Building innovation toolkits: Our venture studio panelists share tips on how to create bold new solutions in large companies

By Stu Willson

In our webinar series Build, Buy or Partner we explore big questions about innovation with leaders who have spent their careers figuring out better ways to build. In these conversations we ask how they make critical decisions, what they see coming next, and what they find interesting right now.

On March 25 we hosted a conversation led by Dave Knox, Author of Predicting the Turn with three leaders in the world of venture studios and co-creation. Elliot Parker is the CEO of High Alpha Innovation, a venture studio that supports corporate partners like SVB, Cummins, and Allegion; Lizzie Francis is a partner at M13, which has helped P&G Ventures launch new business like Kindra, Bodewell and Opte; and Jason Brooks is managing partner at Co-Created which works closely with companies including Citi, IKEA, HP and Diageo.

Venture studios and the idea of co-creation have become buzzy terms, and to clarify what those endeavors and organizations actually do, and how they’re distinct from one another, Knox started out by asking the panelists to define the difference. “For us, it’s the combination of a build function plus a source of capital, which is different from a startup studio, that’s the build function without capital,” Parker explained. “You combine that investment ability with the build team, and that becomes a venture studio.” He went on to say that for him that philosophy circles back to the 1970s when venture capital was a new game, and investors didn’t just write checks, they sat down, rolled up their sleeves and provided personal guidance to projects and young companies they had invested in.

Co-creation combines the strengths of start-ups with the resources of a bigger company — larger access to insights and mature distribution networks, Brooks explained. “Co-creation is how do I take best from the internal, best the external bring them together for a higher probability of success on that venture than either one of those by themselves?,” he said.

All three of the panelists told us that choosing the right projects for co-creation and venture studio incubation is crucial, but when it’s clear what kind of companies thrive in those partnerships, there can be a very high rate of success.

The panel talked to Knox about how to build innovation toolkits, why it’s so hard to create bold new solutions in large companies, and how to address the big culture differences that can arise in a collaborative environment. Here are five key takeaways from their conversation.

Venture studios are not a silver bullet

It’s hard to innovate inside a big company — they’re very purposefully built to minimize risk. Venture studios are an excellent way to foster innovation outside of those limitations, but they’re not the only way, or even the best way, much of the time.

Elliot Parker: A venture studio is a very effective approach when deployed well, but it’s also not a silver bullet, and it’s not a standalone thing. It’s part of a portfolio of tools — it should be. When we’re working with large companies to generate a set of ideas and go try and turn some of these things into external ventures, maybe 20% of the ideas we generate are addressed well through a venture studio model; 80% are things that they should just be doing internally inside the big company, or with another partner, maybe startups are already doing it, maybe there’s an acquisition out there they should go do. The important thing is to be deploying a portfolio of tools.

Distributed models work

The pandemic has made it easier for venture studios to expand the geographic reach of their work with founders and companies and it’s been a success — though everyone is eager to add the dynamism of in-person meetings back into the mix.

Lizzie Francis: This past year has shown that a distributed model works. We just launched our first remote cohort with PepsiCo and it completely changed the way we thought about recruiting founders. We were not limited to LA, we had the entire United States to play with. The experiment was: could we bring people from disparate places together, and they would effectively collide? And the answer is yes, and in fact, these people might never have collided if not for this. Diversity creates better outcomes, and if geography is part of diversity, then we’ve solved that this year, and we’ve shown that the model can work in many ways.

Figure out who can make decisions — and what scares them

There are major culture differences between start-ups and large companies, especially when it comes to how decisions get made, and recognizing that can lead to far greater buy-in for everyone involved. Founders are used to pivoting on a dime, and thinking a few months out. Decision makers in large organizations are looking out for problems coming five years from now, and may have to consult several other teams to approve a proposal.

Jason Brooks: Be super clear as to who can make decisions on what and when. Ok, we’re going to invest in a cool idea — what if it’s actually an investment you want to go make in a new start-up? Is that a totally separate team and a separate governance unit and a separate thing? Until somebody actually stress-tests that, they don’t know.

Interview your senior stakeholders. I guarantee you, the senior people in the organization and board members and key investors are terrified about where disruptions come from, and they have opinions. And if you can find some of those, look around, you can align to their interests.

Incentives are crucial

Founders often trade stability for the possibility of a big exit, but within a venture studio, especially one inside a company, the incentives and pay structure work differently than at a VC-funded start-up out in the wild. Addressing this culture disconnect is possible, and necessary, with some creative thinking around incentives.

Elliot Parker: There is always a cap on the upside and on the downside. What I mean by that is if it’s been done inside a corporation, whether you’re running a new venture or running a venture studio fund, you can’t make more money than the CEO next year. I mean, come on, that won’t fly. At the same time, hey, if this thing doesn’t work, you’re going to have a job in 12 months.

You may experience some discomfort

At its best, co-creation combines the nimble qualities of a founder mindset with a big company’s resources and ability to scale, which can lead to rapid, hugely valuable innovation. Working together though, can require an open mind, especially when it comes to work culture.

Lizzie Francis: You have to go in with this co-learning expectation because the reality is you cannot de-risk everything. If you’re used to predictability and precise forecasting in a perfect formula, it can seem culturally so uncomfortable to be in that start-up world where the founders are moving fast and breaking things, and ruthlessly prioritizing in a way that may seem illogical to people who are used to having more time, or where culturally, it’s accepted to have more time to make decisions.

For more insights from Radicle: here.