Speakers: Matthias Walter & Pauline Pezerat
“David & Goliath - a Winning Team” Insights into Corporate Platform Venture Building: This workshop aimed to demystify why corporates and startups cannot form a winning team to launch and scale a successful platform venture together. The hosts, based on their long-term professional experiences, shared key best practices, insights and discussed how such a setup really works.
This session was named intentionally “David & Goliath - a winning team” to highlight that “people can team up, look at their strengths and their assets, and then form a winning team”, says Matthias Walter. The idea that co-creation is an asset that parties should take into consideration and profit from, guides the hour-long workshop.
Walter kicks off the session by contextualizing today’s business challenges with one of the main changes that have occurred in the last decades:
“when you look back and compare the average lifespan and life expectancies of companies; in the past, it was about on average, maybe 75 years. But nowadays, it’s about 15 years.”
A great deal of this is due to platforms. Meaning that platforms are disrupting every kind of industry, and platform venture corporate building is a phenomenon that emanates from this.
Before “you had traditional producing companies and enabling companies. And some years ago, platforms put themselves in between the traditional companies and the consumer.” This kind of disruption of the value chain means mainly two things for the traditional companies / the incumbent companies: they lost direct contact with customers; and, they saw their margin lowered “because now the value chain is not only divided by two kinds of players but three.”
Facing imminent change and trying to avoid or adapt to these losses in their value chain, some traditional companies implemented a partial digital transformation. They did this through one or more programs, such as the transformation of the customer experience (implementing online shops, apps, or other digital touch-points); digitalization to automatize internal processes (such as through the installation of SAP), and the training of their employees (about digital HR work).
These tools helped them to “understand what was happening, how startups and digital natives work.” But, as Matthias Walter comments, “what they really failed at, was creating real new digital businesses at the core.”
There are several aspects and working synergies that distinguish pure digital businesses and moreover, startups. By having fewer resources, startups can be more efficient compared to corporations and also, focus on their main priority (in order not to waste their scarce resources).
“As a startup, you are not afraid of putting something out there on the market, which you are sure is going to work. Because you have nothing to lose, right?”
This gives flexibility and spontaneity to the decision-making and implementation processes.
Having mentioned the advantages of startups, it is important to say that corporations also have unique characteristics that make them valuable even in today’s business era. And thus, an enriching and valuable experience occurs when merging both business models. So, the assets of corporations come together with the execution, the speed, and the digital understanding of startups: “this is what we call corporate venture building.”
Corporate venture building means you are really working together and building a new company in a timespan of three, five years. So it’s a long-term investment, says Matthias Walter.
Walter also explains that for corporate venture building to be successful there are several things to have into consideration. First, the team should count on “senior or serial entrepreneurs who have done it before.” Second, it’s “very important to create a startup format outside of corporate governance. This is really in 99% a key success factor you cannot go around it.” This aspect includes creating a new legal entity, with its own compliance rules, privacy data specifications, and so on. And in third place, create an inventory of assets and thus, understand “what you have in regards to the brand and the access to customer data.” This is not only in reference to security data but also understanding which is the customer target group and the values the brand stands for.
In a co-creation model, the training is done together, and you need to think about who is responsible for what. It’s very important that you have a joint incentive model, says Matthias Walter.
Pauline Pezerat acknowledges that “sustainability is now a business imperative: we are at a crossroads, the time for action is now. We have the tools. Corporates need to move quickly or risk being left behind.” And, pointed out that:
“the target of corporate venture building is to think outside the box. Incumbents can’t make small things in a small way—they have to think about making something massive. How can I have an impact?”
The co-host continues by pointing out some worldwide percentages and figures to illustrate the panorama of the emergence of a new business model: the economy of ecosystems: “97% of corporations are product-based or service-based companies versus platform companies. 30% of global corporate revenues, by 2025, will be generated by platform companies. And, 70% of unicorns are platform companies. Successful companies transform from a participant in the market towards an orchestrator of the market.” And so, taking this into consideration: “corporate venture building is more than transformation, this is a challenge of adapting to a new business model by building a new venture with its own: governance, operations, technology, sales and marketing, legal and financial issues, go-to-market, trust framework, brand, human resources, network effects, points of control, ecosystem, and so on.”
Corporate venture building is a new way of thinking, a new way of working, and a new way of doing business, says Pauline Pezerat.
Pezerat also highlights the fact that “if you want to make something massive if you want to change, it means investment. And, financing, especially seed funding, is a veritable way of the cross for the start-ups: usual round tables requirements before the go to market validation and capital development fundings are: time consuming, dilutive and non competitive.” Here is, in addition to their business expertise, data and assets which can definitely be more leveraged, where the corporates have the advantage to bring when considering venture building. "Because, they have open doors to capital and funding, speeding up the access to funds. Corporates cannot build ventures in the same way they built their core business but can rely on disruptors: the start-ups.”
Presenting the benefits of a corporate venture-building approach with a start-up Studio, Pezerat adds that “corporates can rely on start-up studios to manage the risk while benefit from a tailored execution and fundraising strategy by accepting to lose some control". This co-venture building approach combines the best of entrepreneurship, that is to say start-up studio and the best of business knowledge is combining the greatest competitive advantage.
Finishing up, Walters reflects upon the governance rules of venture building and mentions that “percentages of the ownership vary and are the result of very individual negotiations. Where in general, corporates want to put the money on the table, founders bring along the motivation and the studio contributes mainly with their resources and experience.” As a result of weighting in these aspects, shares of the venture building will be split.
Written by: Flavia Consoli & Pauline Pezerat
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