One of the biggest challenges facing firms considering a strategic corporate venture capital initiative is the difficulty of objectively analyze the viability of a Corporate Venture Capital (CVC) program prior to developing a solid understanding of the subtleties of the discipline. Many firms attack this by ‘going to school’ on the venture industry – interviewing investors, reading the many books, websites, blogs, twitter feeds, etc. which follow the action day-to-day, and generally connecting with the many sources of received wisdom about how to make it as a corporate investor. Executives researching CVC also typically do a fair amount of top-down, inductive analysis by looking at technology themes, disruption threats, start-up activity in their value-chain, competitors’ visible external innovation activity, etc.
While all of this can be useful to some degree, benchmarking the experiences of others & analyzing externalities can tell managers almost nothing about the nuts and bolts elements of designing and executing a successful CVC program.
Worse, since situational factors and the particular strengths and weakness of the enterprise are the true driving factors of CVC performance, this mode of inquiry can be deeply misleading. It’s a little bit like studying art history and then picking up a paintbrush expecting to produce masterpieces…it just doesn’t work that way. (Although the analogy only goes so far: paint and canvasses are cheap; a corporation will spend millions of dollars in the process of figuring out that benchmarking and top-down analysis led things astray).
For clients in the Inquiry stage we determine the viability of a potential CVC program by matching the firm’s existing needs and capabilities to the opportunities presented by the innovation ecosystem. These include both objective factors (technology needs, R&D strengths and weaknesses, activity in relevant investment spaces, etc.) and subjective factors (potential for internal sponsorship, capacity to absorb externally-developed technology, management needs & expectations, to name just a few).
Synchrony brings both proprietary tools and the objective perspective of an expert outsider to the task of performing an unbiased analysis of the firm’s potential to succeed as a CVC investor. The deliverable includes a characterization of which technology areas are likely to be viable and which to stay away from, the potential scale of the program (both financially and in terms of operational impact), which groups and divisions are likely to be early-adopters and which laggards, and a catalog of both the benefits to be gained if a program were launched and the risk-factors to be addressed as part of the development process.
In addition to the tangible deliverables of an Inquiry stage engagement, the process itself begins to familiarize internal stakeholders – the CVC group’s eventual ‘clients’ – with the benefits they can gain from the initiative; this helps establish credibility and engender acceptance early in the process.
At the end of the process, Inquiry-stage clients will have a clear understanding of the size of their firm’s playing field for a potential CVC program. This frames the decision to invest further resources into the development process and begins the important task of engendering senior management confidence and support.