As legacy businesses are becoming more and more desperate to attract younger employees, customers and audiences, they are shelling out boatloads of cash to develop incubators and venture arms and are even buying “cool” companies outright. Just recently, for example, AB InBev’s “innovation, incubation and investment” unit ZX Ventures took a stake in a soda startup from California. And Tyson Foods, yes, the chicken company, has gotten into the alternative meat craze by investing in a plant-based seafood venture through its VC arm, Tyson Ventures.
Sorry to burst your commercially hip bubble, but investing in a few startups will not make your company innovative. Because, most often, we see this strategy lead to heartburn and headaches. According to research by CBInsights, 60 percent of corporate accelerators fail within two years. Coca-Cola infamously shut down its Founders program, citing struggles with integrating the cumbersome approach of a big organization to the fizzy mentality of a start-up (so much for New New Coke). And, more recently, tech giants Oracle and Samsung shut down their Israel-based accelerator programs due to a lack of success with their cohorts.
And the Why? is simple—corporate leadership often lacks a realistic understanding of how to strategically accelerate growth without having corporate bureaucracy destroying the culture.
The most successful corporate innovation initiatives pay deference to a strategic, mission-driven approach rather than a “spray-and-pray” approach. If you are thinking about investing in startups, there are three key areas of thinking you should spend time developing aside from a critical, growth-centric venture mentality.
Vision and expectations. Corporate stakeholders rarely see eye-to-eye on the vision for a venture fund or incubator. Many anticipate outsized returns. Some are trying to find fresh, young talent. Others are just looking for a distraction from their mundane day-to-day lives. But everyone is usually misaligned on what an ideal future looks like. Building common ground among business unit leaders and senior leadership is critical. Everyone must align on the grand vision as well as the practical reality that the likelihood of investing in an early-stage home run is minimal. And, more importantly, everyone must face the reality that supporting growth for each of these startups will be hard work—not just as a customer but as an advocate to help them open doors they couldn’t open themselves.
Advocates. Though it might seem obvious to most, getting buy-in from business unit leaders is absolutely critical. At least one of these individuals will be assigned to each startup. Business unit leaders must be cultural ambassadors who will serve as advocates for their startups—forging relationships inside and outside of the business and breaking down the walls of corporate bureaucracy. The hardest part of having big ideas in the corporate world is the inability to fight the uphill battle against complacency. Strong advocates can change minds and, hopefully, culture.
Culture. It is what makes startups what they are: rebels, renegades, disruptors. In an ideal world, large, bulky corporates should be able to gain some of that energy through acquisition or investment. But that rarely is the case. Efficiency at scale is given primacy over lifestyle. Shared vision is diluted among the masses. Culture has an outsized impact on future innovation. If you want to develop a culture of innovation you must slowly and methodically isolate groups of empowered, high-performing teams and give them space—like a startup within your company. The established corporate leader must be an entrepreneur.
Building a cohesive investment strategy in innovation and entrepreneurship takes a lot of time, buy-in, and cooperation across business units, leaders, and partners. Although you could strike gold with a startup, internalizing the values, thinking, energy, and, ultimately, revenue of a startup requires discipline.
Abhay Jain is a partner at Quire, a growth and innovation consulting firm with offices in New York and Los Angeles.