In recent years, you may well have heard a lot about venture building – a transformative process which has the potential to turn innovative ideas into thriving business. But do you know how it works exactly? In this article, we delve into what venture building truly entails, why it is often faced with obstacles, and how Opinno has developed a distinct approach to tackling these challenges head-on.
What is venture building?
Let’s start by defining what venture building is – and what it is not.
Venture building is a process of transforming ideas related to new products, services and business models (that is, the “idea domain”) into real new business (that is, the “money domain”). If this is done in the traditional core markets and with the current customers of a company, then we’re talking about plain innovation, which involves research, development, operations, and sales. As we know, this is typically a lot of work, but it doesn’t involve a lot of risk, so companies are used to do it, and they are usually good at it.
However, if this is done in adjacent or new markets and for new customers, then that is what we call actual venture building, which involves product discovery, market testing, and escalation. As the average innovation efforts, it too requires a lot of work but, on top of that, it also involves risk. This understandably makes companies wary of undertaking a Venture Building approach, and that’s why, as a manager, you may require help when starting a project of this kind. When we initiate a new Venture Building process, we always follow three main steps.
The first step is discovery: mapping ideas, using design thinking strategies, inquiring employees to come with new ideas… Secondly, we begin prototyping using agile methodologies. We develop prototypes, we expose the prototypes to the market, gain feedback from it, and test the product market field, typically by minimum viable products. Lastly, we bring those prototypes into the real market and create new businesses around them. In this article, we will be delving into this third phase, which is where companies usually struggle the most. We will analyse the most common ways in which this step is done and why they may fail.
Traditional ways of venture building
As we’ve said before, it is this ” go to market” portion that really creates the divide between the innovation work (the idea domain) and the real market (creating a viable business model). Here is where most of the good ideas come to die, not because they are bad ideas or not because market has not accepted and validated them, but because corporate does not find a way to bring these ideas into the marketplace. “And why?”, you might ask. Well, there are many ways that a company can disrupt and go into the market with new ideas, so let’s take a look at the approaches that are traditionally followed to bring a new product, a new service or a new business model into a new market, and why it is that sometimes companies fail to succeed using them.
The internal maze
The first approach to venture building is using the same “go to market” processes that the company uses for their core market and for their traditional products and services. This is what we call the internal maze because, what typically happens is, when trying to push these new services into the market, the company will struggle with its own corporate backbone processes and systems. Systems that have not been designed for new ventures. So, they are typically exposed to large ERPs, to monolithic CRMs or to systems that usually take 6 to 12 months to be changed. On top of that, the team in charge of the Venture Building usually ends up fighting an internal battle with the CFO because they are asking for a budget that doesn’t make the “investability” thresholds, or they find and obstacle in the legal department, which is usually very strict on how they will expose the brand and the brand equity into a new market. So, the Venture Building project gets choked withing the company’s own systems, processes and bureaucracy.
Acquiring a startup
There is a more expeditious way of going to market, which is analysing the market, identifying entrepreneurs or startups that have a product or a service that the corporate is ambitious to have in their portfolio and either buy the startup or do venture client, which is utilizing their products and services as a prime or as a step before the acquisition is considered. But usually, when a company buys a startup, bad things start happening. We call it the DNA feast: all the antibodies start to activate. That is, all the “this is not how we do things here”, “this is not how we usually operate” … the startup’s way of working clashes with the parent company’s, which ends up harming innovation. Besides, most of the times there is no business unit that pays attention to the opportunities that are created because they haven’t not come from them: they are coming from the traditional business planning process.
So, the process usually goes like this: someone in the company scouts a startup, they decide that is a good idea to buy it, and then they integrate it into the company. That’s when they put their hands on the startup and try to force their own processes and systems, suffocating the startup, killing it in the end.
There is a third way to do it, which is incubating or accelerating startups. You try not to intervene too much on the startups but rather try to help them grow. This usually yields into good results, although most of the times this approach has a very questionable return on investment. Rather than that, most of the cases end up in what they call the innovation theatre: lot of movement, lot of activities, lot of exposure to the internal executives learning – which is good –, but not a lot of outcomes in terms of new ventures into the market.
