New Study Illuminates Best Practices for Collaboration Between Large Corporations and Start-ups

Researchers Offer ‘Field Guide’ for CEOs and CIOs involved in Corporate Venture Capital Units

Barcelona, May 03, 2018. – With all of the focus on entrepreneurship, start-ups, tech, and venture capital, a new study released today by faculty of IESE Business School in collaboration with Opinno Consultancy, sheds some light on the best practices for corporate venture capital and innovation. The Open Innovation: Building, scaling and consolidating your firms’ corporate venturing unit study found that while Corporate Venture Capital is a promising solution to source innovation opportunities at speed, executives must take a mid- to long-term view for this to bear fruit and must be diligent when designing a model that will be aligned most appropriately with the firm’s objectives and culture.

 

The authors of the study also compiled a ‘Best Practices’ guide for collaboration between large corporations and small start-ups, offering insight into how to build, scale and consolidate Corporate Venturing Units – identifying challenges and opportunities.

 

Corporate venturing (CV) mechanisms act as a bridge between innovative startups and established firms. At major corporations, they are not a new practice. Large firms such as Intel, GE, IBM, and Merck have employed them for years. However, due to the explosion of technology in the past two decades, there has been a spike in firms starting and expanding CV Units to keep pace with the evolution of technology and its ubiquitous adoption across industries.

 

“The pervasive impact of technology in all sectors demands a better understanding of how to make the collaboration between established firms and start-ups work,” said professor Julia Prats, co-author of the study and professor of entrepreneurship at IESE Business School. “In this study, we looked at the CV initiatives of 46 large firms, and extrapolated what works and what doesn’t. With all of the startups and CV money out there, this study should prove invaluable for those building, scaling and consolidating a CV practice.”

 

The practice of innovation in large corporations has been described as an attempt to steer an ocean liner. Established firms are well suited to what has made them successful but, in general, they are slow to adapt to new opportunities. In contrast, the flourishing and dynamic ecosystem of tech start-ups, where innovation is their daily bread and butter, continues to grow in every sector, propelled by new technological advances and fueled by the availability of funds.

 

Through interviews with 46 Chief Innovation Officers, and those in related roles, in eight countries – the United States and seven across Europe – the researchers identified major themes for success and failure:

  • Success –
    • The best practices include enabling technologies and processes to interact with the start-up at the required speed, moving from prizes to pre-investments in open competitions, granting autonomy with meaningful interactions, balancing the companies’ decision-making metrics between strategic and financial returns, and also considering their own employees for the corporate incubator application.
    • According to analysis, the most common practice across stages is the use of corporate incubators as a means to attract and relate with start-ups easily.
    • In the consolidation stage, accelerators play an important role in pushing projects that eventually will move ahead internally.
    • Simplified flat hierarchies and informal ways of communicating enhance innovation. Having a centralized perspective of the innovation at a whole, while keeping independent execution lines (project-oriented units), ensures the units have some decision-making freedom.
    • A clear point of contact with external CV partners also simplifies the relationship. There is a clear link between how the unit matures and how the firm is organized internally.

 

  • Failure –
    • For companies starting a CV unit, common sources of failure are the absence of a clear tangible value proposition for either the large firm or the start-up and a lack of buy-in from the large firm’s top management.
    • In the scaling the CV unit, triggers for failure: the lack of a clear path, procedures or resources to expand the unit; and a failure to fulfill the expectations of either the firm (expected innovation and return on investment) or the start-up (benefits). The challenges vary when the CV mechanisms are already consolidated and must interact closely with the business units. On many occasions, the CV unit did not have enough freedom to test new opportunities in the market and had difficulty in integrating with the core business.

 

Open Innovation: Building, scaling and consolidating your firms’ corporate venturing unit was done in collaboration by professor Julia Prats and Josemaria Siota of IESE Business School and Tommaso Canonici and Xavier Contijoch of Opinno Consultancy. Professors Alfonso Gironza, Jordi Prats and Celeste Saccomano of IESE Business School also contributed to the research of the study.

 

To view the complete study, please visit the following link.

 

About IESE Business School

IESE Business School was established in 1958 with the aim of developing business leaders who aspire to make a positive and lasting impact on the people, organizations and communities they serve. At IESE, the emphasis is always on professionalism and ethical values. Distinctly global in dimension, IESE boasts campuses in Barcelona, Madrid, Munich, New York and Sao Paulo. The school enjoys longstanding academic alliances with top U.S. universities including Harvard and Wharton, as well as a network of associated business schools across five continents.

 

About Opinno

Opinno is a global innovation consultancy that helps large and medium companies in their processes of innovation and digital transformation. Its “innovation as a service” model, which is an end-to-end integral accompaniment to innovation, consists of four business units: People, Ideas, Solutions and Academia. Its mission is to generate impact through collaborative innovation and has available one of the largest networks of experts and talent. Opinno is specialized in the processes of open innovation and corporate venturing, helping large companies to collaborate and develop their own internal and external ecosystems. The company is the editor of Harvard Business Review and MIT Technology Review in Spanish, leads one of the most important competitions on innovation, technology and entrepreneurship: MIT innovators under 35 in Europe and LatAm. Its more than 150 consultants work globally from Madrid, Barcelona, San Francisco, Boston, Mexico City, Bogotá.