external talent as well as a fundamental lack of understanding of the time it takes for a new initiative to gain traction and “move the needle” in a large corporation.

Financial returns on innovation inevitably take time, given the degree of experimentation required, and have a different risk / reward profile than usual corporate investment decisions (by way of example, the cycles in venture capital are typically 20x longer than quarterly reports while VC’s funds often require a couple of years to deploy their capital and another three to five to exit.)

3. Getting CVC right — the three basics

1. Be crystal clear on your strategy
   Successful corporate venturing, and its ultimate goal of accessing external innovation, is all about long term strategic goals — less critical is the question of immediate or short-term financial returns. If both strategies are mixed, there is a risk that none of the goals will be achieved.

   The challenge, of course, is measuring or quantifying this strategic element of corporate venturing, particularly when contrasting it with the comparatively clear definition of success.

2. Provide startups and teams with autonomy
   Corporate venturing can be a godsend for rookie businesses — enabling access to R&D expertise and scale, providing support in navigating complex regulatory frameworks and IP protocols for example — but the corporate partner should never forget that too much corporate direction or intervention will kill the very thing that made the target so attractive at the outset of the relationship, that elusive “startup mentality”.

   Startups (and innovation teams) require resources to take risks and make mistakes which would not be acceptable in a corporate environment, the objective during early stages being to maximise learnings and not returns. As startup guru Steve Blank reminds us, a startup is a temporary organisation in search of a business model and a corporation is the industrialisation at scale of a business model. They are two very different operating models.

3. Keep the parent company close, but not too close
   It’s vital that corporate venture teams, acting as a sort of hinge between the inside and outside worlds, develop authentic relationships inside the parent corporation and with the external ecosystem.

   Demonstrating empathy and showing understanding that business unit teams are necessarily focused on near term goals will help to align both groups’ incentives gradually. Conversely, it’s equally essential that CV units do not seek to orient their investments and partnerships too closely to the “corporate narrative” — doing so will stymie left-field thinking but also make all-important fast and flexible decision making impossible.

The ultimate power of the magic triangle

Thought leadership is not about broadcasting knowledge, it’s about fostering meaningful change. My vision is to place my expertise in innovation strategy, digital transformation, and health ecosystems at the service of organisations ready to take bold steps forward.

As we stand at the intersection of technology and human needs, the potential for transformative impact is immense. I look forward to collaborating with partners who share this vision and are ready to explore new frontiers in innovation.

Let’s connect and discuss how we can create the future together.