Since most internal innovation programs aren’t yielding the results they should, and neither do investments in corporate venture capital, there has to be a better way for corporates to successfully innovate.

As such, companies serious about their future have started to build new ventures. These new ventures are close enough to the core business to leverage corporate assets, yet far enough to not be absorbed by the machine designed to execute upon existing business models. Whilst this approach builds upon principles from VC’s, there’s more of a commitment and involvement from the corporate beyond a mere financial stake.

In prep for our upcoming online event on Business Design & Venture Building (7-11 December), we explored how that works in practice.
 

#1 Sanity Check: No Significant Impact


As Ralph Christian Ohr outlines in his post, PWC's strategy consulting arm Strategy& recently surveyed 50 Chief Information Officers (CIOs) and Chief Digital Officers (CDOs) across Germany, Switzerland and Austria (with additional samples from the US, Japan and the Netherlands). They found that barely 10% were managing to grow revenue from digital initiatives to more than 5% of group revenue. 40% saw no significant impact from digital innovation.

While their digital innovation units generate a lot of activities and ideas, only a large minority have successfully scaled their ideas up into sizable digital offerings. 

Another German study by Infront Consulting and Capital Magazine has revealed a mixed record of innovation labs and digital units as well:

  • Almost 50% rate their own commercial success as "not high"
  • 40% introduce max 2 innovations to the market annually
  • Less than 20% generate a positive cash flow
  • The labs find it particularly difficult to develop innovations that are distant from the core business.

#2 It Starts At The Top


[Innovation] labs and accelerators have some major flaws, argues Felix Staeritz, Co-founder and CEO at FoundersLane. 

There is often a significant lack of board involvement. You simply cannot outsource the creation of a strategically-relevant new digital business. You have to get involved.

Equally, the environment the labs and accelerators create is often too restrictive and, as a result, doesn’t attract the top talent needed to make these ventures a success. 

Corporate venture capital alone doesn’t help because they don’t put the assets into the business. Acquisitions don’t help because you can’t acquire what doesn’t exist. Often you need to create these new businesses from scratch.

Here are a few key success factors to put in place.

  1. Create the new venture on an arm’s length basis.
  2. Make sure you can create shares for founders, so you can hire people from outside the corporation.
  3. Make sure that venture building is a C-level topic. Top-level management has to take responsibility for the project.
  4. Think long term. Peg people’s bonuses to how much value they have created in new businesses or how much they moved the company forward on sustainability goals.
  5. The right governance structure. You can’t be dependent on just one C-level champion. It has to be structured like a CVC fund, building 10 modules in 10 years.
  6. Make sure you have clear KPIs to help validate if the project is successful. You have to look at things like customer acquisition costs and growth rates.

#3 The Best of Both Worlds?


Like a M&A in reverse, corporate venture building aims to fast-track the growth of startups through a combination of the best of several tools, suggests Carol Menezes at Byld.

The startup has full alignment with the corporation’s mid to long term strategy since day one, nurturing a full integration with the corporation once the startup is growing and scaling, enhancing an innovative image and attracting top talent with an entrepreneurial mindset for the startup team. 

In opposition to M&A, the cost is more accessible since it's build from scratch and the speed to market can be very high, depending on how fast the corporation can take decisions.

Read more here

#4 Testing Strategic Options


Markus Ortmann, Managing Director at Mantro, suggests that the main idea behind [corporate venture building] is to build one's own future M&A target. 

A corporate would never acquire another company without seeing a strategic asset in it, whether it is to broaden the own offering or to improve the current market position. 

Actually the more interesting thing is that since it is not solely financially motivated the approach is very different from running a (corporate) venture capital fund.

Through the process of venture building, companies can test several strategic options. Think of:

  • Business models that are close to the corporate's value chain/its offerings but not exactly within the core business (e.g. mobility services for car manufacturers)
  • Business models of which the corporate and its competitors are customers of
  • Business models that change or influence existing customer or supplier relationships in the overall market ("platforms")
  • Business models that might benefit from a cross-industry shareholder structure to grow
  • Business models that generate relevant data to improve the core business

#5 Decisions About Governance 


The questions Corporate Venture Builders need to face are mainly around governance according to Sebastian Mller, Chief Operating Officer at MING Labs. 

They need to structurally think through the management of the various aspects of the setup and institutionalize them correctly. While venturing is inherently risking and sometimes seems more an art than a science, doing it repeatedly and in a structured way usually yields success. 

