A company builder to nurture disruptive growth opportunities, and seed culture change

For disruptive growth opportunities corporations often turn to launching new business as a startup because their traditional innovation channels are not effective. Because processes, policies, organization structures and people’s mindset simply block disruptive initiatives. 

Such company building in a corporate environment is not new. I set up a venture organization more than a decade ago: we assembled multi-disciplinary teams focused on disruptive opportunities in an internal incubator that mimicked startups as good as we could - we named these teams ventures. These ventures eventually morphed into new business units (if good corporate fit and large business), launched as startups (if not core but still good business) or were killed. But such venture building was difficult to say the least, navigating regular business policies and processes and convincing business leaders of this exploratory work. 

Later, corporations moved from mimicking startups to the real thing: a dedicated and separate organization (a.k.a. company builder) incubating business opportunities and if successful launching startups. And when the startup gets traction it can scale and grow on its own, or be acquired.

The premise is simple: the startup becomes the seed for new big business

for the parent corporation. 

Company building is not just an interesting path for disruptive business creation. It can be much more. My experience shows that it can be an engine for change for the corporation too: embracing uncertainty, bringing an entrepreneurial mindset, experimenting disruptive innovation from the inside, and re-skill the talent pool on the job. But change only percolates if the company builder is managed as an integral part of the corporation’s innovation portfolio and collaborative relationships are entertained with the parent. Here is how.

A dedicated and separate breadboard. The small and nimble company builder takes care of everything to incubate and launch a startup. So that the hand-picked entrepreneurial incubation team can focus on the business value proposition through customer development, product validation and business modeling – all fast-paced and experiment-driven elements the corporation struggles with. All non-business aspects such as payroll and legal are taken off the entrepreneur’s shoulders and handled by the experienced company builder staff. That staff also keeps the parent’s stakeholders abreast. 

The pain points are known. The company builder’s focus is home-grown disruptive growth opportunities triggered by pain points experienced by the parent corporation or its ecosystem (suppliers, partners, customers). Nevertheless, a huge effort goes into understanding and validating the pain through identifying, interviewing and observing the customer. Including corporate stakeholders during customer development helps them understand the way of working and builds co-ownership of the problem space (by having a parent team member on the incubation team). 

The intangibles: passion and dynamism. Probably the biggest driver making a company builder so likable is its dynamism. Because it is separate, because it has simpler policies, the company builder can be fast acting in everything it does. And the team is typically small, so everybody jumps in to make things happen, and that, well that is contagious. It is especially ‘culturally disruptive’ for the corporate members of the incubation teams - a common feedback from all teams we worked with. They are the best ambassadors that the startup way of working is real - they can entice their co-workers and managers to implement some of their incubation learnings in regular business.

Create goodwill through spill-over effects. The company builder infuses the mother ship with new DNA. It shapes the capability of experimenting, accelerating or fast killing initiatives, performing fast due diligence of strategic acquisitions thru the builder’s vetting process, developing and retaining entrepreneurial talent, re-skill on the job, leading design thinking and lean innovation workshops. What is normal practice for the company builder is a great learning for the parent - better than passive workshop participation leaving post-it plastered walls in meeting rooms.

Key is to operate seamlessly within the corporation’s larger innovation portfolio and entertain relationships at all levels between corporation, company builder and startups to create spill-over effects.

A tough balance to find. 

Entrepreneurial and investor-minded leaders. Disruptive business growth requires a learning and patient mindset of the leaders of the parent corporation too, and radically different metrics and innovation accounting (as compared to regular business accounting). This is best executed in a separate but connected organization, reminding leaders that an exploratory mindset is needed in the company builder that is different from the parent’s daily operations. Eventually spreading the exploratory mindset and accounting to the rest of the organization’s leadership. A difficult continuum leaders have to walk. 

Company building also requires a long-term executive sponsorship from the parent in order to give it a fighting chance. Many incubations and startups have to be launched to realize a few home-runs (similarly to VC investing). And, follow-up investment is needed to scale the startup in its go-to-market phase, avoiding a too fast integration into regular business (as in pampering the startup to death). Too often in case of financial hardship or changing business context (or strategy), leaders glide into the known safe innovation and operation tools. 

Outsource the company builder. Here is where the venture studio for corporations comes into the picture. Instead of setting up an own company builder, the corporation can outsource the function to a venture studio. Whereas the corporation defines the challenge and/or the opportunities to be worked on, the studio manages the full incubation process and the launch of the startup. Based on size and scale, the studio features a broader range of services, an experienced staff of venture builders, a larger and richer mentor network and ecosystem that complements the corporate one. The studio can spread its resources across multiple ventures. Spill-over effects into the corporation could be harder to obtain though, unless special attention is drawn into the corporate-studio-startup relationship during incubation and scaling of the startup - through (virtual) co-ownership of the startup. Sometimes recommendations from the external studio can be easier to accept by the corporate. Here too, however, the studio efforts need to be part of the corporate’s innovation portfolio and a long-term investment is required to obtain good returns. If well managed it can be a solid path to changing the culture in the corporate. And, the studio path is a fixed and known cost following a rigorous process. 

The fast pass: outright acquisition. If the appetite and patience for company building is lacking, the corporation can go the acquisition route. Corporate development will bring immediate top and bottom line value if the right startup is acquired that tackles the pain point at hand. Leaders can apply their well-oiled operational and financial leadership to the startup – scaling the acquired business. The biggest challenge however is finding that balance between integration of the acquired into the regular business for optimal scaling effects, and shielding the acquired from corporate policies and bureaucracy to keep the fast acting pace. Oftentimes intangibles such as culture, values and mindset, and differences in processes and policies are the biggest value breakers of inorganic growth. Don’t count therefore too much on changing the culture in the parent through an acquisition. But if successful, it can be a blockbuster. 

There is no unique recipe. The pressure on corporations is mounting in current times of uncertainty. So think hard about how you want innovation to be part of your business strategy, how you want to run disruptive growth initiatives, what path best fits your culture. Or even better, how you can use company building not only to create new business but also as a practical path to bring change in the way you work.