Growth in the Tech Era: A Story of Innovation, Business Decisions

On a sunny Monday morning, Jim, CEO of a successful manufacturing company, sat in his office with a cup of coffee. He had been pondering the future of his organization. Over the past five years, sales had grown 3X and the company’s profits had increased thanks to its operational efficiency programs. However, he wondered how long this growth would be sustainable if new players were breaking into the market with new products and services much better adapted to modern times and focused on new generations of consumers. Jim has never been a conformist and always sought to get out of his comfort zone. He knew that competition would soon become fierce, and that customers would begin to demand more innovative products.

A recent report suggested that companies in his sector were betting on strategies that seemed novel, such as Venture Clienting, Corporate Venture Capital (CVC) and Venture Studios. However, he was not clear on how they worked or what the best option was.

So, Jim decided to set up a meeting with Sofia, his director of innovation, and Robert, his CFO. Both had studied these strategies and could help him understand them better.

A Master Class in Corporate Innovation

Sofia walked into the meeting room with an infectious energy. “Jim, this is so exciting! Venture Clienting, CVC, and Venture Studios are all amazing tools, but they have fundamental differences.”

“Please, explain,” said Jim.

Sofía says:

“Imagine a corporation that wants to access external innovation in startups:

• Venture Clienting is like being a client of a novelty chef: you try his food (solution) without investing in his restaurant (startup).

• Corporate Venture Capital (CVC) is like investing in the restaurant: you bet on its growth and future.

• Venture Studio is like opening your own chef school: you create and develop startups from scratch to align them with your vision.”

Jim frowned, intrigued. "Argue more, please."

Sofia continued: “The Venture Clienting model allows companies to establish business relationships with startups without having to invest in them. By purchasing innovative products or services, corporations accelerate their adoption of emerging technologies and disruptive solutions.

Corporate Venture Capital is when a company creates a fund to invest directly in startups with the aim of obtaining strategic and financial benefits. These startups already exist and have their own team, business idea and structure. Generally, these investments by the corporation seek to strengthen the company's core business or explore new markets. This is ideal for exploring new technologies and business models without compromising internal resources.”

Robert interjected: “Exactly. CVC allows you to diversify risk and obtain a financial return if the startup is successful, but mainly it allows the integration of innovative capabilities within the organization, thus achieving a strategic impact. In addition, you can learn from their way of operating and collaborate on joint projects that benefit both parties."

Jim nodded, but then asked, "What about Venture Studios?"

Sofia leaned forward: “A Venture Studio, on the other hand, is a model where your company creates startups from scratch. You identify an opportunity in the market, design the concept, build the team, and provide the resources needed for it to grow. It's more labor-intensive, but you have full control and can align the startup with your organization's goals from the start.”

Debating Advantages

Jim paused. "This sounds interesting, but what are the specific advantages of each model?"

Robert immediately argued. "Let's summarize:"

Advantages of Venture Clienting:

• Low initial investment: This facilitates the process of adopting new solutions.

• Flexibility and speed: Agility in the implementation of new solutions.

• Quick access to innovations: Since you do not need internal development, although you must validate its functionality.

• Reduction of financial risk: By avoiding direct investments in startups.

Advantages of Corporate Venture Capital

• Access to external innovation: You can take advantage of ideas and technologies that are already in place without developing them internally.

• Strategic impact: Access to disruptive innovations and emerging trends to create synergies between startups and the organization.

• Risk reduction: Investments are diversified among several startups, which limit financial risk.

• Collaboration ecosystem: You work with entrepreneurs, investors and other market players.

• Financial return: If the startup is successful, you can obtain significant economic benefits.

Advantages of the Venture Studio

• Creation of your own assets: Startups are born under your vision, aligned with your strategy.

• Total control: You design and direct every aspect of development.

• Customized innovation: Solutions are tailored to the specific needs of your industry.

• Internal synergies: You can take advantage of the talent and resources that exist in your organization.

How to Decide?

Jim looked at both. "This sounds great, but which one should I choose?"

Sofia smiled and replied. "That depends on the objectives: Venture Clienting is ideal for companies looking for specific solutions quickly and efficiently without committing capital to long-term investments. CVC is suitable for companies with investment capacity that seek strategic innovation in the medium and long term. However, if you are looking to build something of your own and adapt it to your strategy, the Venture Studio is the best option."

Robert added: "You can also consider a combination of all three. Some companies use Venture Clienting to identify new suppliers, but with a highly innovative component, CVC to invest economic resources in startups that strategically and financially impact the organization, and Venture Studio to identify trends and, once they find a promising opportunity, they develop it.

The Action Plan

Jim stood up excited. “This makes sense. I propose that we start with a small CVC fund to learn about the market and evaluate opportunities. At the same time, we will dedicate a team to analyze innovative trends within the industry and then, when we identify an idea that aligns with our strategy, we could launch a Venture Studio to develop it. In parallel, we will engage with startup entrepreneurship ecosystems to identify new suppliers through a Venture Clienting model.”

Sofia and Robert nodded. "It's an excellent strategy," Sofia said. "We will begin to research the company's internal needs and identify relevant startups that can solve these needs, while defining a plan to establish the investment fund."

Robert concluded: "We will also be evaluating the resources needed for a Venture Studio. If things go well, we could have our own startup in less than two years."

Final Reflections

That afternoon, Jim felt more confident about the future of his company. Venture Clienting, Corporate Venture Capital, and Venture Studios each offered different paths to innovation, but all three could complement each other to maximize success.

The message was clear: innovation is not just an option; it is a necessity. And now, thanks to the enthusiasm of his team and a clear strategy, he was ready to lead his company into a future full of possibilities.

Luis Hernández Alburquerque is an expert leader in Corporate Venturing and Corporate Venture Capital (CVC) focused on transforming mindsets to build growing organizations based on innovation, technology and venture investments.