Digital venture building is hot. The topic is buzzing in corporate board rooms across the GCC (and the rest of the world) and every self respecting corporate has appointed ‘intrapreneurs’, ‘digital transformation officers’ and is gearing up to launch their own digital ventures. Globally large corporates such as Goldman Sachs and BP have successfully set up inhouse venture builders aiming to capture new digital opportunities and fend off well-funded tech start-ups.
However, in reality, while there is a lot of talk and posturing, there are only a handful of successful digital ventures that have been built by the existing local corporate players. More often than not, the existing corporate structures and processes do more harm than good when trying to launch a new digital venture. We have highlighted some of the best practices corporate must take to set-up their digital ventures for success.
- Keep the CFO out of it
Corporates tend to use their normal finance and budget processes to approve, manage and control the new venture building initiatives. However this won’t work. Given the large amounts of uncertainties and continuous pivots, existing processes are too slow, too rigid and most companies will lack the expertise to judge whether the venture is on actually on track or going nowhere.
- Hire a team of experts
The days where anyone could launch a venture by building a ‘website’ or ‘app’ are over. Venture building has become a profession, with experienced entrepreneurs that know how to find product market fits, with technology experts that know how to build quickly, on future proof tech stacks, with expert marketeers that are able to navigate the sea of options available to tech companies. Rarely, these skills are available within the company.
- Manage through the board – stay out of the day to day operations
New ventures need to move fast, adapt fast and grow fast. They think in minutes versus days, days versus weeks and months versus years. The best way to not slow them down is provide oversight through a separate board set-up for the company, but let the teams run the business. The board (or a designated corporate liaison) can help facilitate access to corporate resources but at no point should slow down the actual venture building process.
- Don’t rely on your IT team or external ‘vendors’
Too often corporates still believe that launching a tech venture is similar to launching an internal IT project. The truth can’t be more different: the tech stacks are different, the ‘mindset’ of try fail repeat goes squarely against the typical corporate roadmaps and 3rd party contracts. Treating a new digital venture as an IT project (whether internal or with a 3rd party vendor) will almost guaranteed lead to a (hopefully quick) death of the initiative. The new ventures should either build their own internal teams or alternatively partner with (internal) venture builders that work with a founders – start-up mindset.
- Launch for scale
Too many ventures (start-up or corporate) make the mistake of taking steps that are too small. Not enough capital is reserved, the team is under resourced, the marketing budgets are reliant on the parent company and hence the new venture loses steam, people will get demotivated and chances of failure become high. Research of successful corporate venture launches has demonstrated that you need to launch for scale, with sufficient resources and when things go well at launch, grow it as fast as possible.
While there are many pitfalls in launching corporate ventures, we are strong believers in the model when it is done properly. GCC businesses have the advantage of having long established histories with strong brand names and strong cash flow generation. Launching these new tech ventures will not only defend their traditional business against newcomers but also grow and excite the next generation of entrepreneurs and successful companies within the region.