As Steve Blank, largely recognized as the creator of the lean startup movement, put it: “Corporations optimize an existing business model, startups look for a business model”. There are certain innovations that corporations are well-positioned to work on, but others are more difficult to execute on in a corporate environment. Corporations tend to be more successful around sustained innovations that optimize existing products or services by lowering costs or adding incremental features.
Corporations are best at leveraging technologies that are somewhat proven and can help optimize existing business models by expanding market reach or margin improvements through operational efficiencies. Blank’s methodology also recognizes that startups are not smaller versions of large companies, but rather require their own set of processes and tools to be successful. As the failures of digital innovation labs and the recent departures of several Chief Digital Officers demonstrate, it is challenging to marry industrialization of processes at scale with a startup mentality and digital mindset.
So, why do corporations fail at disruptive innovations and how can venture studios fill the gap?
Challenge: Existing corporate DNA and incentive structures.
Corporates focus on the ‘status quo’ and driving operational efficiencies to achieve quarterly results. Rocket Wagon Venture Studios (RWVS) explores emerging ecosystems, new business models and yet unproven, transformational technologies.
Challenge: Incremental features versus disruptive innovation.
Most in-house innovation is focused on delivering incremental improvements such as new features on top of existing offerings. To mitigate risk and deliver against an established roadmap, corporations tend to use proven technologies and established system integration partners. RWVS explores emerging business ecosystems enabled by disruptive technologies that carry greater risk but promise step change in innovation.
Challenge: Lack of in-house entrepreneurial talent.
As much as many companies claim they seek entrepreneurial thinking, careers at existing businesses are made by executing against highly structured tasks to optimize existing business models, not by exploring breakthrough innovations and developing new businesses. This makes it difficult for them to recruit and retain creative thinkers, designers and engineers. RWVS brings talent to projects that can be game-changing for our partners without disrupting day-to-day operations, enabling innovation to flourish.
Challenge: Constrained technical resources.
The shortage of tech talent has led to a situation where many corporations are facing skill shortages and available tech resources need to be allocated to the core business. In emerging tech areas such as Distributed Ledger Technology (DLT) or Artificial Intelligence (AI), corporates do not have access to top talent. In addition, it is often uneconomical to invest full time equivalents (FTEs) in yet unproven technologies. RWVS pools talent across multiple disciplines and as experts in disruptive New Mobility technologies, accelerates development and commercialization.
Challenge: Managing financial risk.
RWVS pursues innovations where emerging technologies have promise, but the level of uncertainty is too high for corporates to dedicate the necessary number of high caliber resources. Corporations typically can achieve greater returns by investing in existing or adjacent areas rather than exploring innovations with uncertain product market fit, new business models and unproven technologies. Most disruptive innovations are difficult or impossible to predict in terms of their market potential, and as a result the initial revenue opportunities combined with high risk of failure are at odds with shareholder objectives. RWVS provides a model for corporates to focus on what they do best and make a calculated bet on a disruptive future.
Challenge: Failure to meet internal investment criteria.
Many innovation ideas created from within corporations get shelved as they do not meet the internal criteria with regards to strategic fit, addressable market, revenue potential etc. This opens opportunities to emerging startups and leaves many employees that have a passion for these ideas frustrated and disenfranchised. RWVS is a place to realize these ideas.
In summary, the venture studio model is an effective complement to in-house R&D and innovation efforts. Given that the industry must re-allocate internal resources to invest in make-or-break initiatives such as the shift toward electric mobility, a venture studio can extend in-house resources and bring entrepreneurial talent and hard to obtain technical skills into the fold.
In a time when many corporations initiate cost-cutting measures to deal with economic uncertainties and deliver the cash flows needed to invest in make-or-break future initiatives, the venture studio model allows companies to have line-of-sight into disruptive innovation whilst sharing investment risk with venture capital and corporate partners.
RWVS creates future options on the transformation of mobility and transportation and helps corporations focus their top talent on getting the core business ready for the future.
Do you want to learn more about how to create options on the future of mobility? Contact us here.
About Rocket Wagon Venture Studios
Rocket Wagon Venture Studios helps to build startups for the cyber-physical world by providing a team of experienced entrepreneurs who also have strong experience in IoT and specific vertical expertise. The RWVS parent organization provides the architectural cyber-physical framework including considerations regarding devices, security, privacy, data governance and ownership, communications, and a broad range of analytics, as well as shared legal and financial services, underlying operational systems, and corporate relationships. The related subsidiary studios are vertically focused venture studios that combine entrepreneurial expertise to de-risk startups and accelerate them to market with vertically aligned, IoT specific expertise to drive targeted startups at higher valuations.
Learn more at rwvstudios.com.