1 Venture Building Strategy

A Venture Building unit should have a clear understanding of what that strategy means for them. They need to be able to break it down into clear choices and constraints, which then cascade down to the venture teams.

It can be about the problem space, the potential solutions, or also trying something completely different on purpose. Every interpretation of the strategy is acceptable, as long as it is clearly articulated and shared.

2 Corporate Assets

A critical decision is, therefore, which assets the venture builders will be able to access. This will often determine the configuration of their possible solution.

3 Relationship To The Existing Organization

How close or how distant they are can make a big difference. As discussed above, establishing a link is essential. That is the only way to confer the desired advantage to the startup. Yet being too close can also cause issues, as any veteran venture builder will tell you.

4 Talent Sourcing

Creating something where nothing exists is never easy. And by all experience, it does take a particular type of person to do it.the fundamental choice is to work with existing teams or outside talent. Both options have distinct upsides and downsides, which need careful weighing.

5 Planning For Success

If we build a winning venture that solves a relevant problem and acquires paying customers, what happens with that venture?

Will the corporation retain all of the equity? Will the venture builders receive equity incentives? Should the startup raise outside funding? Should it run standalone, or become a business unit? Or will a successful venture be absorbed by a legacy business unit, which needs renewal? These are all potential options, yet very distinct in the trajectory of how they can play out.


#6 De-Risking Inevitable Risks


Taking selective risks is inevitable, argues Julian Ritter, Associate Partner at Stryber. 

If [you want] to create new and significant upside and revenue streams by building up new technologies or new business models, it will be required to take risks at a project level as this type of innovation usually deals with unproven business models or technologies where success is never guaranteed.

Risk on a project level must therefore be welcomed and accepted. But these risks can and must be managed in two ways.

First, on a project-level the risk of a new venture can be significantly reduced by using best practices and drawing on the experience of seasoned entrepreneurs.

Second, these individual risks must be managed by fitting them into a larger portfolio strategy to reduce overall risks while still aiming for significant upside. That is the proper approach to de-risking corporate innovation initiatives.

RBS put ~£100M into one startup, digital bank Bo, which was shut down earlier this year. Kudos for being open to risk-taking. But de-risking its approach by investing smaller amounts across a portfolio of new ventures could have yielded more predictable and positive results for RBS.


Another example of how not to take risks is Quibi, as Rafael Chaves Lopes outlines here.

#7 The Last Exit: Trust


Mantro CEO Manfred Tropper zooms in on another key aspect for corporate venture building to work. 

No matter how you define the structure, partnership, or governance of your venture, the only thing that keeps things running when two or more parties are involved is trust. All of the parties must be able to trust each other.

In addition, all parties must be seen as equals within the partnership, regardless of size, relative importance, or investment. Only through trust and equality between all partners can you ensure the success of your venture. Manfred suggests reframing your approach in the following ways:

It’s Not Yours, It’s Ours

Rather than approaching ideas, innovations, and even businesses as belonging to one particular organization or member of the partnership, remember that you are all in this together. Every one is equal in an innovative partnership, and creating a business can only be successful if you come from a place of trust and equality.

It Won’t Hurt to Make Mistakes

Remember that in order to grow, you must be free to make mistakes. Failure is a necessary part of innovation and transformation, and mistakes on the path to growth are inevitable. Embrace mistakes so that you can learn from them and enhance your strategy.

It’s a Long-Term Game

Although it can be easy to focus on short term development and financial return of an idea, it is important to keep in mind that innovation is a long term game. When you are establishing a new business, you need to plan for the future of your idea. Consider ways that your idea can grow and expand, and consider who you can bring into the game as the process continues and you need different skills and solutions.

Ask yourself: how can this product evolve to remain strategically relevant? Imagine it in the marketplace three years from now. Will you be willing to buy the product? Will it still be useful in three years?

Keep the Contract Simple

Keep your contract with your innovation partners simple. Not only does it establish trust between you and your partners, it makes it easier to create a functional partnership. Outline exactly what you hope to achieve with your partnership, and avoid trying to plan for every possible eventuality. You can’t predict what will happen, and you simply create unnecessary complication with detailed contracts.

