When our clients are in a position to make tough choices on which path to take for growth (especially in slow-moving, scaled organizations), we tell them put on their Venture Capitalist hat and imagine that they’re investing in a startup. This helps them re-imagine and re-prioritize the risks associated with launching new products, services and business models in new ways, which is sometimes hard for organizations that aren’t used to growing in this way.

Lean-In to the Discomfort of Innovation

There’s no debating the importance of innovation. 88% of the Fortune 500 has changed between 1955 and 2014. Many say the pace of that turnover is likely to accelerate. And incubation, internal genesis of new businesses, is a means for defending against that disruption. Effectively, incubation, or intrapreneurship to borrow a modern descriptor, allows the pursuit of disruptive businesses inside the going concern. Best case, this is more affordable, and less risky, means for seeking out and realizing significant new growth (compared especially to M&A and Corporate Venture Capital investments).

Why it’s Hard for Companies to Innovate

One of the biggest failure points in intrapreneurship (i.e. corporate innovation) is the inability to receive the output of the innovation group back into the core business – often due to a lack of intentional design of both the mechanism and the decision-making model. In other words, an internal group of intrapreneurs have done their due diligence to validate that customers want, and will pay for, a new service/business model, but the core business doesn’t feel confident in transitioning it into an existing or new vertical of organization. There’s a host of other issues related to this, but this is where we’ve seen a number of genuine market successes fail. And there’s nothing more heartbreaking than to see the market say, “Yes, please! I’ll pay!” and to then have the business say no.

How the VC Mindset Can Help

Enter the investor’s mindset. We’ve found putting the key sponsors (direct funders or indirect decision-makers) of the innovation initiative(s) in a new investor role, rather than their day-to-day manager role, a simple and highly effective technique that begins the necessary change management around this very issue. They’re familiar with how the opportunity evolved from its inception and the learnings and pivots that happened along the way.

So, instead of giving a new initiative the gladiatorial thumbs up or thumbs down (i.e. giving answers on the spot), they become advocates for growth, asking strategic questions and defending investment criteria and prudent risk-taking. They look to the not-too-distant horizon, not 10 or more years out, and tell the founding team what they need to come back with to prove that it’s worth follow on investment. Just as a VC would want her entrepreneurs to do. This shift is absolutely critical, if significant new growth is to be realized via incubation or strategic corporate venture investment.

What do you think? Have you tried something like this out? What else have you seen work? Drop me a line at cmaxwell@peerinsight.com

Also, checkout our Corporate Innovate Playbook for other tactics that innovation groups at Fortune 500 companies use.

– Clay Maxwell, Peer Insight + Peer Insight Ventures, San Francisco

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