The challenge is how to take advantage of the best of each world: “fresh” business models as a startup and the experience and resources of corporations.
There is a new concept known as Corporate Venture Team or Intrapreneurship for corporates to create new businesses or manage their innovation initiatives. It is the concept of large industrial organisations forming and sponsoring a dedicated venture team to develop a new product lines and create a new business in a separate “startup”, funded by the parent corporate or corporate venture capital.
Typically, the separate “startup” created by the venture team takes place in the industry of the parent corporate. The goal of the venture team is to break away from corporate’s old mindset and bureaucracy, and have freedom to innovate and purchase new opportunities.
Meanwhile, the venture team can still have the access to resources and connections of the parent corporate, and leverage on the experience and industry know-how to overcome the industry barriers and win the competition in the market.
However, if not managed cautiously, the venture team may run into conflict with the parent corporate and get marginalised in the corporate value network. Moreover, the inner inertia of the parent corporate may also confine the venture team and make it behave just like a mini version of the big corporate and defeat its own purpose to create new business as an entrepreneurial “startup”.
The challenge is therefore how to take advantage of the best of each world: “fresh” business models and entrepreneurship as a startup and the experience and resources of corporations to accelerate the product and business development.
There are three steps that makes the venture team work:
1. To assemble the joint venture team with an external partner
Building an effective venture team requires breaking down existing work relationships and creating new ones. It can be best done by forming a joint venture team with an external venture building partner, such as startups, venture builders, etc.
The joint venture team consists of insiders from the parent corporate and outsiders from the venture building partner. Insiders in the team will still keep the access to the resources through their relationship with the parent corporate, while outsiders will bring in new skills, perspective and cultures. Together they define the new goal, incentives and performance metrics for the joint venture team.
2. Define the right job scope for the venture team members
At the beginning of the venture project, the job scope needs to be clearly defined for the insiders and outsiders in a joint venture team so that we can make the best use of their advantages and keep their negative tendencies in check. The insiders take on tasks that flow along the same path similar to the parent corporate, while any task that is beyond the capabilities of the insiders must be led by outsiders in the venture team.
Over the course of the venture project, the job scope for individual team member can be revised as the venture team is creating its own culture, building up new connections with external partners.
3. To manage the conflicts proactively
With a different goal and culture from its parent corporate, the conflict between the joint venture team and the parent corporates is normal and can easily escalate if it is not managed proactively. The leader of the joint venture team needs to be someone familiar with both parties and collaborate well with the parent corporates’ operation. He also needs a senior executive from the parent corporate who supports the joint venture team, prioritizes the parent company’s long-term interests and adjudicates contests for resources.
Conclusion
Steve jobs once said, “My model for business is The Beatles. They were four guys who kept each other’s kind of negative tendencies in check. They balanced each other, and the total was greater than the sum of the parts,” [60 Minutes, CBS, 2003]. This is also the idea behind building a joint venture team with an external venture building partnership. Entrepreneurship is on the upsurge globally. It gives company leaders a new opportunity that goes beyond the internal R&D and M&A activities to manage internal and external innovations. A joint venture team is a new collaboration framework for established corporations to approach innovations and pursue new opportunities in the 21st century.