Corporate Innovation/Analysis/

What’s hot and what’s not in corporate innovation

This is what leaders in corporate innovation do and how much they spend on each part of their programme.

By Maija Palmer

Alberto Onetti

It has always been difficult to measure what “good” looks like in corporate innovation. For one thing, companies are always changing what they do.

“Nothing is crystallised, everything is always evolving,” says Alberto Onetti, chairman of Mind the Bridge, an open innovation consultancy. Companies have tried many different ways to innovate their businesses — setting up accelerator programmes for startups, encouraging staff to become intrapreneurs, investing in startups through corporate venturing arms. It is not always clear which of these work best.

Secondly, it takes a long time to see which strategy works best — results can take decades to emerge.

“The ultimate return on innovation investment is survival. Doing these things allows a company to be alive in 2030 or 2040. If they don’t innovate, they won’t be.”

But if companies do want to benchmark their innovation efforts they can look at what some pioneering companies are doing and what they have learned from doing this over a number of years.

“The ultimate return on innovation investment is survival”

Every year Mind the Bridge analyses how Fortune 500/Forbes 2000 companies interact with startups and scaleups, and selects 50 companies that do it best. They are picked based on factors like whether they have a structured dedicated unit in place, whether they use a wide range of tactics and whether they are evolving their approach — as well as what kinds of results they get.

This year’s list of 50 will be revealed on Thursday (December 16) but ahead of that, Future Proof has a sneak preview of what the characteristics of a “good” programme are. Check out how your own programmes compare against best practice.

🔥 Hot

Venture building

This is the new flavour of the month, with many companies now moving to build their own startups. Some 80% of leading companies have a venture builder programme, but only 30% have had one in place for more than three years.

The companies tend to allocate $5-10m a year to their venture building programmes, and aim to build three-five projects each year.

Venture client model

All the leading companies identified by Mind the Bridge have some kind of structured programme to scout startups that they might want to work with.

Companies will typically look at 1,000-5,000 startups each year

The scale of these scouting operations is huge. Companies will typically look at 1,000-5,000 startups each year, whittling them down to a shortlist of around 200. Of those, around 10-20% will go on to do a pilot project with a company and typically around 20 might go on a full commercial deal.

It’s a pretty brutal funnel, but leading companies go on to buy around $50m-100m worth of goods or services from these startups each year, so the deals can be very lucrative for the startups that make it through.

⚖️ Holding steady

Innovation outposts

88% of leading companies in corporate innovation have a presence in one of the global tech hubs, like Silicon Valley or Israel, so they can keep track of emerging trends and meet up-and-coming startups. Some companies are also building outposts in upcoming tech centres like Dallas, Austin, Dubai, Singapore, London, Barcelona, Berlin and Munich.

Intrapreneurship

These programmes are still popular. 60% of leading companies have a programme that has been running for more than five years. They look at 500-1,000 potential projects each year and implement around 5-50 of them.

👎 Not Hot

Accelerators

These have fallen out of favour because of a lack of results. Only 50% of top companies still have their own accelerator programme, the rest have transitioned to either a hybrid model where a third party runs part or all of the programme.

Only 50% of top companies still have their own accelerator programme

“There are two kinds of companies,” says Onetti. “Those that are shutting down their accelerator programmes and those that are restructuring them.”

Airbus, for example, has stopped its BizLab accelerator programme entirely to focus on venture building. Telefonica’s Wayra programme has also changed its focus, from a corporate accelerator to building ventures for companies.

Corporate venturing

A majority — 85%— of leading innovators have a corporate investment arm that takes minority stakes in promising startups. The average size of the fund is $200m-500m, although a sizeable minority — 43% — of leading companies have a fund larger than $500m. Leading companies will typically spend between $5m-25m a year on startup stakes.

The average size of the fund is $200-$500m

There aren’t many examples, however, of corporates investing in startups that have gone on to rocketship-like success — and that the corporate investor has benefited from.

There has also been a growing trend for these corporate investment arms to be spun out to become more independent of their parent companies. Orange, Eon, Santander and Boeing are the latest in a long line of companies to have done this.

Often the idea is that an independent CVC fund can act more quickly and boldly than one closely tied to a corporation. However, the corporation may miss out on the benefits of building a relationship with startups. “The jury is still out on whether it works,” says Onetti.

 

The Mind the Bridge’s report “Evolve or Be Extinct: Current and Future Models of Open Innovation from the 2021 World’s Corporate Startup Stars” is available for download here. 

Maija Palmer is Sifted’s innovation editor. She covers deeptech and corporate innovation, and tweets from @maijapalmer

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