Large companies are going bust faster than ever, merely 52 of the 500 companies on the Fortune 500 list in 1955 remain on the list today and the average lifespan of S&P 500 companies is predicted to fall from 61 years in 1958 to 12 years in 2027.
The survivors have one thing in common – they reinvent themselves over and over.
COVID-19 has made the need for innovation more urgent. This was the key takeaway from a recent webinar by the Singapore Economic Development Board (EDB) and Mach49, a Silicon Valley-based growth incubator that helps businesses create, build and launch new ventures. During the webinar, Mach49’s Chief Executive Officer Ms Linda Yates and Managing Director Mr Paul Holland shared how you can drive new ventures to disrupt and lead the rebound.
The dinosaurs beating the unicorns at their game
There are no reasons why large companies cannot out-innovate startups. In fact, long-established global businesses are already doing it.
Global energy player Shell has incubated a brand new company, Tulli. A productivity app built to help wind turbine field technicians manage workflows, Tulli is undergoing Series A funding and is on track to become a high-growth business.
Energy and automation giant Schneider Electric has incubated Clipsal Solar, a mobile energy management platform driven by sensors data, analytics and machine learning. Clipsal Solar is now one of the top renewable energy companies in Australia.
Japanese multinational corporation TDK established TDK Ventures Inc. with a US$50-million (S$68.9-million) fund in July 2019, expanding from electronics to material science technologies.
As seen, global companies are innovating from the inside-out by launching new ventures to expand their core businesses.
Being bold when others are fearful can reap such companies plenty of rewards.
Mr Holland shares that as opportunities opened up after the 1995 recession, venture investments pooled spectacular returns of 90 per cent while returns fell to -0.89 per cent just four years later. Companies need not fear the downturn as long as they utilise their ideas, brand and resources to seize opportunities.
In the context of the COVID-19 pandemic, a key question would be how companies can commit to venture building during this period. To this, Ms Yates makes this point:
“If you don’t invest now, you will go out of business.”
So, how are businesses building the pipeline and portfolio to capitalise on growth opportunities for long-term survival?
Seize the mothership advantage
“What differentiates a large company from a startup is its two fronts of battle – the external market, and friction within the mothership,” reveals Ms Yates. However, she argues that large companies enjoy far more advantages than startups by being able to tap on the mothership.
In times of crisis, large companies have an upper hand because:
- Existing talent can be redeployed to build a full-time venture team of four to six diverse talents committed to innovation.
- Access to resources and seed funding can be reallocated to drive ventures through prototyping, launching pilots and commercialisation.
- A new venture board of top executives can be appointed to play the role of venture capitalists (VCs), leveraging the core capabilities of your company and providing necessary expertise and mandate for your venture to grow.
Mothership advantages ensure that new ventures access markets rapidly, providing a competitive edge over any startup.
Big companies also have the advantage of hedging their bets. Companies are launching and managing world-class corporate venture capital funds with deal flow networks rivalling top-tier venture capitalists.
When it comes to corporate venturing, Mr Holland emphasises that a diverse investment portfolio is key to maximise chances of a winning breakthrough.
The yin and yang of new ventures
As you can see, large companies have two complementary ways to disrupt: outside in, and inside out.
The advantage of outside-in corporate venture capital – which focuses on investing in or acquiring promising startups – is rapid diversification according to Mr Holland. “It allows you to place more chips on the table so that your mothership learns about a wide range of areas, driving business to adjacent markets,” he explains.
The benefit of inside-out incubation of ventures, as Ms Yates explains, is ownership. By building your own growth engine, you own the talents, resources and output. Ms Yates also observes that keeping a close eye on proprietary innovation assets and insights is invaluable for companies looking to stay abreast of fast-moving trends and the “art of the possible.”
Bring Silicon Valley into your company
To disrupt markets, start with disruption from within. Rethink organisational governance to introduce the entrepreneurship and dexterity of startup culture. This does not mean overhauling business models, assures Ms Yates.
Instead, build an ecosystem that allows new ventures to thrive alongside existing systems. This can be done by identifying advocates within each department or function. Companies can build ventures faster by giving employees room to make changes and allowing exceptions to protocols.
One of Mach49’s clients, Nestlé Purina Petcare, adopted this new organisational model. They managed to innovate and build an integrated hardware product with an in-house new venture advocate, fast-tracking vendor procurement to one week instead of the usual 90 days.
Ms Yates believes that the value of new ventures naturally incentivises companies to transform.
“When you tether enough speedboats worth US$100 million (S$137.9 million) to US$300 million (S$413.9 million) in revenue each to the mothership, that mothership will turn. Everyone will start thinking about what needs to be shifted to help those ventures thrive.”
It’s time to build
“Now is the time for a new venture,” asserts Mr Holland, “and Mach49’s Singapore studio is the perfect opportunity.”
Conducting venture building in Singapore enables corporates to plug right into the nation's thriving corporate venture building community, in a city ranked as the most innovative country in Asia by the Global Innovation Index 2019. Home to 46 per cent of Asia regional headquarters, Singapore also facilitates access to the US$3 trillion Southeast Asian economy that is set to become the 4th largest by 2030. The strong venture-building network here facilitates collaboration across the region and diverse industries, increasing opportunities for innovative growth.
This next turn in the economy need not be a bleak one. If you are willing to embark on a new venture, it is possible to chart a course in times of uncertainty. COVID-19 may even present the perfect opportunity to make bold ventures for long-term growth.
Reach out to us if you are keen to explore how EDB can empower your company along the journey of venture building.