Corporate Entrepreneurship and Business Innovationcimp.nd.edu/.../bowman_corporate_entrepreneurship... · Corporate Entrepreneurship Corporate Entrepreneurship ... Corporate venturing

Corporate Entrepreneurship and Business Innovation

Scott Bowman – Partner, Clareo

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Corporate Entrepreneurship

Corporate Entrepreneurship (CE) is the process by which teams within an

established company

conceive, foster, launch and manage new business initiatives

that are distinct from but leverage the parent

firm’s assets, market position and capabilities.


First Hand Experience


This is harder than ever…

* Business Week / BCG CEO Most Innovative Companies Survey; Accenture CEO Survey, 2014

70% of CEOs that name innovation as top 3 priority

Nearly 50% of CEOs dissatisfied with return on internal innovation investments

#1 Obstacle For innovation is slow development cycle times

1 in 5 CEOs Believe their innovation is enabling them a competitive advantage

Only 1 in 3 CEOs believe they have a well-defined innovation strategy

93% of CEOs that say innovation is vital to long-term success

“Houston, we have a problem.”


(change and disruption are the new normal)

…and more important than ever


Does your company struggle with creating totally new

innovations and/or new businesses?

Why do you think it is so difficult?


Innovation through Big Data and IoT: Emerging Technologies Group (ETG)


Global Technology Council (GTC): Creating Sustained Pipeline of Longer Term (4+ years) Breakthrough Innovations


Mentoring Teams to Create New Businesses: Taleris (GE-Accenture JV)



No One Size Fits All Study of CE programs at nearly 30 leading firms along factors such as leadership, strategy, structure, process, people, resources, linkages and culture. Examples:

Two dimensions (out of many) explain most of the variability:

§  Organizational ownership (who is charged with CE?)

§  Resource authority (where does funding reside?)

The differences are critical to the successful management of CE


Two Dimensions…Four Models

Resource Authority

Organizational Ownership

Ad Hoc

Dedicated

Diffused Focused


Four Models of Corporate Entrepreneurship

Resource Authority


Ad Hoc

Dedicated

Diffused

The Enabler

• Procedures for finding, selecting and resourcing NBC

• No formal, dedicated organization

Focused

The Advocate

• Defined organization acts as a facilitator and proponent

• Limited budget; majority of funding from Business Units

Office of the CTO

The Producer

• Formal organization with specific mandate to create new businesses

• Significantly self-funded, or controlling others’ resources

Corporate venturing tends to fall into Producer and/or Advocate model…

The Opportunist

• No (or limited) formal CE procedures or organization

• Social networks drive NBC selection & resourcing


Evolution in Models Over Time

Resource Authority


Ad Hoc

Dedicated

Focused Diffused

The Opportunist

The Enabler The Producer

The Advocate

All firms begin as “Opportunists”. By nature, small, growing firms focus on their core business. If they pursue CE, it occurs opportunistically, and without formal processes.

Even after maturation, most firms require sufficient growth pressure and/or competitive threats to embark on true, structured CE efforts, which require substantial resources and leadership attention.


Discussion:

What are some examples of programs or groups within your company that

resemble one or more of these models?

What do you believe are the success factors…and challenges of each model?


Five Key Principles We’ll Discuss Today

1.  Define your objective clearly

2.  Build a strong connection with your plan for innovation

3.  Pick the right internal customers and forge strong alliances

4.  Design small experiments to test, learn & scale

5.  Do everything you can to gain an external perspective


Principle #1: Clarify the Objective (Top Factor)

Enabler

Enable Innovation Company-Wide

Transform Existing Businesses

Build Truly New Businesses

Opportunist Advocate

Producer Enabler


Producer Enabler


Producer


CEO: What do we do about a world that doesn’t need lubricants?


