Whether open innovation and venture capital activities should be executed in close cooperation or separately largely depends on the organization. For more mature, innovative companies, separating CVC and open innovation may make these functions quicker and more effective. For those organizations that are early in their innovation and digital transformation journey, keeping them close may be a better idea. This is because both functions are trying to still figure out how similar or different their scope is and what are the best tools and geographies to work with. Working on these questions jointly may save a lot of time, effort, money, but also create a better structure with more strategic value overall. In this blogpost, I will go over those types of value which I believe could be drawn out of the joint cooperation between the CVC and open innovation functions.
Open Innovation and CVC: Three Principles of Cooperation
Before I move into the specific types of mutual value within the open innovation and capital venture teams, there are a few basic principles that I would like to comment on. These are basic principles of any good teamwork. Yet, in the context of complex corporate structures, they tend to get lost in the surplus of information and mundane communication within the company. Making them the cornerstone for the teams’ cooperation helps every team member connect to the big picture and fosters the culture of openness inside relevant business units.
Principle 1: Open communication as the cornerstone of the Open Innovation and CVC team work and processes.
Opting for daily, informal channels of communication within a team makes it easier to get to know each other’s priorities and skillset. In many research projects in corporations around the world, good communication patterns between team members were the most effective way to enhance overall team performance (e.g. the Microsoft research on productivity).
Principle 2: Transparency and “Radical Candor”
Teams work better in environments where people challenge others directly and care about them personally. This was shown to create a level of transparency and trust within teams. The concept comes from Kim Scott’s book “Radical Candor”, where she describes in detail her experiences from various Silicon Valley companies running a culture of openness and care. It’s a must-read for every team leader.
Principle 3: Individuals and interactions over processes and tools (agile management principle)
Processes are very important, but open innovation relies on human connection and EQ excellence, which are required to assure pilot project success and other teams’ openness to innovation effort in general.
Strategic Value of Cooperation between Open Innovation and Corporate Venture Capital
Below, I have listed specific types of value that can be achieved through a close collaboration between open innovation (OI) and corporate venture capital (CVC) functions.
In general, the value generated by combining efforts listed below stretches the team’s budgets and capabilities, reduces time needed to achieve these efforts and creates an environment of knowledge and skills sharing, where the team achieves better work quality with less resources.
- Joint Challenge Creation and Opportunity Mapping: Easier Alignment of Opportunities and Priorities Across OI and CVC Functions.
Challenge creation and opportunity mapping is, in my opinion, the most important success factor in introducing open innovation into traditional companies. Many employees in business units outside innovation and Business Development (BD) are initially uninterested or even hostile towards pilots with startups and other OI activities. In order to bring them on board, joint challenge creation is a good way to include them in the process. By jointly mapping potential quick wins, trust in the open innovation activities and piquing others’ interest in championing innovation in their organization can be achieved more effectively.
This is why in general, open innovation projects in the “pull” models (when scouted partnerships are based on internal requests) work better, especially with those companies at the beginning of their OI journey. The “push” model (when specific technology has been found and presented to BUs without their expressing interest first) is much more difficult to pull off in the early OI stages, before successful cooperation with business units has been achieved
- Joint Scouting: Establishing a Single Funnel for OI and CVC to Align Efforts and Ensure Wider Outreach to Relevant Companies.
A joint, effective scouting process presents immediate value to OI and CVC team members and strengthens the company’s ability to map more opportunities and cover more geographies. In my view, the key factor here is to create an easy-to-follow process complemented by a straightforward CRM/scouting software that allows for all the necessary automation.
Thanks to joint scouting, all parts of the OI and CVC process have a chance to learn from each other and reduce the level of “noise” for the organization by coming across the same startups and technologies again and again, each time by a different party.
- Joint Visibility and Marketing vis-a-vis Startups: Leveraging Global Presence to Reach Quality Startups.
Ideally, as the OI and CVC effort progresses, significant numbers of relevant startups and other potential partnerships could approach your corporation on their own, providing all the relevant information in a detailed contact form that would automatically store their information in the OI and CVC database.
To achieve that, a company should foster its presence within relevant global startup communities and reach large numbers of startups via brand awareness. If you are not an established brand within the innovation community, startups may not know how much value such collaboration with you could bring them. By promoting your added value, you can signal your interest in partnering with them on a broader scale.
- Global Ecosystem Partnerships’ Development: Strengthening OI and CVC Outreach
In addition to building visibility and brand awareness directly with relevant startups, an additional global ecosystem and partnerships development would allow an organization’s open innovation and venture efforts to become more efficient through establishing good working relationships with venture capital funds, accelerator programs and ecosystem leaders in relevant verticals around the world.
These activities have the potential to bring a large number of relevant connections in a short period of time with minimal effort on the team’s side. At the same time, it strengthens the brand within the ecosystem and supports the deal flow generation.
- Building Transparent Engagement Process for Startups: Developing and Refining the Internal Process and Creating Trust in the Startup Community
In order to strengthen a corporate’s reputation as a valuable startup partner, it is useful to create and maintain a systematic “funnel engagement” process, which would require OI and CVC teams to give startups entering the partnership or DD a clear understanding of how the internal cooperation or investment process would look like and, ideally over time, how much time it should take approximately.
Once a potentially relevant startup has entered the process with a company, it would be fair to give it a clear understanding of the specific steps and provide a transparent and realistic work plan as a default engagement tool. Without it, startup-corporate partnerships tend to be slower and more uncoordinated than necessary.
Streamlining POC or investment process within a company is initially difficult, but beneficial for a company in the long-term. By building and refining a single process for collaborating with various types of tech companies, a company gains a bullet-proof structure for various employees to use, saving significant time and effort for each project.
- Supporting Digital Transformation and OI-CVC-related Knowledge Sharing
Open innovation works best in those organizations whose internal innovation and digital transformation processes are mature. Leveraging partnerships and investments to create content for managers inside different business units can be a good way to indirectly promote ventures and OI work with employees who do not deal with innovation on a daily basis.
Such activities familiarize all employees with the work of OI and CVC, but also support the digital transformation and internal innovation activities.
- Startup Portfolio Support: Maximizing Existing Partnerships and Investments
Supporting the development of companies that an organization has invested in should be a primary goal for the CVC, but also an important aspect of the OI work, especially in those cases where no partnerships with the corporation have yet been established.
If the investment strategy is to invest in those technologies that can be relevant for the company’s business in 3-5 years, then supporting the portfolio with business and market knowledge, learning mutually from each other and seeking business partnership as soon as possible is in the interest of both sides.