Company builders are changing the game. Corporations are adjusting their approach to innovation. Digital transformation is on everyone’s lips. Among all this hustle and bustle, how do you successfully update your business in 2021?
Words by Jan Strmiska
In just a few years, months even, venture capital has moved from wild cards and bold gambles to safe bets and later-stage investments. While avoiding risk, it has also become less innovative. At the same time, more and more companies feel the need to change their existing structures, go digital, or just adapt to trends. But can they do this on their own? Typically not.
Why corporations shouldn't create their own startups
Fundamentally, corporate environments are not set up for real change. In a piece written for the Dialogue journal, author and entrepreneur Henrik Werdelin illustrates this with his “hunter vs. farmer” analogy. Large companies typically employ farmers, people who are great at harvesting, optimizing, and systemizing products which were created many years ago. But if you want to innovate and grow, you need hunters. These are the people who can spot opportunities, won’t get paralyzed by risk, and, most importantly, are able to build something from scratch.
Head-hunting for hunters means looking for people who:
Can empathize with the customer's feelings and would use the resulting product themselves.
Are impatient enough to do things on their own without being asked to. They want things to happen. They're proactive and passionate, they believe in their cause and motivate others to do the same.
Understand context. Trying to see the bigger picture is not a waste of time for them. They are interested in universal principles and not afraid to dig into them.
Are able to reframe a problem without clinging to the original goal. In a startup environment, one of the hardest things is admitting that you've reached a dead end. A hunter can handle the truth.
Hunters don’t thrive in corporations, farmers do; making the corporate environment in itself contradictory to big changes. For a large food corporation, a change in flavor is innovation enough. But to switch from candy to salad might be too big of an ideological leap. So, is there a need to invest in experiments?
Wild experiments have a low probability of success
There's nothing wrong with starting in-house accelerator programs or innovation labs. But don’t just do it for the sake of it, FoundersLane’s Felix Staeritz tells Sifted. You should begin with a specific goal in mind. Accelerators and labs are great for early-stage experimentation and they can help you figure things out, but there will still be the issue of how to turn the result into a business plan.
Take science for example. With academic lab research, the university is the investor, one who doesn’t expect an immediate return. Business is different – few companies have the luxury of wandering. They place much higher expectations on incubators. Felix Staeritz argues that there is probably only one “unicorn” in Europe that has been created using an accelerator (namely, the Axel Springer Plug and Play Accelerator). It’s the German online bank, N26. Most companies, however, spend money on lab work with no results. At the same time, few CEOs will bet their entire careers on an idea that was born in a lab.
How about buying an already completed project?
Acquisitions don't help much. If you really want to innovate, you often have to create new businesses on a greenfield. You can't acquire what doesn't exist yet.
… or just investing the money?
That's the venture capital model. This works great for fast-growing startups like Netflix or anything related to the gig economy, e. g. Bolt. Their direct-to-consumer approach allows for rapid scaling. But venture capital is not suited to long-term processes, like developing retirement and healthcare solutions. Or the energy sector.
It’s all about your mother (company)
To illustrate: children who grew up in an overly controlled upbringing will never fully grow up nor become independent. Then again, giving your offspring too much freedom can be a huge risk. It’s a classic dilemma. Similarly in business, creating a “startup” under a 100% control of the parent company can be overbearing. But developing a solution from scratch in areas like eHealth, Telco, or renewable energy can take decades and might not pay off.
That’s why company builders are the perfect caregivers. They offer an ideal balance between support, control, and expertise. These are not consulting agencies that just draw up a project and leave the implementation to you. They will see to the complete development of the project while working in synergy with the parent corporation.
How company builders work
Each company builder has its own methodology, but testing should be its key element. We have proven this time and time again at Creative Dock, having worked with multinational colossi like Société Générale, Raiffeisen Bank International or E.ON, but also new economy leaders like Avast Software or DPDgroup. Creative Dock’s CEO, Martin Pejša, even goes as far as saying that as a company, "we cannot specify in advance what we will ultimately build for the client."
Following up on ideas just because someone in sales – or even a client – kind of likes them is not a very scientific approach. At Creative Dock, our innovation team comes up with assumptions that are constantly being tested on different-sized audience samples and using different methods. Testing is a part of the product throughout all stages of its development, not contradicting, but supporting the more organic creativity and startup feel. Our innovation methodology has been refined over the years, tested on hundreds of projects. We are constantly learning and developing a best practice of how to organize creativity and systemize chaos.
Learn more about our innovation methodology:
Company builders – sometimes they're also called Studio Ventures – are simply more careful than business punk rockers. At the same time, their approach is more sustainable. The typical "break the rules and fail fast" attitude is absolutely legitimate. It just doesn't address the long-term challenges and can ruin a budget uncontrollably without any results. A professional company builder is more controlled but still able to react and change fast. It’s evolution rather than revolution.
Great as a complement to market leaders
This type of project building is particularly suited to brands and industries that are monolithic in nature. The ones that feel like they have been carved out of marble, where conservatism still makes great sense despite all the innovations. For example, the finance and insurance industries. Or any big player whose own internal procedures, honed over years, can be both a safeguard and a hindrance. To innovate in such an industry, you first need to take a breather and get some distance from your company. Otherwise the new project will never grow properly. Just like a small tree will never grow up next to its giant and overshadowing parent.