Castrol 2020: Creating the Agenda

External Collaboration Internal Ideation Prioritized Portfolio Futures

§ All three business: automotive, manufacturing, marine

§ Global view: Silicon Valley, London, Shanghai, Bangalore

§ Powerful, collaborative sessions with externals

§ Senior leadership involved in futures … and implications

§  Ideation (multiple rounds)

§ Clustered into territories

§ Consumer galleries–insight

§ External validation

§ Opportunity profiles

§ Portfolio assessment

§ Creation of territories

§ Agenda for the future…

Summer/Fall 2010 Fall 2010 / Spring 2011 Fall 2011


Castrol Beyond Lubricants: THE FUTURES


Castrol innoVentures Today

IntelligentOperations

Next GenerationEngineering

Smart Mobility

ResponsibleCastrol

Supporting customers in

facilitating and improving the

production and logistics

process.

Providing sustainable

solutions for consumers and

industry in the context of

accelerated demand and a

low carbon world.

Providing a better Mobility

Experience in the vehicle,

around the vehicle and

independent of the vehicle.

Exploring and investing in

technology leadership in

liquids and materials,

transform the capabilities of

engines and machines.

Organization, structure, governance & process for innovation beyond the core

Portfolio strategy and innovation approach linked to focus areas Explicit mandate to be a Producer


Powerful New Business Engine, Fueled by Venturing Unit


How do we organize to enable existing businesses? (very different objective than Castrol)


Acting as an Advocate: Transforming, Enabling and Growing Existing Businesses

BP Office of the CTO

§  Deliberately small team, connected to the business

§  Develop deep knowledge of the business

§  Create scanning & partnering function

§  Search & apply with VC community

§  Evangelizing new technologies (blue chalk sessions)

§  Relevance, technical readiness

§  $100m+ per year in cost savings to BP in 5 years

§  Sensor networks, predictive analytics, field automation


The Differences are Significant


Principle #2: Build a strong connection with your plan for innovation


Innovation is about New Value, Not Just New Things

z

Offering Innovation Product Leadership

Functional Value

Customer Innovation Customer Intimacy

Emotional Value

Partnership Innovation Relational Excellence Value Amplification

Operations Innovation Operational Excellence Economic Value


Innovation is about New Value, Not Just New Things


Connecting Innovation to Business Challenges


Connecting Innovation to Business Strategy

Manufac-‐turing Marke@ng Distribu@on Design Inventory

End–to–End ownership

GAP owned GAP owned Outsourced

$30 COGS

$100 Regular Price Markdown

0 15 5 10

$36 COGS

$85 Regular Price Markdown

0 15 5 10

GAP ZARA

Gross Margin

COGS

15% Price advantage

20% Cost disadvantage

Despite lower prices and higher costs, Zara’s gross margin dollars are 55% greater than Gap

Gross Margin Productivity: Zara vs. Gap

50% at Reg

80% at Reg

20

Legend:

Source: “Keeping Inventory- and Profits off the Discount Rack” , Strategy + Business reader, 2008


Connecting Innovation to the Company’s Strategic Aspiration, Mandate

What growth options should we consider?

Novo Nordisk Aspiration: To defeat diabetes by finding

better methods of diabetes prevention, detection and treatment


PYY gut hormone to counteract obesity by regulating appetite

Next-generation insulin with 40 hours coverage vs. 18-26 hours (industry average)

Education, Solutions: First-ever insulin dosing guide & physician solution for iPhone

Focus on customer experience, not just science – new delivery systems (e.g. FlexPen and NovoPen)

Changing Diabetes in Children programme: Clinics to diagnose & treat children with Type 1 diabetes in developing countries

Stakeholder Engagement: Diabetes Attitudes, Wishes and Needs (“DAWN”) study World Diabetes Foundation (WDF)

Connecting Innovation to the Company’s Strategic Aspiration, Mandate


Question: How well defined…socialized…aligned

is your plan for innovation at your company?


Principle #3: Forge strong internal alliances


Do Your Internal Partners Understand?


Amway Business Innovations – Before and After…

• Pick your internal customer

• Secure strong sponsorship

• Build relevance• Speak their language

• Remember: this is a relationship game…


Principle #4: Design small experiments to test, learn and scale


This is not only for startup companies…

Culture Change

FastWorks Being leaner, faster and

closer to customers

Source: GE Internal; The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses, Eric Ries, 2011.


Organizing for Experimentation General Mills created a digital marketing experimentation program, called G-WIN. Goal: Create powerful insights and create new consumer engagement models

Principle #5: Do everything you can to gain external perspective


Corporations seek the predictable… startups seek out the possible.

