Unraveling the success factors of Corporate Venturing

21 May 2015 Consultancy.uk

Rotterdam School of Management, Erasmus University has launched a new executive education programme for managers, advisors and professionals interested in boosting their knowledge in the field of Corporate Venturing. To understand more on the upcoming, but also complex topics, and the two-day programme, Consultancy.uk dove into the world of corporate venturing and spoke with the facilitators of the programme.

Corporate Venturing has in recent years developed into one of the buzzwords in the world of management. While the field is not new by itself, a mix of recent trends and developments have elevated the domain from a greenfield to a strategic theme for most large and small companies globally. Through the rise of among others new technologies, markets and industries nowadays are more susceptible to being disrupted. Examples can be found all over the place, with Uber transforming the taxi world, online platforms reinventing the retail value chain, Airbnb disrupting the market for hotels and house rentals, and so on. Typical about the new disruptors is that they tend to be new players, undergoing explosive growth on the back of a breakthrough business model and a scalable, cutting-edge technology.

Uber and Airbnb

“Small firms and start-ups play an increasingly important role in our economy nowadays. Disruptive innovations and business models are creating new market and value networks, posing a major threat to more established firms”, comments Vareska van de Vrande, Associate Professor of Strategic Management at RSM and an expert in open innovation and corporate venturing. Combined with the growing economic pressures and market challenges incumbents are facing – driven mainly by globalisation, competition, regulation and changes to consumer behaviour – organisations are increasingly turning to innovation to maintain, or even recover their competitive edge. A recent research from Strategy& underpins the trend – last year the innovation spend of the globe’s 1.000 largest organisations reached $647 billion globally, a record level, up 60% from a decade ago. “Several research studies released over the past years signal that innovation is growing in importance in the corporate space as a strategic means to achieve competitive advantage, and the priority is increasingly reaching the boardroom”, says Van de Vrande.

With innovation on the rise, the market has opened up to new or refurbished forms of innovation. Traditional innovation, centred around in-house Research & Development, remains the heart of the industry in terms of volume, yet alternative approaches such as co-creation, crowd-based innovation, partnerships, network collaborations and R&D outsourcing quickly gained terrain. Another topic that is increasingly dominating the innovation landscape is corporate venturing, a term given to the (minority) investments by corporates in external start-up companies. Key objective of corporate venturing is to gain a specific competitive advantage, either through getting hold of innovative and/or proprietary technology or knowledge, or through gaining access to a network of clients and/or suppliers. Corporate venturing is a subset of venture capital, a $48 billion market according to advisory giant EY*.

Corporate Venturing is gaining terrain globally

Corporate venturing is by no means a new business – over the past decades corporate enthusiasm for venture capital has waxed and waned – but has seldom been greater than it is now. Traditionally the approach appealed mainly to high-growth sectors such as pharmaceutical or technology companies, yet with the rise of digitisation, online and disruptive technologies, corporate venturing is nowadays welcomed across industries and markets. Despite the growing attention for the field, and the wave of research, models and best practices out in the marketplace, corporate venturing’s track record can be described as ambiguous. According to the National Venture Capital Association, the representative organ for the industry in the US – the globe’s largest market – 25% to 30% of venture-backed start-ups fail completely, with another roughly 25% to 35% not meeting expectations. However, many dispute the data, arguing that venture capitalists "bury their dead very quietly”, hence understate the failure rate, with a Harvard research even advocating that a staggering 75% of venture-backed start-ups do not deliver the projected return on investment**.

Whichever view is considered reality is less the point, clear is that corporate venturing in its fundament is a risky business. To get the most out of it, a rigorous approach needs to be in place, and to help executives, managers, entrepreneurs and innovation leaders gain grip on the process and critical success factors, Rotterdam School of Management, Erasmus University has developed a brand-new executive programme that focuses purely on corporate venturing. The two-day programme takes place on 5 and 6 November 2015, and will be facilitated by Van de Vrande and Rob Kirschbaum, former Vice-president of Open Innovation at DSM and commonly regarded as a thought leader in innovation.

Vareska van de Vrande and Rob Kirschbaum

The programme will present insight in the latest market trends, developments (and academic perspectives) in corporate venturing, as well as position the domain within the corporate innovation process. The latest tools & techniques will also be discussed, presenting participants the opportunity to test and churn out those which make the best fit with their practical requirements. In addition to theoretical knowledge, real-life company cases from varying sectors have been integrated into the curriculum, to ensure that “theory and practice blend into another”, comments Kirschbaum. At the end of the road, the facilitators pledge participants will return to the firm with a cutting-edge package of “insights, best practices and concrete skills and tools that will support on-the-job delivery”.

* Global venture capital insights and trends 2014. The share of corporate venturing is estimated to be between 10% and 15%.

**Research from Harvard Business School, led by Shikhar Ghosh.

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