The Opinno Way: Venture building as a service
Opinno’s approach to Venture Building is what we call “Venture Building as a service”. This consists of taking care of everything that corporate doesn’t know how to do or doesn’t want to do. We divide it in four levels: people, processes, systems, and financing. We begin by scouting what people with entrepreneurial capacity the company has inside, we analyse what roles are missing and reach out to experts from outside of the company to create a hybrid “dream team”. Then, we do the same with the processes: we typically create new much more agile processes in systems we typically use off the shelf –software and applications – that later can be integrated back into corporate’s backbone. Finally, if needed, we can also provide financing or reach to financing partners that can invest in the startup, so you don’t need to negotiate or fight for your budget in inside corporate business planning. We do all of this using what we call an “Exo” approach.
The “Exo” approach
An “Exo” approach means that we see new ventures as if it was the Moon spinning around the Earth, where the Earth represents the company, and the Moon represents the Venture. There are some strong gravitational bindings between the Earth and the Moon, but it’s not the same thing. The Moon has its own laws, its own atmosphere, its own gravity, different from those of the Earth. It is connected to the Earth, but it’s still independent.
We treat the Venture in the same way: instead of functioning with the same processes, rules and rhythms of the parent company, we develop it as a whole new thing, outside the walls of the company’s internal day-to-day activities. That’s the reason why we call it “Exo”.
The main advantages of this method are, first, flexibility: thanks to the “Exo” approach we can move much faster by avoiding internal fights, red tapes, and antibodies. We avoid innovation killing. Secondly, speed: we can move ahead much more expeditiously, cutting the “go to market” time frame by an order of magnitude, so what is typically done by Corporate in a year, we can do it in two months. Thirdly, it’s low risk: by creating a new company, by naming things differently, we avoid carrying the risk and the responsibility of the corporation brand. There are no brand or image risks to the parent company, neither legal risk as we are operating as a complete separate company. Plus, in the end, if there happens to be a change in priorities, the company can always cut the venture loose without affecting your day-to-day operations.
The process: how we work
The first thing we do when approaching a new Venture Building project is to work with the company, their employees, and the innovation department, to come up with a funnel of ideas as a starting point. Then, we create a new company, a new “Co”, run by Opinno personnel and welcoming the entrepreneurial talent from the company that wants to join the Venture. We then create a firewall regarding the legal and brand protection to eliminate risks. Finally, we take care of everything necessary to bring this new product or service into the market: operations, demand generation, go to market, channel development, etc.
The second phase of venture building, which is “testing”, speaks about minimum viable product. What we use instead is a minimum viable process: we create minimum process that we need to be able to sell the new product or the new service into the market.
HP: a Venture Building Success Story
HP Inc, one of the world’s largest tech companies contacted us asking for help regarding a Venture Building project: they had been struggling with a great idea for several months: selling personalized cookbooks into the UK market. They had been struggling because, due to HP’s internal processes, the new Venture wasn’t finding the enough attention and the priority inside the organization to be able to take off.
We created a new mercantile in UK and, from there, we took care of everything -exception made of technology, that the company had developed and licensed into us- necessary to turn the idea into a viable business model: we found the print service providers, we took care of order taking, information flows, payment flows, and tax clearance. We incorporated the UK company in two weeks and made our first sale only one more month after that. Three months after the kick-off we were already selling more than 500 products. One quarter later, we were constituting a US branch, where we began selling the following quarter. And not only that: when they thought that the business had grown sufficiently, HP decided to sell it. We then initiated the selling process, facilitating the transfer to one of the print service providers that had been serving as a supplier during the venture, who now owns the business. The company was able to spin off the business to Opinno and Opinno was able to help the customer to sell out their business to one player of the ecosystem. An end-to-end approach.
Is my company fit for Venture Building?
Venture building helps any type of business. While most of the times we associate it to software business, Venture building helps B2B, B2B2B, B2C, transactional, software as a service… You can be selling a product, such as HP’s cookbooks; it can be hardware, like beer dispensers; it can be services like car sharing; it can be new business models, or even extensions of adjacent customers like in the case of insurance. So, venture building and the process to follow is universal and can be applied to any type of business.
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