None of You Knows Anything

Along the same lines, it is important to remember that nobody knows the future. We don’t know what may happen in two days, two weeks, or two years. Rather than trying to plan for every potential downfall, be brave and willing to take risks. Follow your instincts and don’t be afraid to make mistakes. Above all, establish an atmosphere of trust between your organization and all of the partners involved.


#8 Who’s Leading The Venture? Risk Versus Reward


To get high performers on board with your spinout idea, you might need to have some tricky conversations regarding risk versus reward.
The risk/reward ratio is fundamentally different when shifting from working inside a large enterprise to founding a startup. 

For corporate executives, there’s usually a generous compensation package, vacation time, and a 401(k) match or bonus — but the compensation is often capped at a certain point.
Some executives, though, thrive in high-risk, high-reward environments. Running a corporate spinout is riskier, but there’s also an outsized reward potential. Startup founders typically get 10% to 15% equity in a new venture, which could be worth a ton of money if they do well. Let’s say the spinout gets a $200 million valuation with a 10% equity; that’s $20 million for the executive if he or she secures funding or if the company gets bought out.
Ultimately, this approach creates value and better prospects for the firm, the spinout, and your customers. 


🧐 Want to dive deeper? Over the last months, we featured innovation leaders from companies like bp, BASF, EnBW, Ford, P&G, Audi and Airbus sharing their approach to building new ventures from start to scale. Check all session recordings in the Content space (requires Content or Premium Pass).

🤩 For the best and latest on Venture Building, join our upcoming online event 7-11 December, featuring experts like Manfred Tropper (mantro), Sven Jugnmann (FoundersLane), Rafael Chaves Lopes (Trimaran), Elyas Munye (Ming Labs) as well as venture (program) leaders like Karen Roter Davis (Alphabet’s X, the moonshot factory) and Mike Peng (Mitsui & Co’s Moon Lab). Check the agenda here and general info about Innov8rs Connect series here.
You’ve probably all seen this meme circulating on social media. Who drove your digital transformation - your CEO, your CTO or Covid19?

Over the last 9 months, most innovation teams have been focusing on shifting existing and finding new business models given changing consumer behaviours, safety regulations, broken supply chains and other disruptions caused by Covid19.

In preparation for our upcoming online event on Business Design, 7-11 December 2020, we collected insights from different industries on business model innovation in response to Covid19.

#1 Why Business Model Innovation Is Key

The pandemic has brought so much to a halt: travel, economic growth and pre-pandemic-style socializing, to name a few.

Yet, the restrictions in place to protect public health need not limit business leaders’ imaginations. In fact, this is a prime time for business model innovation and new approaches to value creation. Microsoft CEO Satya Nadella said as much this spring when he told investors, “we’ve seen two years’ worth of digital transformation in two months.” 

The company moved decisively through global panic: between March and June 2020 alone, it made five acquisitions to expand its cloud computing empire.

So, should some supply chains be shorter? Can effective training happen via videoconferencing? Will older customers embrace online banking as fully as millennials? The short answer seems to be yes, and that carries long-range ramifications for current business models and the assumptions that underpin them, says Christopher Zott (IESE).

Read more here

#2 A Shocking Statistic (?)



Even before Covid19 hit, 80% of executives thought that their business models are at risk.

#3 What Business Model Changes Have Industrial Firms Been Making

Mika Ruokonen and Miikka Laitila (Futurice) highlight some of the business model innovation changes industrial firms have been making:

  • Digital sales, marketing, service channels, customer relationships and thought leadership
    Instead of serving customers face-to-face, moving interactions and relationships to COVID-proof digital channels. Supporting customers in their online buying activities through content, insights and advice.
  • New partnerships e.g. in product delivery and servicing
    Using new technology and partnerships to broaden offerings and activities in the customer work, e.g. finding local service providers for spare part deliveries. Already happening in B2C, and the models could potentially be used in B2B.
  • Shift from products to services
    Moving from the provision of single products to continuous service agreements, various XaaS models and total solutions that are provided to customers. Moving from selling ownership towards selling access. Various bundles of equipment, software and services.
  • Outcome-based value propositions
    Outcome-based offerings whereby customers can buy based on the value delivered. Data ecosystems to support outcome delivery.
  • Platform business models
    A company acts as a network orchestrator that matches the supply and demand of goods and services in a given industry sector or value chain.
  • Selling data and insights
    Understanding what valuable data assets a company has and then identifying existing or new customers that could buy data and insights, then launching data-enabled offerings and revenue models.
  • New remote activities
    New remote activities, such as remote support and services that are delivered from anywhere in the world where COVID-19 outbreak is not hurting the operations too much in a certain moment of time.
  • Automation in operations
    Applying automation in plants, warehouses and facilities.
  • Scalable talent ecosystem e.g. outsourcing
    Using more outsourcing, partners and freelancers to create more workforce flexibility, building an ability to quickly scale up & down resources and activities thanks to partnering.

