Open Innovation: Best practices for raw material companies13 Dec 2018
Adopting a collaborative approach to innovation can greatly benefit companies in the raw material industry. Th...
In the previous column ‘Large Cooperates Join SLUSH too!’ I regretted the absence of large corporations in SLUSH. There was an appreciable amount of feedback; for example, Kimmo Alkio reported he brought along the entire management group of Tieto to the event. Excellent!
Why worry? How can large corporations take advantage of start-up companies, or create an atmosphere of entrepreneurship within them?
The role of corporate venturing activities is to renew entrepreneurship. They are initiated when the growth predictions for the current business is low, when looking for new opportunities, when the industry is threatened by an external repercussion or when new expertise is needed in the company.
Nokia Ventures was Finland’s largest ever venture operation. Between 1998 and 2005, it tried all possible instruments. It had the accelerator, research projects commercialization pipeline, the future team, partnership programs, seed funds, spin-off fund, mutual fund investments and own funds.
The other Nokia employees’ relation to the Ventures-Gang was a mix of amusement and exasperation. It was an opportunity to undertake sexy new stuff, things were invented that should have been realized in day-to-day business – or things that veterans knew not to try. Over the years, the best ideas were transferred to mother-Nokia, and the worst ones were a learning experience. Eventually, the unit was discontinued.
Entrepreneurship can be advanced in stages. Many companies already employ idea- and patent competitions. However, a large fraction of the output of these competitions remains unexplored. With an internal accelerator start-up companies can be simulated and ideas can be refined in the long run. Entrepreneurship-oriented people get their own community.
Since entrepreneurship is risky, internal entrepreneurs deserve a reward. They spend time on a project that will open up a whole new opportunity for the company if they succeed. They can ruin their career if they fail. A large corporation should be able to extend its reward system to support these heroes.
Even the outcome of a successful program does not always fit the strategy. It would be beneficial for a large corporation to have a procedure for rotating these projects externally. The company can have minority ownership of the spin – offs and buy them back later if the strategy changes. This will also avoid layoffs.
Strategic investment in startups can be very educational. However, it requires large corporations to employ new procedures. The Business Acquisition Department and the CFO turn their noses up for small transactions. Even a small start-up investment may require an executive board decision. It takes a courageous CEO to justify such a project. Fortunately, the private equity activities can also be outsourced.
Many Finnish companies would now need a Corporate Venture unit. Will this be part a of Nokia’s new strategy?
The author is the founder and Chief Executive Officer of Spinverse