In recent years, many industry-leading corporations have been replaced by startups or competing firms that were able to innovate quicker.
Take BlackBerry for example. It dominated the cellphone manufacturing industry, with over USD 15 billion in revenue in cellphone sales alone during its peak in 2011 according to data from Statista. But just 4 years later, Statista’s data shows that the company did not have any revenue from the sale of its cellphones.
The former phone manufacturing giant seems to have all but disappeared. CNN reported that BlackBerry still stuck to making phones with physical keyboards when the consumer market was shifting toward the touchscreen phones made by Apple and Samsung.
It seems that its competitors were able to innovate and react to market shifts faster and better than BlackBerry. Business Insider reported that the company failed to innovate, leading to the demise of its cellphone manufacturing business.
Many other established and seemingly failure-proof corporations have gone down the same path. This highlights the need for all corporations, including current industry-dominating corporations, to innovate in order to stay ahead of their competition and relevant to their customers.
One innovation strategy these corporations can employ is corporate venture building.
Corporate venture building (CVB) in a nutshell
Corporate venture building (CVB) is a proven innovation strategy wherein a corporation sets up an independent business entity, known as a venture, that produces innovative products and services.
Corporations often take advantage of this high-risk, high-reward innovation strategy to produce long-term success and growth for their organization.
Ventures are often built to serve markets that are unserved by the venturing corporation’s core business, thus providing a new avenue for growth for its organization.
For example, a corporation whose core business is in telecommunications can build a venture in the e-commerce or fintech space. Ventures may also be built to complement a corporation’s existing products and services.
While newly created ventures operate as their own business, with their own workforce, offerings, and business model, they will commonly remain integrated with the organization of the venturing corporation.
The venture-building process
The process of building ventures is similar to creating a new startup however, the goals are slightly different. CVB and building startups share the same goal of building a new business but under CVB, the ultimate goal is to diversify the offerings of a venturing corporation and create a new revenue stream for it.
Embiggen Digital Ventures, Embiggen’s corporate venture building arm follows a 4-step venture building process.
‘Discover’ problems worth solving
CVB starts with the Discover phase. As all innovations are rooted in solving a problem, the venture-building team starts by discovering unsolved problems. Each of these problems may be an opportunity for the venture to innovate and solve.
The opportunity to innovate may come from anywhere. To find these opportunities, the venture-building team can use a variety of research tools and methods. Some examples are the business opportunity map, environmental analysis, and futures research.
While there are many opportunities to innovate, not all are appropriate opportunities for the venture to solve. The venture-building team must identify a problem that the venture can solve and has high demand to be solved.
Once a few problems worth solving are found, the team needs to confirm that there is demand in the market for a solution. Furthermore, the team needs to do additional research to identify the value the solution can bring to the company and the potential market size for the solution.
The team can now take the problems that pass these criteria into the next phase.
‘Develop’ solutions to address selected problems
Under this step, the venture-building team starts to create business cases and design solutions to the problems they identified in the previous phase.
The team uses typical product design development tools such as ideation sessions and innovation sprints. They will also develop the value proposition and business model of the venture, alongside the development of the solution.
At this phase, it is important to always keep going back to the core problem and check if the solutions being ideated are actually capable of solving the problem.
Many innovators, particularly at this stage of venture building, ‘fall in love’ with the solutions they make which puts them at risk of forgetting the problem they set out to solve. They may become jaded and falsely believe the design of the solution is more important, even if it doesn’t solve the problem efficiently and effectively.
Thus, the team must always check for problem-solution fit in order to create a solution that best solves the problem at hand.
Once a business case and solution design are selected, the team can move on to the next stage.
‘Incubate’ the solution to the problem
At this point, the team starts building the minimum viable prototype of the selected solution and begins to test it with consumers. The ‘Incubate’ stage determines the viability of the created solution in the market. It also validates whether or not a solution solves the customer’s problem and how good it is at solving this problem.
This prototype will be repeatedly iterated based on the feedback from consumers and learnings gathered from the test. The repeated iteration is done in order to de-risk the product and work out any problems that the tests identify. With each iteration, a solution must become more effective at solving a problem and more attractive to consumers.
By the end of this stage, the venture building team should have created a market-ready solution, ready to be used by paying customers.
‘Scale’ the venture into its own business
Lastly, at the scale stage, the venture can now be grown into its own business, operating independently of the venturing corporation.
The venture starts building its own dedicated team for further product development, sales, marketing, service delivery, and more. It is also at this final stage when the venture starts selling the product to the market and generating its own revenues.
As this process goes on, the newly created venture will rely less and less on the support and resources of the venturing corporation. It will start looking more and more like a standalone business.
For the newly built venture, this phase goes on indefinitely as it grows and potentially even dominates the market. But what happens to the venture building team after this? They repeat the whole process of finding a new problem, creating a solution, and building a new venture all over again.
You might be asking: What can CVB do for my corporation?
Building and scaling new ventures have the potential to bring significant benefits to both the venturing corporation and the newly created venture.
Paul Genberg, Head of Product of Shell’s corporate venture builder StudioX, claimed that the corporate venture building strategy is the fastest path to innovation.
Genberg wrote in a Forbes article that “investing in a CVB for your company could lead to an explosive wave of growth, industry-disrupting innovation, and rapid introduction into a new market.”
As ventures are created with the explicit goal to scale them into an independent business, corporate venture building has a strong potential to significantly contribute to an organization’s bottom line.
Furthermore, these ventures allow an organization and the venturing corporation to enter, serve, and access new markets, industries, and consumer segments. Ventures also diversify the portfolio of products and services an organization offers.
Ventures may even disrupt other companies that are currently in the market served by the venture.
On the other hand, the newly created venture may benefit significantly from the support it has from the venturing corporation.
The business venture created by a corporation through this innovation strategy is more competitive than a traditionally-made startup because it combines the best of both the startup and corporate worlds. Ventures have both the nimble and innovative culture of startups and the vast amount of resources that the venturing corporation has.
Comparatively, startups typically have the same innovative mindset and culture but have to rely on their own often smaller pool of resources. This may make innovation slower if their innovation initiatives are resource-intensive.
Thus, ventures have the potential to grow faster and develop their innovations quicker than similarly mature startups solely because of their access to resources.
Globe’s fintech venture GCash is one of the best examples of what a newly built venture can do for an organization.
CVB Success Stories: The rise and domination of GCash
GCash was built by Globe Telecom, Inc.’s corporate venture building arm 917Ventures. While telecommunications is Globe’s main market as one of the Philippines’ largest telecommunications providers, GCash is its venture into the fintech industry.
The fintech platform offers various digital payment and finance solutions.
Just under 2 decades after its establishment in 2004, GCash has achieved double unicorn status with an estimated value of over USD 2 billion in November 2021. Over 60 million users utilized the fintech platform a day, with a peak of 19 million transactions in 2022.
It perfectly exhibits the full potential of corporate venture building. The numbers above contribute significantly to the bottom line of Globe’s organization and provided Globe with a new avenue of growth outside of the telecommunications industry. Through GCash, it accessed a market untapped by its telecommunications business.
Beyond contributing financially to its organization, GCash has helped more Filipinos access financial services, in a country where only 51% of the population had a bank account according to a 2021 BusinessWorld report. It has significantly improved financial access in the country, signifying its impact on the communities it serves in the Philippines.
GCash is far from the only venture that has had a significant impact on society.
CVB for Good: Shell’s StudioX for a sustainable future
It supports and invests in startups focused on innovating the energy industry. Through its accelerator program, it hopes to build the ideas of startups into commercially viable products that will revolutionize energy. Among others, it is supporting the development of green energy and emissions management solutions.
This is just one case of using CVB to create a better tomorrow. Through its efforts, SixLab is helping to ensure that the future of energy is greener and sustainable.
So why should I build new ventures with Embiggen Digital Ventures?
Embiggen Digital Ventures is ready to be your external corporate venture builder. If you have an idea, let’s co-create it.
Our team has decades of combined startup and corporate experience, giving us the unique ability to build ventures at startup speed. Our team’s hyperlocal understanding of startups, venturing, and emerging markets puts us in a unique position to diversify and future-proof your organization.
Do you fear your current core product or service won’t last? Do you think there are opportunities you can take? We will help you break these barriers.
Let’s co-create the next big thing.
Learn more here: https://embiggengroup.com/cms/embiggen-group/digital-ventures/