Read more here

#4 Focus On Resilience

The second factor is the resilience of a business model. We can classify business models along two dimensions, which lead to four types: Product, Project, Platform and Solution. Within the same industry sector, the business model types with higher inclusiveness have been better off because, on average, they showed higher resilience in times of the pandemic.


Increasing inclusiveness can be achieved when the comprehensiveness of the offering and/or the stickiness of the business transaction is enhanced, via a platform or solution business models. This implies moving from standalone, often physical offerings with vastly independent transactions, to comprehensive and integrated offerings with recurring transactions.

With higher inclusiveness levels, we have generally witnessed an increase of resilience. The higher the offering’s breadth and depth, the bigger the ecosystem around its customers, and the more premium services are integrated (e.g. free-of-charge shipping, unique content), the less reasons exist to change vendors. 

Furthermore, subscription-based monetization models increase the probability that the customer will continue the relationship with the same vendor and often leads to a chain of transactions.

Read more here

#5 What’s Happening In Different Industries

Here’s a glimpse of how companies in different industries are adjusting their business models:

Supply Chain, Health, Cybersecurity, Insurtech, Retail, Enterprise Tech, Travel, Media & Advertising, Fintech - click here 
Pharma - click here
Manufacturers - click here
Auto industry - click here
Financial services - click here
Retail - click here
Mining - click here

Do share any other resources about business model changes in different industries

#6 Examples Of Business Model Pivots

During our recent Innov8rs Connect Unconference, Vincent Pirenne (Board of Innovation) shared some examples of business model pivots.

 
The team at Board of Innovation also keeps track of business model pivots in this public list:

If you’d like to understand the current state of the Low Touch Economy, join Nick de Mey’s session on 26 November - What We Got Wrong About The First Year of the Low Touch Economy

#7 Highlight Anomalies and Challenge Mental Models

As companies position themselves for the new normal, they cannot afford to be constrained by traditional information sources, business models, and capital allocation behaviors, argue Michael Jacobides and Martin Reeves.

Instead they must highlight anomalies and challenge mental models, revamp their business models, and invest their capital dynamically to not only survive the crisis but also thrive in the post-crisis world.

Any analysis of growth opportunities must go well beyond a simple categorization of what you already know. You need to challenge your ideas about what’s happening in your traditional business domains by taking a fresh, careful look at the data. This requires that you actively seek out anomalies and surprises.

Dive deep into the data - Anomalies usually emerge from data that is both granular (revealing patterns hidden by top-line averages) and high-frequency (allowing emerging patterns to be identified rapidly).

Take multiple perspectives - In the military, a technique for discovering what you don’t know is to use the “eyes of the enemy.” Military leaders ask themselves, What is the enemy paying attention to? and then shift their own attention accordingly to illuminate potential blind spots and alternative perspectives. 


#8 Testing, Testing, Testing

The key to preventing spending unnecessary amounts of resources and time on developing a business model is through the continuous testing of its most critical aspects. That way, you get fast feedback from customers, users, and partners regarding the feasibility of the model. 

Check this guide to help you:
·    Understand the testing process step by step
·    Choose the right tools that can help you find the right questions
·    Understand the best test formats and setups for the successful development of your business model

Over to you. What business model changes have you worked on, or seen? Any examples of successful pivots you can share?
Feel free to comment below with your takeaways, or ask questions to the experts featured. If you rather don’t respond publicly send me a DM or email hans@innov8rs.co

For the best and latest on Business Design, join our upcoming online event 7-11 December, featuring innovation leaders from Bosch, Nestle, Microsoft, DNB, NASA, and Google X. Check the agenda here and general info about Innov8rs Connect series here.
As innovators, we mostly focus on searching for new business models, organized separately from the core operating existing business models. Both activities are fundamentally different in nature, and whilst often organized separately, there needs to be a proper (power) balance between "exploring" and "exploiting".

In preparation for our upcoming online event on Strategy, Leadership & Governance and Funding, Accounting & Metrics, we explore the latest on effectively organizing for both Explore and Exploit activities.

#1 Not Either/Or but a Continuum

When we think of the best companies in the world we imagine highly efficient execution machines, that are great at exploiting their current success. We [at Strategyzer] have spent the last two years conducting extensive research to understand why certain companies have been able to create immensely successful businesses, disrupt entire industries and survive disruption themselves.

In reality, those companies do not prioritize exploitation over the exploration of new opportunities for growth. They are world-class at simultaneously managing the entire continuum from exploring new businesses to exploiting existing ones.


Read more here

#2 Back to Basics: The Ambidextrous Organization

[In 2004, Thusman and O'Reilly] discovered that some companies have actually been quite successful at both exploiting the present and exploring the future, and as we looked more deeply at them we found that they share important characteristics.

In particular, they separate their new, exploratory units from their traditional, exploitative ones, allowing for different processes, structures, and cultures; at the same time, they maintain tight links across units at the senior executive level. In other words, they manage organizational separation through a tightly integrated senior team.

We call these kinds of companies “ambidextrous organizations,” and we believe they provide a practical and proven model for forward-looking executives seeking to pioneer radical or disruptive innovations while pursuing incremental gains. A business does not have to escape its past, these cases show, to renew itself for the future.

Read more here

#3 Building Ambidexterity: Diversity and Dynamism

Companies in stable, simple environments do not require ambidexterity—they can thrive by emphasizing operating efficiency. But most others will need to pursue it. Ambidexterity can be achieved through four distinct approaches: separation, switching, self-organizing, and external ecosystem.


To build ambidexterity, companies must understand the diversity and dynamism of their environment and choose and implement the appropriate approach. Each approach requires a different set of organizational interventions and implies a different role for the center.

Where separation is required, identify scale-driven (that is, exploiting) and innovation-driven (that is, exploring) business units and set clear boundaries between them by separating objectives, resources, talent, and risk management approaches. The role of the center here is to set and maintain these boundaries and provide centralized services as efficiently as possible.

Where switching is needed, design incentives to break down silos and encourage collaboration, and create a culture of flexibility among managers. The role of the center is to create alignment between strategy style and environment and to modulate style over time. Central functions like HR and IT should be flexible enough to meet the changing needs of individual groups over time.

Where self-organizing is called for, break down business units and functions into small groups and set local rules of interaction for how units negotiate with each other and how performance will be assessed. Here the role of the center is smaller: its function is to design and implement the local incentives from which the organization will self-assemble.

Where an external ecosystem is required, create platforms that are attractive to potential partners, develop a vision around which to orchestrate parties, and rearrange the corporate center as coordinator of the external ecosystem.

Read more here

#4 Yet... So Far Only 2% Succeeds

Of the 2,500 public companies we [Knut Haanæs, Martin Reeves, and Jules Wurlod] analyzed, just 2% consistently outperform their peers on both growth and profitability during good and bad times.

These “2% companies,” with Zara, Amazon and Toyota mentioned as examples, are able to renew themselves in large part by driving innovation and efficiency simultaneously.

Read more here

#5 The Importance of Re-shaping the Core

Having separate organizational units for exploit and explore will leave a big gap in between. As Maarten Korz outlines in this video, summarizing the work done by Ralph Christian Ohr and Frank Matte, it's necessary to re-shape the core as well.


#6 It's a Mindset - Not an Org Chart

Especially since Covid19 hit, even the core business, the "exploit" part of our organizations, faces massive amounts of uncertainty. Brant Cooper suggests we let go of the idea of ambidexterity as an org chart and instead embrace the notion that it's a mindset. As innovators, we can guide the core business to close uncertainty gaps.


#7 The Ambidextrous CEO

True ambidexterity is uncommon. It requires CEOs to perform a precarious balancing act. Leaders who successfully model this leadership style embrace uncertainty, ambiguity, ambivalence, tension, and even conflict. They evince comfort with discomfort.

This is key. Without effective guidance from the CEO, organizational discomfort may trigger organizational traps—vicious cycles that lead to an increasingly one-sided focus. Absent a disciplined approach to both, exploitation drives out exploration—and vice versa. Established firms gravitate toward uniformity, and many develop mindsets and practices far more aligned with one philosophy over the other. In this way, they escape the tensions generated by a dual imperative.

