Venture Capital and Corporate Innovation - A Point of View From Mayfield Fund

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We also believe that listening to the market and the needs of the market are important insights for our start-ups. We have built a substantial network - the Mayfield CXO Network, which provides a platform for us to learn and share ideas on emerging innovation, while our start-ups gain insight into the needs of the market. The members of this network are CIOs, CTOs, CISOs, Corporate Innovation Leaders and other operational CXOs like CROs, CSOs, CMOs, etc.

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Over time, we have learned a lot about the struggles that corporate teams have driving successful open innovation - both organic and inorganic. So, we went ahead and captured best practices from many of these meetings, and turned the learnings into a summary that we call the 3 Is of Corporate Innovation (illustrated below).

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Fundamentally, the big struggle with open innovation is the impedance mismatch – which is that corporate environments and start-ups are naturally opposing forces. Like any initiative, there are better ways to approach this and worse ways.

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In a large organisation, corporate innovation can sometimes come across as a Sisyphean task. As soon as your team clears one hurdle, another comes into view. When this is combined with a weak budget and compensation allocation, it can feel like spending a lot of time focused on innovation is just not a high priority so it’s important to crawl before you run.

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1. Get to know your customer

Having a huge customer focus is critical. We are seeing this today at very successful companies like Amazon and I think at this point it is common knowledge. But understanding customer needs is so important when it comes to making a blueprint for new business.  

· Talk to them beyond just a survey and get to know their pains.

· Don’t outsource – executive teams should be directly involved.

· Over-index on data-driven insights than can be tested (as opposed to tradition or bias).

· Don’t bombard your customers with too much information, but instead the right information at the right intervals.

· Focus on what your customers’ needs are – as opposed to adding technology for the sake of technology.

· Better communication across IT and the business units can help foster better customer-facing initiatives.

· Customer engagement groups can help provide direction on where customers are going – and how your teams can go with them.

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2. Bold Imagination

Give big ideas a chance to be debated – even the process of going through that discussion can yield some interesting insights. The volume of ideas matters a lot – leadership, beyond the innovation team, should understand what the key trends are in the market to better guide these innovation efforts.

· Make an effort to marry customer pain with the art of what’s possible – start-up style.

· Get your leadership team engaged in curated “corporate tourism” to stay on top of key innovations and trends.

· Partner with those who have an interest in helping you innovate: This could mean local incubators, appropriate VCs, or other start-up programs. Make an effort to cultivate these relationships to bolster your incoming flow of new start-ups

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3. Deploy Small Bets

Small and fast is better than big and slow. We have seen programs that run MVPs as fast as 30-60 days against very small use cases and then expand from there. This keeps the risk and investment low while building out insights.

· Have a short-term process of go or no-go when working with a start-up; for instance, a 60-day trial to determine if there is any fit at all before moving to a deeper dive.

· Organise the core team from legal to procurement, to facilitate access as purpose-built for this short sprint process so that everyone is on the same page.

· Provide this as a prescriptive process for the start-up to succeed or fail when working with you.

· Test and measure MVPs against your customers’ pains (refine, retest, re-measure).

· Become an expert at small bets.

· Failure terminology gets replaced with a “learning loop” that celebrates new insights and learnings.

· Build a catalogue or library of knowledge – data-driven insights that capture what works and what doesn’t.

· Low risk but potentially high upside.

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4. Remove Roadblocks

‍There are always tons of roadblocks to innovation efforts. The easiest way to make this a priority is to tie it to compensation and KPIs.

· Review obstacles, metrics, governance, compensation, resource allocation, policies, procedures and politics with an eye for innovation.

· Get everyone on the same page forPOCs – align the rest of the organisation to this fast-paced process of working with start-ups. Speed matters.

· Protest the barriers &obstacles and then systematically remove or reduce them.

· Consider these changes to be “preconditions” for success.

· Don’t let well-established legacy processes kill innovation – challenge legacy.

· Continue to re-review obstacles, getting more effective at every step…award successes in productivity here.

5. Define Your Team

· Who will be on the team?

· Who are the executive sponsors that will remove the barriers?

· Who can assist the team from the outside? Peers (competitive and non-competitive), non-peers (orthogonal insights), VCs, universities and other innovators.

· It is important to clearly define how and who in advance with clear roles and KPIs.

· Three core skills: idea makers, growth makers and efficiency makers.

6. Incubate

‍What does success look like for an open innovation team? And that is going to mean different things in different places.

· Set Metrics - Set your targets, timeline, journey and what success looks like for you.

· Get Organised - Hone your innovation team’s methodology and process. Get everyone on the same page throughout the organisation. Become experts at the innovation learning journey and lifecycle.

· North Star Urgency - Honestly embrace facts of disruption and continuously fund, test and gather feedback on small bets. Driven to exceed customer expectations.

· Develop a Pipeline - Garner a VC-like investment thesis: A synopsis of the evolving market, and predictions around the future landscape, players, and early signals to track.

· Learn the players in the innovation ecosystem: VCs, incubators, entrepreneurs and suppliers.

A few of the themes we’ve been seeing across the ecosystem this year are:‍

· Generative AI - AI that generates something new rather than analysing something that already exists, using generative models such as large language models.

· Digital Twins - A digital representation of an intended or actual real-world physical product, system, or process that serves as the indistinguishable digital counterpart of the product for practical purposes, such as simulation, integration, testing, monitoring and maintenance.

· Autonomous Logistics - Systems that provide unmanned, autonomous transfer of equipment, baggage, people, information or resources from point to point with minimal human intervention.

· Low Code – Low code is an application development method that elevates coding from textual to visual.

· Datafication and Applied Observability - Transforming objects, processes and more, into a quantified format so they can be tabulated and analysed.

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Author: Gamiel Gran, Chief Commercial Officer at Mayfield