MORE CORPORATIONS SUCH as Walmart,
Eli Lilly, Samsung, and The Walt Disney
Company are engaging in a practice
called corporate venturing, in which
they open in-house incubators to support
startup projects. The objective is
for these small startups to generate big
profits for their parent companies.
But how successful can these small
companies be while tethered to a larger
corporate entity? A new study conducted
by the University of Navarra’s IESE
Business School in Barcelona, Spain,
and the consultancy firm BeRepublic
looks at how much autonomy large companies
should give in-house startups if
they want to maximize innovation.
The researchers interviewed more
than 120 chief innovation officers at
companies in the United States, Europe,
and Asia. They found that if corporate
venture units are to maximize their
innovation, their parent companies must
strike just the right balance between giving
the units autonomy and integrating
their activities with parent companies’
strategic visions. That balance, the researchers
note, relies on how well companies
attend to four key areas: the extent to
which company executives participate in
the unit’s decisions, the distance between
the unit and company headquarters
(both physically and legally), the level of
the unit’s dependence on headquarters
for funding, and the ways that the unit’s
director is evaluated and compensated.
With those areas in mind, the researchers
recommend that companies
take several actions to get the most from
their corporate ventures. For example,
they should keep the unit’s funding independent
of other activities, as well as give
the unit ample time between reporting
cycles. Companies also should ensure
that a unit’s location and legal designation,
in relation to headquarters, reflect
its capability for generating value and the
level of autonomy it can handle. Finally,
companies should reward units for the
value they generate for the company—the
authors stress that “innovation for innovation’s
sake is not enough.”
Read “Open Innovation: Balancing the Autonomy and the Impact of Your Corporate Venturing Unit.”