Corporate venture investing, once used by a handful of companies seeking financial returns, has evolved into a crucial tool for gaining access to innovations, discovering disruptive technologies, and addressing new markets, according to new research from The Boston Consulting Group (BCG).
That research reveals that 40% of the 30 largest companies by market capitalization in each of seven innovation-intensive industries—and 57% of the top 10—are engaged in corporate venture capital (CVC) investing. The research is the backbone of a new BCG report, Corporate Venturing Shifts Gears: How the Largest Companies Apply a Broad Set of Tools to Speed Innovation.
At the same time that CVC has spread across the corporate landscape, the venturing toolkit has expanded. In addition to minority equity investments, companies’ repertoires now include accelerators and incubators, innovation labs, and a broad array of activities and events, such as “hackathons,” start-up competitions, and scouting missions to university research facilities.
Accelerators and incubators are the most popular new tool, in use at 44% of the top 30 companies. And one out of five of the top 30 companies operate an innovation lab. The new report examines in depth how companies use these tools and offers critical success factors for any company looking to enter—and win—in corporate venturing.
Extensive research on the innovation strategies and venturing tools of the top 30 companies as well as their search fields shows that a clear innovation strategy is the foundation of an effective corporate venturing operation.
“The most successful corporate venturers can state clearly why they are engaging in an external search for innovation, the specific search fields they are considering, and how they intend to create value,” said Michael Brigl, a BCG partner and a coauthor of the report. “Without such a strategy in place, companies cannot effectively determine which innovation tools to use and who in the organization will be in charge of the venturing effort.”
Close study of the top 30 companies in seven innovation-intensive industries—automotive, chemical, consumer goods, financial services, media and publishing, technology, and telecommunications—reveals how the tools and search fields favored by companies vary depending upon their industry.
Chemical, media, and technology companies, for example, search for innovation in their core businesses mainly using CVC. Telecommunications companies focus on core-business innovation and adjacencies using a combination of CVC and accelerators or incubators. Financial services, automotive, and consumer goods companies use mostly accelerators and incubators to search for innovations in adjacent industries.