Venturing Insights #17 - It’s all about choosing the right Tools (Pt.2)
Choosing the right venturing tools is about aligning innovation goals, balancing internal and external talent, managing resources, and navigating short and long-term risks.
Previously on Open Road Ventures: In our last episode of Venturing Insights, part of the "It’s all about" short series, we explored the myriad tools available for corporate venturing and open innovation. If you missed it, you can catch up here!
Welcome back to the "It’s all about" series!
First off, apologies for the brief break—I was in South Korea last week, and let me tell you, the trip was nothing short of inspiring.
South Korea is a fascinating country where tradition seamlessly meets innovation. From ancient palaces nestled among skyscrapers to the most advanced technological landscapes in cities like Seoul, it’s a country that embraces both its heritage and cutting-edge future. Walking through these modern streets, I witnessed how this blend of old and new creates a thriving environment for innovation. From cutting-edge tech startups to global giants like Samsung, Hyundai and LG, the spirit of innovation is palpable everywhere you go.
Now, let’s get back to work. Our topic today is how to choose the right open innovation and venturing tools to propel innovation forward.
The Importance of Decision-Making in a World of Choices
"The essence of strategy is choosing what not to do." — Michael Porter
Have you ever found yourself overwhelmed by choices, like me standing in a Korean marketplace surrounded by countless unfamiliar yet intriguing products? That's how selecting the right innovation tools can feel—exciting but daunting.
With tightening budgets and increasing competition, being strategic about your choices is more important than ever. In fact, a recent survey by Mind the Bridge revealed that 27% of the world's top companies plan to reduce their open innovation budgets in 2024. This underscores the need to choose the most effective tools to maximize impact.
Choosing the Right Tools
Before we dive into selection tips, it's helpful to know which tools are currently leading the pack. According to recent data from Mind the Bridge:
Venture Client emerges as the most utilized Open Innovation tool, with 95% of companies adopting it, and consistent use expected in 2024.
Antennas follow closely at 87% adoption, with 3% planning to initiate and 5% planning to reduce their use.
Intrapreneurship programs are embraced by 84% of companies, showing a 5% variance between those planning to initiate or reduce implementation.
Corporate Venture Capital (CVC) is utilized by 78% of companies, with 5% planning to launch it.
Mergers and Acquisitions (M&A) are in the toolkit of 73% of respondents, with an additional 8% planning to engage in such activities in 2024.
For Accelerators, although 57% are currently using them, 11% intend to downsize.
The most significant change pertains to Venture Builders (51% adoption), with an expected 14% increase, though 5% of companies are reassessing their decision.
These statistics highlight which tools are gaining traction and which ones are seeing reduced emphasis, providing valuable context for your own tool selection.
Now, the pressing question is: How do you choose the tools that will effectively turn your strategies into groundbreaking realities?
When selecting the best corporate venturing tools for your business, it’s important to consider multiple dimensions to ensure your choices align with your strategic objectives, resources, and innovation needs. Below are the key factors to help guide your decision-making:
1. Align tools with your Innovation Strategy
Your innovation strategy is your compass 🧭. Before selecting any tool, clarify your objectives. Are you focusing on incremental improvements or disruptive innovations? For example:
If your focus is incremental innovation or efficiency, tools like Intrapreneurship programs or Hackathons can quickly mobilize internal teams to generate solutions.
For disruptive innovation, consider Corporate Venture Capital (CVC) or Venture Builders, as they provide opportunities for more radical breakthroughs with long-term impact.
2. Assess talent needs: Internal vs External
One of the biggest considerations when choosing a tool is whether you want to leverage internal talent or external expertise.
Internal Talent: If your strategy focuses on leveraging the knowledge and creativity of your current employees, tools like In-House Incubators or Intrapreneurship Programs are effective. These tools nurture internal capabilities and align with the company’s culture.
External Talent: For corporations looking to tap into fresh perspectives or acquire niche expertise, Corporate Accelerators, Venture Clients, or Strategic Partnerships provide access to external startups and innovation ecosystems. These tools are ideal when you need fast access to new technologies or markets.
