Innovation is the ultimate performance enhancer. PWC claims that “competent innovators” have performed 18% better than their peers and are expected to see 2x the revenue growth of the innovation laggards. Yet, Harvard warns that up to 90% of innovations fail. Is it feast or famine? At VentureFuel, we have spent the past 5 years helping the largest corporations in the world successfully execute over 100 different partnerships with emerging technologies and startups. It’s all we do. Last week at our Innovation Brew event in NYC, we curated a group of over 100 corporate decision makers, leading VCs, and cherry-picked founders from around the world to unpack the challenge of big companies partnering with startups. Here are 5 take-aways to help corporate marketers improve successes, mitigate risks and ultimately unlock the potential of innovation.
The Juice is Worth the Squeeze
Throughout the conference, I asked a variety of luminaries in the corporate world some version of the question: Should big companies even think about startups and new tech? It takes time and effort and the initial results are rarely immediate or not of enough scale to greatly impact today’s KPIs – quite simply, is the juice ever worth the squeeze? Jim Stengel, former CMO of P&G, replied in reference to the 200+ companies he interviewed for his book Unleashing The Innovators, “Most of the smart companies said, we would be totally arrogant to think that we have got the corner on innovation. We don’t. We are only so big, we only have so many capabilities, so much time. If we could find some system, some way, to tap into the ideas that are happening out in the world that are important for our hunting grounds, wouldn’t that be amazing? And I think if you ask companies like Motorola, like IBM, like GE, like Ford, like P&G, is the juice worth the squeeze they would all say, resoundingly, yes.” Tom Hartnett, President of 1-800-Flowers.com continued, “Embracing new technologies gives us another touch point, another way to communicate with our customers. These technologies help us create a community and develop relationships, enabling us to remove friction from the process and better serve consumer needs. And, if we are first movers, there are some very tangible benefits from being there for our customers.” Ben Feeney of MillerCoors concluded “If we are able to find a technology that can increase our results or efficiencies by 1% and it has the ability to scale across all of our business units and/or globally – you can imagine how tangible those results become. That’s juice everyone should be squeezing.”
One of the VC Panels at VentureFuel's Innovation Brew 2018 in NYC
Cast a Wider Net
Less than .01% of founders engage VCs, Incubators or Accelerators at any point. Where can you find the other 99.99% of startups? Many companies go to conferences like CES or rent an outpost in Silicon Valley. Many even partner with a local accelerator, incubator, university or VC. Each of these are fantastic pieces to the puzzle, and, if you have time to do them all, gives you a solid base to source from.
But the feedback from the most successful corporate innovators and leading Venture Capitalists, is that you need to look wider, across the world and outside of tech hubs to find what is next. Caroline Lewis, of Rogue Venture Partners in Portland, Oregon commented, “The reasons startups go to Silicon Valley is access to capital and talent, both of which you can find elsewhere now, and in cities with lower costs, higher quality of life – giving the company a competitive advantage by residing outside of The Bay.” Eyal Bino, Partner at ICONYC Labs, said “Innovation no longer has borders. The Israeli tech scene has over 350 multi-national R&D centers and over 200 startup accelerators – to ignore that would be a competitive disadvantage.” Tosin Agbabiaka, early stage investor at Octopus Ventures, continues “Each city, country and region have different types of founders and solutions that can solve challenges in unique and unexpected ways. For example, the UK Fintech scene often approaches different problems than the Fintech scene here in New York because of their different regulatory environments.” Other investors that spoke have a focus on specific verticals, such as AI for Sarah Fay of Glasswing Ventures or AR for Ori Inbar, Founder of Super Ventures. The barriers to start a company have dropped to the point that anyone, anywhere can see a gap in the marketplace and create an ingenious solution. That creativity and problem solving can give large corporations innovation magic. In fact, when VentureFuel analyzed our 100+ partnerships, a vast majority of the solutions we facilitated had founders based outside of Silicon Valley; from Ireland, Germany, UK, Italy, Mexico, Austin, Denver, Boston, Los Angeles, New York, Chicago and more.
Panel discussion on sourcing Beyond the Valley
One senior CPG executive asked, “How you can go wider, when you need to move faster?” and, “How can you find real partners that keep you at the forefront of innovation, while also being invested in your long-term success?” The simplest answer is to find partners whose business objectives are aligned with your own, who will work to solve your specific problem.
Many VCs, Incubators and Accelerators offer some sort of corporate innovation program – but, their ideal outcomes are different from your needed outcomes. VCs only invest in companies that can deliver huge financial returns in a short period of time. They’re looking for unicorns and may pass on the thoroughbreds that can perfectly solve your business challenge. They are also limited by their thesis and limited to founders that are willing to give up 5-10% equity for their services.
