Corporate Innovation: Driving Growth with Venture Building
Corporate venture building has emerged as a powerful strategy to drive growth through corporate innovation, especially in today's technology-driven and competitive landscape. According to McKinsey, 50% of CEOs view building new internal ventures as a top priority for achieving sustainable growth. This article explores why corporate venture building is essential to corporate innovation success and how technologies like artificial intelligence (AI) are accelerating this trend (McKinsey, 2024).
The Context and Challenges of Corporate Innovation Through Venture Building
Corporate venture building enables organizations to develop, scale, and launch new business lines that expand their core offerings, positioning them at the forefront of corporate innovation. According to McKinsey, companies leveraging corporate venture building strategies can grow revenue 2.6 times faster than those that do not, as they create new revenue streams in high-growth sectors (McKinsey, 2024). However, executing corporate innovation through venture building presents significant challenges. Structural obstacles and a lack of an innovation-focused culture are among the main issues companies face when developing new ventures. Deloitte reports that 70% of executives identify organizational culture as a primary barrier to corporate innovation (Deloitte, 2023).
The Role of AI in Enhancing Corporate and Open Innovation
Artificial intelligence, particularly generative AI, has become a significant driver in corporate and open innovation, transforming how companies test and develop new ideas. In corporate venture building, AI accelerates business idea validation, significantly reducing initial development costs. PwC finds that 85% of companies plan to increase their AI investments over the next two years, expecting this technology to boost data-driven decision-making in corporate innovation initiatives (PwC, 2023).
Why CEOs are Embracing Corporate Venture Building for Corporate Innovation
Accelerating Growth Through Corporate Innovation in New Business Lines
McKinsey reveals that CEOs typically allocate around 20% of their growth capital to creating new ventures. This investment level is seen as ideal for balancing risk and return in corporate innovation. Companies allocating this amount to venture building are twice as likely to achieve high returns compared to those that do not (McKinsey, 2024). Additionally, Harvard Business Review emphasizes that corporate innovation through venture building fosters organizational resilience, enabling businesses to respond quickly to market shifts and disruptive trends (Harvard Business Review, 2023).
Challenges in Scaling Corporate Innovation Through Venture Building
Despite its advantages, corporate venture building poses scalability and ROI challenges. A study by Innovation Leader shows that only 30% of new ventures launched by large corporations achieve significant scale, largely due to the absence of dedicated, skilled teams. This statistic underlines the need for specialized teams and an organizational structure that supports both corporate and open innovation efforts (Innovation Leader, 2023).
Building an Innovation Culture for Corporate Innovation Success
Fostering an Environment that Supports Corporate Innovation
Establishing a culture of corporate innovation is essential for venture building success. McKinsey suggests that companies should create collaborative environments where employees feel empowered to experiment and learn from failure without fear of repercussions. Amazon exemplifies this approach, with a corporate culture that values innovation and allows teams the resources and freedom to develop new products through experimentation (McKinsey, 2024).
Developing Internal Capabilities to Drive Corporate and Open Innovation
Employees are the most valuable asset in any corporate innovation initiative. McKinsey recommends assembling cross-functional teams that combine technical expertise with a strong business vision. This structure optimizes the venture building process, ensuring that each member adds value to the new business venture while supporting broader corporate and open innovation goals (McKinsey, 2024).
Optimizing Corporate Innovation with Technology in Venture Building
Generative AI: Driving Scalable Corporate Innovation Solutions
Generative AI is revolutionizing how companies approach product and service innovation within corporate innovation frameworks. Deloitte notes that generative AI in venture building allows companies to significantly reduce product development times by providing real-time insights into product viability. According to Deloitte, 60% of companies implementing generative AI in 2023 reported a 40% reduction in product development costs, a testament to its value in corporate innovation (Deloitte, 2023).
Process Automation and Data-Driven Decision-Making in Corporate Innovation
Process automation is another essential technology for optimizing corporate innovation efforts. A PwC report shows that process automation has helped companies reduce operational costs by an average of 30%, increasing efficiency in corporate innovation project management. Data-driven decision-making enables companies to identify market opportunities and threats swiftly, optimizing resources for sustained corporate innovation (PwC, 2023).
Success Stories in Corporate Innovation Through Venture Building
X Development LLC (formerly Google X)
X Development LLC Google’s innovation lab, focuses on ambitious projects like Waymo (autonomous vehicles) and Loon (internet balloons), representing profitable and disruptive business models that exemplify both corporate innovation and open innovation. These projects drive growth by creating new industries and technologies (Harvard Business Review, 2023).
Amazon and Its Internal Business Models
Amazon Web Services (AWS) is a leading example of corporate venture building and corporate innovation. Originally designed as an internal resource for Amazon’s technological infrastructure, AWS has evolved into a platform generating over $70 billion in annual revenue, showing how an internal resource can become a market leader (McKinsey, 2024).
Unilever and Its Innovation Platform “Foundry”
Unilever has established an innovation platform called Unilever Foundry, connecting the company with startups and entrepreneurs to develop technological solutions that complement its products and processes. This platform has enabled Unilever to explore new business areas and address corporate challenges through strategic partnerships, transforming into an open innovation ecosystem that strengthens its operations and enhances adaptability. Unilever Foundry has successfully launched over 200 pilot projects in collaboration with startups, some of which have scaled to become part of the company’s global portfolio, standing out as a successful model of venture building in the consumer goods sector (Innovation Leader, 2023).
Microsoft and the Success of Its Internal AI Unit
Microsoft has made significant investments in artificial intelligence through Microsoft Research and its AI and Research unit. One of its biggest successes is Azure AI, an internally developed platform that now powers multiple Microsoft products and services and has become a substantial revenue stream. Azure AI enables Microsoft to accelerate both internal and external innovation, while also offering advanced AI solutions to companies worldwide (McKinsey, 2024).
Transform Your Corporate Innovation Strategy with Rokk3r
At Rokk3r, we understand that corporate venture building is not just a tool for growth but a discipline that transforms how companies scale, innovate, and create impact. With our experience in building and launching new ventures, we help clients structure and optimize their corporate innovation and open innovation initiatives, ensuring that each project aligns with their strategic vision and contributes to long-term success.
Learn more about how Rokk3r can drive your innovation journey by visiting our Open Innovation and Venture Building portfolios , or contact us at info@rokk3r.com to explore how we can collaborate on your next breakthrough.
References
"How CEOs are turning corporate venture building into outsize growth," McKinsey Digital, 2024. https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/how-ceos-are-turning-corporate-venture-building-into-outsize-growth
"State of AI in the Enterprise," Deloitte, 2023.
"Innovation and Growth Through Corporate Venturing," Harvard Business Review, 2023.
"The Future of Venture Building," Innovation Leader, 2023.
"Rethinking Innovation in Corporates," PwC, 2023.
"Building Successful Innovation Partnerships with Startups: Unilever Foundry’s Approach," Innovation Leader, 2023.
"Microsoft’s Journey in AI: The Impact of Azure AI on Corporate Innovation," McKinsey, 2024.