3. Budget and Resource allocation
Not all venturing tools demand the same level of financial commitment. Tools like Hackathons or Crowdsourcing can be cost-effective ways to source new ideas, especially for companies with limited budgets. On the other hand, high-investment tools such as Corporate Venture Capital or Mergers & Acquisitions (M&A) require significant capital but offer greater long-term rewards.
Low Resource: Tools like Hackathons, Crowdsourcing, and Sharing Resources (where startups access corporate resources in exchange for collaboration) are excellent for limited-budget projects.
High Resource: For more capital-intensive projects, Venture Builders or M&A involve substantial upfront investments but provide greater control and potential for creating new ventures.
4. Timeframe: Quick Wins vs Long-Term Value
It’s also essential to match the tool to your project’s time horizon. Tools like Corporate Accelerators or Hackathons are ideal for quick idea generation and prototyping, while tools like Venture Development Studios or CVC are better suited for long-term innovation strategies that require more time to mature.
Short-Term Gains: Hackathons and Accelerators offer fast results and are ideal for quickly getting new products to market.
Long-Term Strategies: For a longer-term focus, consider CVC or Joint Development Agreements, which allow for a deeper exploration of emerging technologies and markets.
5. Risk Tolerance
Different venturing tools come with varying levels of risk. Tools like M&A or Corporate Venture Capital can provide high-reward opportunities but also come with greater risks. Alternatively, tools like OI Platforms or Corporate Incubators carry less financial and strategic risk, making them ideal for corporations looking to explore innovation with minimal exposure.
High Risk, High Reward: M&A and CVC offer potentially high rewards but require careful risk management.
Controlled Risk: Intrapreneurship Programs or Corporate Incubators allow for experimentation in a controlled environment, reducing risk while fostering innovation.
6. Collaboration Potential
Collaborating with external partners or startups can bring in fresh insights and new technologies, which may not be available internally. Tools like Strategic Partnerships, Corporate Accelerators, and Startup Collaboration open up opportunities to work with innovative companies, bringing new energy and agility to the corporation.
External Collaboration: Tools like Venture Client models allow corporations to engage with startups without taking equity, providing quick and low-risk access to new innovations.
Internal Collaboration: For fostering innovation within your own company, In-House Incubators or Employee Jurors/Mentors (who participate in external competitions) strengthen internal engagement with emerging trends.
A Practical Tool for Inbound Open Innovation
When choosing the right inbound open innovation tool, it’s helpful to balance the strategic importance of the issue with your time horizon. The attached framework can serve as a guide to aligning your open innovation tool with your strategic needs and confidentiality levels.
Short-term perspective & non-strategic issues: Tools like Online OI intermediaries and Proprietary OI platforms for digital contests can help generate quick, low-confidentiality solutions.
Long-term perspective & non-strategic issues: Proprietary OI platforms for OI calls offer a more structured approach for solutions, but over a longer period.
Short-term perspective & strategic issues: Here, tools like Joint development agreements are effective for tackling strategic issues but in a shorter timeframe.
Long-term perspective & strategic issues: Tools such as Corporate Venture Capital (CVC) and Start-up collaborations are more suitable for strategic, high-confidentiality, and long-term initiatives.
By aligning tools based on your strategic needs and the timeline of your innovation goals, you can ensure a more effective and impactful use of resources.
Conclusion: Crafting Your Innovation Path
Selecting the right tools isn't about following the latest fads. It's about making informed decisions that align with your unique goals, resources, and organizational culture.
Remember:
Be strategic: Let your innovation objectives guide your choices.
Be informed: Use data and insights to understand trends.
Be pragmatic: Focus on tools that offer the most value for your context.
Be adaptive: Stay open to adjusting your approach as circumstances change.
Stay tuned for the next episode of Venturing Insights!
Until then, keep exploring, stay curious, and remember—selecting the right tools is a pivotal step in crafting your innovation success story.
One last thing…
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As usual… a soundtrack for you: