Like people, companies grow old. Maintaining that youthful energy and image is a never-ending challenge. Growth requires reinvigoration through innovation. It’s not unique to any one industry. All companies face a similar goal of creating and maintaining a culture of innovation.
But most large corporate entities remain focused on financially driven bottom-line growth and meeting sales, expense and revenue expectations, placing internal innovation on the back burner as a result. In a world driven by KPIs and OKRs, employees do not have the requisite time, or are unprepared to take the necessary risk, to develop and discover new products, technology or innovation outside the core business or their own day-to-day responsibilities.
Plus, with rapid changes in technology, how to remain relevant in the present and have the foresight to look out five to ten years into the future? Supporting strategic innovation outside the core business could be the answer as many companies have turned to Corporate Venture Capital (CVC) as a path to innovation.
What is CVC?
CVC is a subset of Venture Capital. CVC has grown exponentially in recent years due to the proliferation of technology startup companies. The main goal of CVC is to gain a competitive advantage by investing in and gaining access to new technologies. CVC does not require third-party investment firms or ownership in the startup companies they invest in. As such, CVC has evolved from a form of capital investment to a tool of innovation.
What are the benefits of CVCs to startups?
A startup firm can take advantage of the large investing company’s industry and product expertise, financial backing and network of connections. This relationship can even lead to a partnership between the CVC and its parent firm.
Innovation within a corporate environment relies upon unbudgeted resources and political capital. A well-developed CVC program empowers the corporation to fast track innovation outside its corporate walls, with a focus on long-term strategic opportunities. CVC programs span from the tech world to pharma to financial services and insurance. And yet, no vertical is better positioned to leverage the benefits of a robust CVC program than the advertising industry.
Advertising agencies are traditionally risk adverse, reactive entities with a hesitancy to invest in and develop new technologies. They fear it may conflict with the traditional agency revenue model, increase transparency, or risk client stickiness. For an agency to discover (let alone pilot) a new technology, it almost always requires a proactive client as there is very little internal motivation to take such a risk.
Agencies love to look smart for clients – hey we have tested x y and z, sure we know all about the latest and greatest - but are extremely reluctant to take the next step to make the necessary investment to build and develop in-house technology. CVC empowers agencies to pilot multiple opportunities and externally develop new technology without disrupting the focus of day-to-day business.
Looking externally to innovate internally may seem counter-intuitive, but CVC is a proven strategy and as in advertising and all industries, you innovate or stagnate.