How can CEOs cultivate ambidexterity in both themselves and the organizations they lead?

Ambidextrous CEOs weave the exploitation-exploration tension throughout the organization until it becomes culturally embedded on three fronts. It forms a central part of the CEO’s personal mindset, which the CEO then translates into an expansive vision for action and communicates broadly throughout the organization.

It permeates the CEO’s approach to leadership of the entire C-suite, where he or she makes sure that the necessary tensions are acknowledged and actively balanced. And it is embodied in a carefully crafted organizational design that eschews silos and enables a bifurcated, simultaneous focus on exploitation and exploration at every corporate level and division.

Read more here

#8 It Is About Power: Introducing The Chief Entrepreneur

Even an entrepreneurial CEO cannot be 100% focused on innovation; a big part of their attention is always taken up by running the core business. And many CEOs simply lack entrepreneurial skills. In these situations, the company should consider appointing a Chief Entrepreneur instead.

In 2008, Peter Ma, Founder and Chairman of the Chinese company Ping An, believed his company would get disrupted if he didn’t shift it from being a financial conglomerate to a technology company. To drive this change, Ma appointed as Co-CEO Jessica Tan who was given the mandate and responsibility of driving innovation under the title of group executive director. But in effect, Jessica Tan became Ping An’s chief entrepreneur.  

This change allowed Ping An to build a strong innovation portfolio that transcended industry boundaries in five distinct technology-related areas beyond banking and insurance. For example, the company launched Good Doctor which became the world’s largest healthcare platform with over 300 million users.  Since 2010, Ping An has moved from being ranked 383 on the Fortune Global 500 to 21st in 2020. 

Importantly, from our work [at Strategyzer] we’ve come to believe that the chief entrepreneur should be equal in power and rank to a non-entrepreneurial CEO.


Read more here

Now, over to you.

How's the (power) balance between exploit and explore in your organization? What's working, what's not?

Feel free to comment below with your takeaways, or ask questions to the experts featured. If you rather don’t respond publicly send me a DM or email hans@innov8rs.co

For the best and latest on innovation leadership and governance, join our upcoming online event 16-20 November, including an interactive conversation about ambidexterity with leaders from DSM, GN Group and Siemens. Check the agenda here and general info about Innov8rs Connect series here.

Innovation requires dedicated governance and tailored funding. Most companies are implementing venture capital investment mindsets and mechanics, and "growth boards" are an important pillar of such governance.


In preparation for our upcoming online event on Strategy, Leadership & Governance and Funding, Accounting & Metrics, we explore the why, what and how of Growth Boards below.

#1 Why Growth Boards?

To innovate with startup speed, corporates need to make quick, clear decisions about the projects presented to them, in a system. — Eric Ries (Author of Lean Startup and The Startup Way)
In a 2017 interview with TechCrunch about his then launched book The Startup Way, Eric Ries explained why he suggests creating a growth board:

Right now, most corporate employees exist in a matrix management structure, reporting to different people and having lots of different managers who have veto power over what they do. 

But each time a middle manager checks in, he or she exerts a gravitation influence, and most product mangers who I meet with say they spend 50 percent of their time defending their existing budget against middle manager inquiries. That’s a massive tax on most product teams.

So we treat [these units] like a startup and create a board of [say] five execs who they report to infrequently. That way, if any middle manager has a concern, [the head of that unit] can say, “Talk to the board.”  It’s like at [venture firm] Andreessen Horowitz. It has something like 150 employees [yet] not every person who works there gets to call a portfolio company founder. Not every limited partner who has invested in Andreessen Horowitz gets to call its founders. There are well-defined processes in place so that founders [aren’t fielding calls all day.]

Read more here

#2 Extensive Governance Does Make A Big Difference In Results

Accenture found that only 12% of companies govern innovation extensively, and those companies achieved a compound annual growth rate (CAGR) of 5.9%, on average, from 2013-2018, compared with a CAGR of 2.9%, on average, for the 88% of companies that govern innovation more haphazardly.

Check the full report

#3 Key Principles

A growth board is a group of senior executives within an organization that meet regularly to review, discuss, and ultimately fund or kill new growth initiatives. It functions as the enterprise equivalent of venture capital and uses many of the same mindsets and lenses that VCs do in evaluating and deciding on opportunities. 

Here are some principles to keep in mind as you introduce growth boards into your current innovation plan:

  • Convene members regularly. Growth boards only function well if they follow a regular cadence, with all members present.
  • Consider a large volume of bets. Like VC firms, growth boards concern themselves with portfolios, not single opportunities. A growth board meeting should focus on a sizable number of bets built around a coherent growth thesis.
  • Ask the right questions. The right questions are different for the various stages that startups go through, but they are always aligned with commercial truth rather than innovation theater.
  • Fund teams and problems, not ideas. Growth boards fund the problem space and the team going after it, not the idea or strategy per se. Like VCs, they are primarily focused on finding a really big problem and a great team to solve it. The solution itself is likely to change as the team learns more about the space. 
  • Learn and move forward quickly. Growth boards are as much about learning as they are about funding or defunding any particular idea. The byproduct of evaluating multiple solutions in one problem space is gaining a deeper understanding of that space than could be achieved by any other means.

From "To Innovate Like a Startup, Make Decisions Like VCs Do" by David Kidder & John Geraci - read more here

#4 Creating a Container and Surviving Political Realities

The venture board must also equip innovative ideas to survive the rough-and-tumble political realities of the company once they leave the incubator. For projects to survive outside of the protected space it is also necessary that:
  • They are funded from a budget that comes from outside of the protected space
  • They have stakeholder sponsorship from outside of the venture board
  • They meet criteria for maturity (for a product this might mean having a working prototype) to enable them to compete for and capture the attention and imagination of stakeholders
  • The board neutralizes known threats from blockers and naysayers who might stand in the way. 

The work of the venture board is crucial since many companies fail to create a container to hold fragile innovations. The portion of the portfolio that represents the core business often rejects innovations, like antibodies attacking a virus. This is why it is important to have a structure to contain and nurture innovation.

Read more here

#5 Growth Boards - How?

During our recent Innov8rs Connect Unconference, Misha de Sterke outlines what end-to-end accountability from scouting to scaling new ventures looks like.


Check full session recording here

#6 Metered Funding 

With traditional funding, teams and projects are typically funded with an allocated budget for a set period of time (usually annually). With metered funding, ideas are allocated funding over a series of rounds and are based on goals and milestones. The benefit of metered funding is that in the earlier rounds, funding is learning-based, and in the later rounds, funding is growth-based.


Read more here

#7 Don’t Say Yes Too Often

One of the biggest challenges is how often growth boards tend to say yes. When asked to pivot, persevere, or kill, persevere ends up being the default decision far too often. As a result, funnels don’t tend to narrow, every opportunity gets funded. 

The first effect is that there is less money available to fund truly breakthrough opportunities later in the funnel. The second is that many of the initially approved ideas disappear organically but much later than they should have because they didn’t meet the evidentiary burden. Essentially spending weeks and months pursuing traction and spending valuable resources on ideas that should have been killed earlier. 

That’s especially the case in less mature boards, who say yes to 90% of ideas coming in. As boards become more mature, they realize the value of saying no and overcoming that cultural habit. 

More mature boards averaged about 70% yes’s. That’s closer to the balance you can reach for as you build that intentional innovation pipeline.
#8 Pitfalls and Decision-Making Biases

According to Dan Toma there is a risk for Venture Board (=Growth Board) meetings to become a pitching contest or a meeting looking more like a Demo Day from an accelerator program. Another pitfall they have seen with Venture Board meetings is that no decisions are being taken with respect to the ventures that just presented their progress. Also, the atmosphere in the Venture Board should be one of inclusiveness, trust and support. The meeting is not there to punish teams.

Dan also sees an important pitfall related to wrong skills and decision-making biases. Assessing new ventures is different than managing an improvement project. The degree of uncertainty that comes with breakthrough innovation is highly different than the one in incremental innovation. This elevated degree of uncertainty accentuates known decision-making biases, such as:

  • Sunken cost bias: once we’ve invested time and/or money in something, we become vastly less likely to abandon it, even once it should be clear that the project will ultimately fail. 
  • Survivorship bias: we commonly over-estimate the likelihood of success in risky ventures.Safety bias: Safety bias refers to the all-too-human tendency to avoid loss. 
  • Experience bias: The tendency to take our perception to be the objective truth. 
  • Expedience bias: We prefer to act quickly rather than take time. Expedience bias tilts us toward answers that seem obvious, often at the expense of answers that might be more relevant or useful.
Now, over to you.

