Increasingly, large Latin American companies are beginning to work with start-ups in their digital transformation process through Corporate Venturing programs. This is a hybrid model that combines the internal efforts of innovation of companies and work with third parties in open innovation through tools such as investments in start-ups, incubation, acceleration or collaboration. Some companies organise hackathons or watching competitions, while others expand their programmes, creating accelerators corporate or areas of corporate venture capital investment.
This is clearly a phenomenon that will not stop and that is not just a fad, because it is a tool for survival so that companies reinvent with a global and digitised market.
In this context, a report drafted by Prodem with support from Telefónica, available at corporateventuringlatam.com, evidence that they are already more than 150 corporations in the region linked to start-ups and 28 of them are doing interesting things in Chile, which has become the leading country in Latin America.
Diego Barahona, Wayra country manager
After working for more than eight years in open innovation and Corporate Venturing and with a global portfolio of 429 start-ups in, Wayra from Telefónica, we want to share some of the main things we've learned with large companies that are starting to venture into this world.
1.- Do it seriously. This cannot be just CSR, or by improving image. It is not about making a good TV advertisement, that makes the public aware of your company. Innovation will define the future of your company, therefore the capacity you have to innovate and reinvent your business will decide whether your company will be added to the digital revolution in 5 or 10 years or not.
2. Allocate people and resources. Following on from the previous point, if you are going to take it seriously, to really innovate you must commit and finance your own initiatives. Otherwise, there is a risk of only getting sporadic results or not having any significant impact. This is long term, and having your own innovation muscle is key to have the strength.
3. Accept trial and error. There is no innovation without constant learning. It is proven that 80% of the innovation projects you get involved in will end up failing and with a close to zero return. But investing in the medium and long term, the other 20% defines your future revenue sources. And it is even possible that the 1% becomes your next big business, which completely redefines your company. Uncertainty and failure are part of the game.
4.- Do it slowly. If you are just starting out, you do not need to put together a corporate venture capital fund of billions of dollars. You can start little by little, testing and piloting, as start-ups do. In this sense, before assembling an area, hire people and devote many hours to legal figures and corporate bureaucracies, start with just a couple of cases, so you can gradually learn. Invest 10 million pesos in a start-up; contract and use the services of another and integrate into your product catalogue of a start-up to offer it to your customers. Only with these exercises you will already have the learning and the necessary vision to set up a more ambitious programme.
5.- Give autonomy to the program. An area that works with start-ups requires agility, flexibility and entrepreneurial style. An initiative of open innovation and corporate venturing requires independence, both from a hierarchical and budget perspective. Ideally, it reports to the board of directors, with a strong link to the general manager and the strategy manager.
6.- Start-ups are your partners, not your suppliers or employees. It is a big mistake to think that start-ups can only be suppliers for a large company. It is not enough to do pitch sessions for that great company to contract your services. The commitment must be stronger and more aligned with the company's strategic plan. Start-ups with which you work, can be the future disruptor of your business. They are strategic partners, so it should be treated in this way, both in integration, procurement and service processes. Entrepreneurs are not your employees, they are your partners.
7. - Create linking mechanisms between the start-up and your company. It is worth nothing to just select a start-up, reward it or invest it. The great value of working together with innovative ventures is precisely how you manage to link your business with your company's strategy. The leading companies in corporate global venturing confess that they spend more than 70% of their time and resources just to achieve this strategic relationship. It is the most difficult and what takes the most time, but once reached, the mutual benefit is remarkable and it ends up being a competitive advantage for the big company difficult to overcome by the competition.
8. - Measure what you do. It is not enough just to look for vain metrics about how many entrepreneurs participated in your contest or the press appearances that your innovation program had. The important thing is to define from the get-go what the real impact that you will seek to achieve in the company is: financial return on investments; new income generated from joint work with start-ups; measure savings and efficiencies by contracting an innovative service, etc. What you don't measure, does not exist.
There is no single recipe to link up with start-ups, but the key is to give a sense of urgency to the transformation of the business, because in every industry new threats are appearing every day. But by innovating and by working together with start-ups, creating open innovation programs, these threats can become real opportunities.