Capturing Innovation Through Corporate Venturing

Talking corporate venturing and getting the most out of it with two frontrunning experts in the field.

Hong Kong: a flourishing startup hub that’s home to over 3,000 early-stage companies. In this rapidly-growing deconstructed startup ecosystem in the heart of Asia, corporations must find strategic ways to innovate and adapt. Corporate venturing has long been a popular strategy for doing so, but the time is ripe for a more granular discussion on doing it more effectively.

Corporate venturing (CV) responds to corporations’ need to break new ground and drive innovation at multiple levels of the firm. It’s a pioneering solution that many Hong Kong-based corporations have turned to because it’s fast enough to cope with a volatile environment, while also able to achieve enhanced and accelerated results at a lower cost.

Capturing-Innovation-Through-Corporate Venturing (1)
Julia Prats, Academic Director of the Entrepreneurship and Innovation Center at IESE Business School. Image courtesy of Julia Prats.

Julia Prats, Academic Director of the Entrepreneurship and Innovation Center at IESE Business School, has extensively researched the corporate venturing landscape worldwide, and found that the number of firms collaborating with startups has increased fourfold since 2015. Despite this substantial rise, Prats’ research reveals that 75% of corporations still face significant obstacles in achieving their desired aims through these programs.

One of the main obstacles to success is the lack of a clearly defined strategy, which in turn often results in unsustainable CV activities, according to Prats’ study, in which she interviewed 94 CIOs around the world. She adds that internal corporate teams are rarely trained to work with startups, which can easily lead to conflicts.

“We know that results often do not come in the short term; hence, expectations, resources, and teams need to be managed with the right time frames,” says Prats. “Without a deep understanding of the innovation process […], it is difficult for the executive committee to be able to sustain the effort required, and the temptation to discontinue prematurely is huge.”

Irene-Chu
Irene Chu, Partner and Head of New Economy and Life Sciences at KPMG China. Image courtesy of Irene Chu.

That said, Irene Chu, Partner and Head of New Economy and Life Sciences at KPMG China, explains that effective CV demands dedicated commitment to innovation from both sides.

“Startups should also be conscious that they may need to adjust their products or services and operating model in order to service the corporate, and evaluate how best to cooperate while still pursuing their goals,” Chu says.

Both Prats and Chu emphasize that there is no ‘one-size-fits-all’ approach to CV. Prats explains that the right fit is characterized by a number of factors, including objective and internal capacities. She adds that because of this, it’s sometimes harder to explain to a CIO why they should not be emulating another company’s CV program – something that is tempting for CIOs in the nascent world of digital transformation.

“Knowing from one of our previous studies that 60% of CV practices in Europe, US and Asia were launched in the last five years, there is no doubt that there is still a need to create and disseminate knowledge on this topic,” she says.

Julia Prats will talk more on Corporate Venturing: Growth through Open Innovation, and Irene Chu on Global Tech Venture Trends at the Cyberport Venture Capital Forum, November 3-4, 2020.

This article was written in partnership with the Cyberport Venture Capital Forum.

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