How legacy-led CEOs are building the future of their companies

Recent learning 1: Among companies that retain a belief that innovation and new ventures are the keys to growth, many organisations still don’t have visibility into whether projects have succeeded or failed.

Recent learning 2: Among companies that retain a belief that innovation and new ventures are the keys to growth, many organisations still don’t have a clear strategy that underpins the vision for and direction of their portfolio of new ventures.

Surely not?

Well, the source for these learnings is a collection of recent interviews that we recently undertook with more than 300 Director level and C-Suite executives. The data doesn't lie.

For me, there are 5 key findings - I set them out in detail here, along with discussion as to why they worry me.

A few quick notes on the 2 learnings above:

#1

Among companies that retain a belief that innovation and new ventures are the keys to growth, many organisations still don’t have visibility into whether projects have succeeded or failed.

37% of those that we spoke to claimed that they 'don't know' how many of the innovation initiatives that their company has started in the past 3 years have failed. Currently, less than half have any form of metric or innovation accounting to measure success.

Coming from a background of learn startup methodology, where we follow a structured and repetitive process of hypothesise, experiment, measure, learn, iterate - the entire absence of process, tracking and transparent acknowledgment of the measure component is hard to understand.

Without tracking how the relative level of inherent uncertainty in a particular venture is declining, how do you know when to up your investment in that project, or when to kill it?

Without evaluating the compound cost of experiments run within a portfolio to achieve a certain level of validation, how can you estimate appropriate investment amounts and metered drawdown scheduling for future experiments and ventures?

If we don't devise and adhere to appropriate success criteria, we can't track the return of our investments in innovation. If we don't create portfolio governance and the expectation of adherence to that structure, we can't understand what is the likelihood of our venture portfolio returning its investment in the future.

Venture capitalists don't throw their fund at a collection of startups, then sit back with their hands in the air and hope for a return in a few years time (at least the good ones don't). They also don't give a high potential startup all of their total investment in one go. They place bets, track performance, evaluate the validation achieved, reappraise the level of uncertainty of success and its rate of diminishment, and then double down with follow on investments when the data suggests to do so. And they do all of this from the perspective of their portfolio, knowing that high-value and high-impact successes are inherently uncertain, so the majority of startups within their portfolio won't succeed in returning their capital.

Corporate venture teams have a lot to learn here. Their new venture & innovation portfolios must take the same approach, knowing that the future of their company will be delivered by a relatively small number of the ventures within their portfolio. With that as the context, it's therefore obvious just how important it is to have visibility, transparency and intelligent assessment as to whether projects and the portfolio as a whole is on track for success or failure.

The problem with assessing corporate venture investments on an individual project basis, rather than as a portfolio, is stark. If we do that, we will end up working as project teams targeting discrete goals, rather than as a new ventures function targeting fundamental reconfiguration of our industry. We will also inevitably lean towards projects that are more likely to show returns in the short term, which unfortunately means that they are more likely to be lower value, incrementally impactful projects, and therefore more likely to be on the chopping block when lean times arise.

#2

Among companies that retain a belief that innovation and new ventures are the keys to growth, many organisations still don’t have a clear strategy that underpins the vision for and direction of their portfolio of new ventures.

This is enormously worrying. Without a clear strategy and vision that underpins the ventures portfolio, how can that portfolio align and interface with the overall company strategy? How can you ensure that innovation projects are complementary to, rather than competitive with projects being run by business teams, or with the strategy being advanced by the CSO. How can you ensure that the ventures portfolio is a multi-faceted attempt to achieve an overall paradigm shift in what your company is and what it does?

And perhaps most importantly of all, how can you ensure that the role and objective of the ventures function is closely embedded within the CEO's vision for the company that she/he is building?

Failure to have this position in the engine room of achieving the CEO's vision is perhaps the reason why new venture & innovation teams end up in the 'nice-to-have' bucket, rather than the 'must-have', 'entirely-essential' or 'fundamental-at-a-time-like-now' buckets where they clearly should be.

This is why you need your CEO to care about her/his legacy, rather than just about delivering short term value to shareholders. If they see themselves as the steward of the company's future, the protector of enduring value for shareholders and an enabler of positive impact for the world, they simply can't not invest considerable time and money in delivering an effective new ventures portfolio.

So if the new ventures or innovation portfolio is to lose its 'nice-to-have' moniker, it is essential that:

(a) it is built on top of a clear vision and strategy for the ventures portfolio

(b) its vision and strategy is an acknowledged and valued engine in achieving both the overall company strategy, its target future positioning and the legacy that the CEO seeks to deliver

(c) all innovation initiatives have a clear purpose and positioning within a portfolio that collectively supports that future positioning

A legacy-led CEO will absolutely get rid of a bad team, and kill an ineffective portfolio. They will absolutely restructure where the ventures function sits in the company and revise the fundamental strategic focus and vision of the portfolio. They will absolutely call time on anything that makes the new ventures function a 'nice-to-have' rather than an absolute necessity, but if they care about legacy, the last thing they will be doing is dropping investment into new ventures.

------

You can read my full discussion of 5 key learnings from our whitepaper here:

------

Download the whitepaper here: