The Five Pillars Of Successful Corporate Venture (Startup) Studios

Dec. 27, 2018

BY ANTONIO ALTAMIRANO

  

This is the unabridged version of the original Forbes article. Venture studios are here to stay. But how are corporations reacting? They're playing ball. This article provides a blueprint on how senior leadership at a corporation should think about when launching a venture studio. Below I explain what kind of leader you need to make it a success as well as the 5 pillars of a strong Venture (startup) Studio structure. Are you looking to set up a Venture Studio? Get in touch or tweet us @Tangelo.

How to build a corporate venture studio

It has taken time for corporations to catch the startup bug.

Defining the startup model

The process of solving a business challenge through agile methodologies that are bundled within an organization called a startup can tackle issues through new processes and behaviors. The truth is that when a startup finds a problem worth solving, the market ecosystem that is created in parallel can be just as big as the startup itself. So why don't corporations own the creation process? What is stopping them?

Looking at Google is interesting as a way to make the Venture Studio model more tangible. Google was not the first search engine, but it was arguably the best search engine. This prowess gave birth to at least two parallel industries in addition to Google itself -- SEO (search engine optimization) and search engine marketing (SEM) -- both have significant size and influence. This is the golden egg of corporate growth.

The issue facing corporations like Google is that as they get larger, they risk forgetting what made them great in the first place. Google used to be a startup, and its approach to product creation, as I saw it, was to relentlessly look for ways to make its customer experience magical while identifying key areas of improvement in its software and hardware stack. Google is an example of what a massively successful venture studio could become. However, companies that have been around for much longer than Google, have not been able to capitalize on their industry expertise to the extent that Google has due to an outdated culture and bureaucracy.

How corporporations reacted while startups were booming 

How corporations reacted while startups were booming

Think about how corporations reacted during the startup boom of the 90s and then again in 2008. First, corporations tried ignoring Silicon Valley startups. That didn't work for Kodak and Instagram became a behemoth. Then they laughed at hardware startups like Tesla citing a lack of experience. Motown (Detroit) now has to catch up to fast-moving Elon Musk who is literally shooting for the moon. Then they fought companies like Uber, but the innovation was so good that the arc bent in favor of ride-sharing apps.

Since none of these tactics worked for the corporations being upended by these young entrepreneurs, these companies are now creating what I consider to be corporate venture studios.

But if corporate workers have never experienced the intensity of a startup, how can they cross the chasm and build a venture studio that acts like a startup? Let's begin by defining a corporate venture studio.

The Corporate Venture Studio Explained

Corporate venture studio explained

The corporate venture studio can provide all the ingredients necessary for novel ideas to accelerate growth. Those values and expertise define the level of investment necessary to launch the venture: sweat equity (headcount) and capital. Unlike other options in the market, creating corporate venture studios can help you tackle issues within a corporation or its partner ecosystem. For a deeper dive into this topic, I recommend you read this article by Tara Carter on the 3 Types of Venture Studios eating the startup world.

Here are the top 3 components I believe you need to make a venture studio a success as the CEO of a Silicon Valley venture studio.

Vision

Vision

Strategic leadership and discipline tactics make it possible to create a compelling vision for a venture studio within a corporation. Large companies most likely have all the talent they need in order to launch a venture studio. The key is finding the right leadership with a strategic vision that's aligned with the business goals and that can execute and integrate the studio's ventures into the existing corporate machine. I believe this leader should know the rules of navigating the corporation but should also be proactive enough to be able to instill progressive change from within the entity.

For instance, a career corporate chief marketing officer (CMO) might not be the right fit, while an up-and-coming vice president of product with experience in emerging technologies and a healthy disregard for the status quo might be a better fit to lead. The closest example that I can think of is Hugo Barra, who essentially manages Oculus, a Facebook entity charged with making AR and VR consumer products. Oculus could be considered a venture studio for Facebook's foray into VR.

Execution

Execution

A corporate venture studio can also benefit from an engineering and design crew that can implement MVPs (minimum viable products) rapidly and without getting tangled in corporate bureaucracy. The venture studio crew needs to know that they are part of a team that is going to create novel solutions others have not been able to; they should understand they are a special team of high performers. Look for the rebels, the square pegs, and the revolutionaries within your company.Of course, the expertise you need for your studio depends on your industry. If you're a beauty company, your team may need to be knowledgeable in technologies such as SaaS, ERM (Enterprise Resource Management), WMS (Warehouse Management Systems) and e-commerce. The team should also truly understand the goal of the operation. Is the company looking to grow 20% year over year or improve inventory and shipping processes? Both are very different goals. If you're a medical device company looking to optimize EMRs (electronic medical records), then you'll likely need to include experts in technology and privacy in order for your product to stay compliant.

Marketing + Growth

The disconnect between marketing, sales, and product is an issue that continues to plague large corporations and a challenge that can be addressed through a venture studio model that can propose solutions to the issue outside of the standard escalation process. The world of marketing has changed. The marketing department is no longer a separate entity that pumps branded imagery. Your marketing department should be embedded in the studio's development process so they understand not only the story they are selling but the features customers need.

BY ANTONIO ALTAMIRANO

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