Corporations are about managing known risks…

startups are about embracing and eliminating uncertainties.

These are radically different paradigms


The World of Corporate Venturing … Briefly Corporate Venturing: structured approach for investing in and/or partnering with the startup ecosystem.

More than a passing fad…

~7,000 investments in the past 10 years

Over $3 billion invested last year

18% of all U.S. venture deals CVC backed

T H E W O R L D O F CO R P O R AT E V E N T U R I N G 2 0 1 5 7

T H E D E F I N I T I V E G U I D E TO T H E I N D U ST R Y PART 1

However, these returns reflect many groups being active for a relatively short period, and it also has to be noted that the market environment for the past five years has seen technology valuations increase significantly on paper – 70.9% of groups have a return smaller than 150% of cost measured by net asset value. However, it is notable that 15.2% of groups have more than doubled their money, with 1.3% of respondents making a greater than five times return, and a further 7.6% having more than tripled their money.

The most common average age of teams is under 50, reflecting roughly half the industry. Another 40% of teams have an average age under 40.

Those campaigning, like Global Corporate Venturing, for greater representation of women in venturing will be disappointed that 79.4% of groups are majority male or solely male. However, 3.6% of groups are majority female,

while 16.9% of groups have a relatively even gender split.

The most common direct reports for corporate venturing units are to the chief executive, suggesting how important many operations consider their venturing operations to be. This is followed by the head of strategy, the chief innovation officer and the chief financial officer.

Just over a third of units are actively taking fund stakes, suggesting groups differ in the priority they place on using fund relationships to drive dealflow. Perhaps intriguingly, 31.8% of groups have no fund commitments. A significant minority of groups have made an active choice to commit to numerous funds, with 18.2% groups backing five funds or more.

Perhaps unsurprisingly, the most common oursourced service is legal, with 81.4% using external counsel. Accountancy is the next most popular service, followed by recruiting.

Zero to $50m27%

$50m to $100m23%

$100m to $300m27%

$300m to $500m8%

$500m to $1bn6%

More than $1bn9%

How much has your unit invested in its history?

12.9%

15.1%

23.7%

29.0%

44.1%

71.0%

To license technology

To form an ecosystem

To understand high-growthcompanies and venture capitalists

To make acquisitions easierand increase pipeline

To make financial returns

To secure market intelligence and make strategic decisions

What are your main reasons for pursuing corporate venturing?

Multiple reasons / motivations…


Source: BMW

BMW i VENTURES INVESTMENT AREAS.

BMW i Ventures, 20.01.2012 Seite 5

Intelligent parking solutions

E-Mobility

Intermodal Solutions

Car sharing and per usage models

Location-based and

ad-hoc services

… Infotainment

Parking Technology

Peer-to-peer parking

On/Off-street parking

Peer-to-Peer Car Sharing

Car Sharing

Ride Sharing

Pedestrian Navigation

…

Smart Traffic

Big Data / Analytics

Peer-to-Peer EV- Networks

Public EV-Networks

EV Technology

Smart Grid Routing &

Information Intermodal Navigation

CS Technologies

…

…

…

Accelerating New Innovation in Emerging Areas


Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

1,491

1,337

1,153 1,146

969 831

663 625

290 232 229

176 162 143 152 104 43 39 15

1,548

1,657

1,878

02 96

$1,600

$1,200

$800

$400

0

$200

$600

$1,000

$1,400

(in M

illio

ns)

$1,800

$2,000

97 98 99 00 01 95

153 151 179 230

2,006

This may be a matter of corporate life or death…




Take a minute to reflect…

What is one thing you believe you should begin working on

next week, based on what we’ve discussed today?


Closing Thought: Connect innovation to a Broader Mission…

Thank you for your time Contact Info: Scott D. Bowman – Partner, Clareo e: [email protected] c: +616.780.1668

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Corporate Entrepreneurship and Business Innovationcimp.nd.edu/.../bowman_corporate_entrepreneurship... · Corporate Entrepreneurship Corporate Entrepreneurship ... Corporate venturing