Universities are awesome sources for innovation, but to get the one university, at the right time, when they have something that solves your specific problem is a bit like finding the needle in the haystack. Agencies and traditional consultancies are costly and are always focused on their core revenue generators and big-ticket items. They give great lip-service to innovation, but often are just taking the call-ins and the usual suspects found on the conference circuit.
Always look at the core business of anyone that says they can help with innovation. If their core revenue stream is anything but delivering you successful outcomes – chances are, your innovation challenges aren’t going to be their core focus. Find a partner that gives you speed, access and shares the risk and reward of moving fast into new spaces.
A vendor demonstration at VentureFuel's Innovation Brew 2018 in NYC
Look for Creative Solutions, Not a Specific Technology
The CMO reads about Augmented Reality in Harvard Business Review and now you “need” to test AR immediately. We get it. No one wants to be left behind and everyone is chasing the next big thing. But whether blockchain, AI or AR, one of the biggest insights from the day was to chase solutions, rather than specific technologies. “We don’t start with tech, we start with our business, looking at MillerCoors’ business imperatives and connecting emerging market solutions accordingly,” said Ben Feeney, Director of Foresight and Design at MillerCoors, during his case study on the success of their Incubator.
One of VentureFuel’s biggest successes was with a client that asked us for new platforms to engage millennials and drive relevance in pop-culture. They were certainly thinking AR or the next Snapchat, but when we introduced them to The Museum of Ice Cream – they found a rocket ship, unrelated to a specific tech, that delivered on their KPIs thousands of times over. Sometimes a VR experience works for a credit card, because it solves the need to tell an intricate story that may be boring to most consumers. Or, as Steven Cardwell, Director of Program Marketing & Marketing Strategy from HBO, said about creating the entire town of Westworld at SXSW, “We tapped into the authenticity of the show, but used live theatre as our unique delivery vehicle, delivering an actual rather than virtual experience.”
A glimpse at the Future of Retail
To Scale – Vet, Move Fast and Champion
“It’s great to be first to try a new thing, to test, to pilot and to get to market, but how do you go from a successful test to scale, ” asked a senior CPG executive. We all know that many proof-of-concepts are successful but get caught within the corporate machine and the opportunities get missed. How can you remove that friction and drive scalable results?
First, increase the likelihood of success with thorough vetting. Most companies don’t do enough diligence to ensure fit with their organization (and in the process help Harvard write stories about 90% failure rates). What is the new company’s corporate IQ? Who are their founders, their teams? What is their history, their funding? How will they integrate into a company as large and complicated as yours? Will they be able to make sense of your corporate spaghetti? If you look at the greatest sports teams of all time, their success is rarely about raw talent or throwing money at problems. It’s chemistry and the various players integrating to become greater than the sum of their parts. You need to take the time to make sure this particular company works well with your organization.
“The disease amongst big companies, and they all know it, but it’s really hard, is that they are way too slow,” said Jim Stengel. No matter how lean and nimble your corporation, you are a slow-moving wooly mammoth to a startup founder who only survives by getting deals done, quickly. Often, once the startup is identified, they are then bombarded by legal, procurement, creative and multiple other voices at the corporation. Marcelo De Santis, former CIO at Mondelez and Pirelli commented, “We used to send 70-page contracts to startups we wanted to work with and told them to have their legal team review without realizing that they didn’t have a legal team! So, we worked with procurement and legal to create a one-page scope of work to cover us until we got out of the test phase. We learned that a few corporate processes must be ‘reengineered’ in order to build a win-win partnership with startups.“ Andrew Green, Global Director of Innovation at AB-InBev, spoke about the need to navigate the corporate waters and to be “the internal champion of the idea, and the test.” You must shepherd the project through the challenges it will face that are unique to your organization. Green continued, “So much of innovation success is understanding your own corporate timing and aligning your great solutions to the moment they can be implemented.”
Andrew Green and Josh Campbell
Lastly, Stengel advises, “You have to champion the startup and champion the success story of how the partnership worked for your business, to seize upon the energy created.” This point is often lost, as when the test is done, people rotate off the business or on to the next KPI. Its critical to develop what success looks like upfront and then to market that success internally when it is achieved. Press releases, internal memos, demo-days – make sure the rest of the organization sees the change you have enabled. It’s good for your career, good for the startup and good for the organization to leverage their investments in innovation.
If you can harness innovation, you can drive increased revenues, new revenue streams and increased efficiencies while reducing costs and avoiding doomsday disruptors. But it is as complicated as hiring. You only want A-players that solve your current challenges, fit your culture and have the potential to scale beyond the immediate role. Investing time up front to get the best candidates, vetting them for corporate fit and then assisting them throughout the integration stages will de-risk your investments and set you up for success.