Have you installed a governance structure that includes growth boards? If so, how are they operating, and what seems working well (and what not)? 
Feel free to comment below with your takeaways, or ask questions to the experts featured. If you rather don’t respond publicly send me a DM or email hans@innov8rs.co

For the best and latest on innovation governance and funding, join our upcoming online event 16-20 November, featuring Jonathan Bertfield, Dan Toma, Esther Gons, Tristan Kromer and others available to guide you in solving your actual challenges. Check the first agenda here and general info about Innov8rs Connect series here.

I contacted some BU directors of different areas to present them the GB concept and they like it.
Now we're a bit stuck as we are lacking ideas to present. But we're working on that.
Hans Balmaekers replied
  ·  1 reply

For us as innovators to be successful, our efforts must be guided by our innovation strategy, which in turn must be in alignment with (or part of) our organization’s overall strategy. 


In preparation for our upcoming online event on Strategy, Leadership & Governance, we explore the basics for what makes for an effective innovation strategy below.

#1 The Strategy Paradox

The future is uncertain, yet success requires commitment to a strategy well in advance of certainty. That's the Strategy Paradox as Brian Christian shared with us recently.


Check full session recording here

#2 Strategy of Innovation Versus Innovation Strategy

For starters, let’s get clear on the difference between a “strategy of innovation” versus an “innovation strategy”.

A strategy is a heuristic for making decisions under uncertainty. An innovation strategy must relate to innovation decisions. These decisions include:
  • What areas will we invest in?
  • How much will we invest?
  • How will I divide that investment up into an innovation portfolio?
  • Who will make investment decisions?
  • What capabilities will we need to build to support those investments?
  • What capabilities are we not capable of building and must acquire or form a partnership for?

For more, check Tristan Kromer’s blog post via

#3 Alignment Between Strategy and Innovation Strategy

Tendayi Viki suggests to start with an Innovation Thesis to align strategy and innovation strategy.


#4 Why Is This Important? 

In their 2017 Innovation Benchmark Study, PWC found that 65% of companies that invest over 15% of their revenue in innovation indicated that aligning business strategy with their innovation vision was their top management challenge. 

#5 What’s the Cause of Misalignment?

According to Aaron Eden, there are a number of reasons why misalignment can occur.

  1. Exploring Solutions for the Wrong Reasons 
    The “Shiny object syndrome”: teams can become easily distracted by the trends of today and lose sight of the end goals for a project if careful attention is not paid to corporate strategy and vision throughout the process.
  2. Changes in Leadership   
    One leader’s personal goals may influence the direction of the entire organization, for better or for worse.
  3. Poor Communication of Corporate Vision and Strategy
    On top of that, 70% of employees don’t even know or understand corporate vision, and feel so disconnected from it that they can’t explain how it relates to their job. 
  4. Poor Communication of Innovation Strategy
    If leadership does not clearly paint the picture of how innovation fits within the wider context of the company, teams will essentially be flying blind and creating random acts of innovation 
  5. Context
    It is highly probable that many H3 initiatives will appear misaligned because they are in the early stages of development. 


#6 How To Get Alignment

Here are two tools you can use:


How are you getting to alignment? Any tools, techniques, tips? Comment below.
#7 Don’t Just Project The Past...

Pointing at examples like Apple, Mark W. Johnson suggests we start by looking at the future and work backwards, rather than project the past forward.


Check full session recording here

#8 And Know That Strategy Is Emergent

Also, don’t think you can plan for everything. IKEA didn’t set out to sell disassembled furniture as Nadya Zhexembayeva pointed out.


Check full session recording here

Now, over to you.

Reflect - how well is your innovation strategy aligned to your organization’s overall strategy? If you see room for improvement, where could you start? 
Feel free to comment below with your takeaways, or ask questions to the experts featured. If you rather don’t respond publicly send me a DM or email hans@innov8rs.co

For the best and latest on innovation strategy, join our upcoming online event 16-20 November, featuring Tendayi Viki, Brian Christian, Tristan Kromer, Brant Cooper and others available to guide you in solving your actual challenges. Check the first agenda here and general info about Innov8rs Connect series here.

Great discussion. A simple way to focus innovation efforts is to just ask leadership what they see as their biggest problem(s). Then take it from there. High likelihood that the innovation "strategy" will be aligned.