Why do many corporate startups fail in their validation journey? (And how to change that)
We share some of our top corporate venture success factors based on learnings from over 40 corporates, including this technique for validating your corporate venture.
When getting started with an idea, the teams will inevitably be making lots of assumptions when it comes to what to test. This is why assumption mapping is a technique that we consistently use at WhatAVenture to identify and prioritize all the assumptions we have by looking at the riskiest areas of the idea.
The basic innovation rule is that a project is successful when it is desirable for the target group, viable in the market, and feasible to build. But, these characteristics are often not enough to ensure the success of your idea in a corporate environment.
The differences between a corporate startup and a common startup
Corporate startups are new ventures built up with the resources and assets of a corporate. Because of this close connection to the corporate, they have many advantages. For example, they can leverage the resources and assets by the corporate in a way that secures them a competitive advantage compared to other startups. Plus, corporate startups pursue building up a new business field and usually act with great uncertainty. This is important to emphasize, as projects with great uncertainty require different processes to be successful.
Corporate startups are often faced with the complexity of being embedded in an existing structure and therefore demand a deeper look at the corporate context from the very beginning. For this, we re-examined the “feasibility – desirability – viability” validation framework and we introduce a fourth characteristic that needs to be considered: contextuality.
Contextuality, the fourth dimension of the validation framework
To learn from the various innovation projects and programs that we have executed in the corporate field over the past nine years, we conducted a study about corporate startups.
We talked to innovation managers from 40+ corporates about their innovation and intrapreneurship activities. What makes this study unique is our particular focus on radical and disruptive innovation since these projects are, by nature, more challenging.
"Adding the corporate context as an explicit part of the validation work for every innovation project from the very beginning is essential for the long-term success of corporate startups, and also saves a lot of time and budget in the end."
- study participant
Based on the study participants’ insights, one major success factor that we identified is validating the organizational embedding of the corporate startup in the mother company early in the process. It entails answering questions around strategic fit, sponsorship, administrative and legal structure, and many more aspects. This is why the reality for corporate startups demands the fourth dimension to be added.
The innovation framework that fits the corporate environment adds a fourth dimension that questions your idea’s “feasibility, desirability, viability and contextuality”. It allows you to develop your validation roadmap by examining your idea’s risk areas in a corporate climate.
By looking at contextuality, you validate the corporate startup’s organizational embedding in the mother company.
Use the FE-DE-VI-CO framework to avoid potential risks
Here are some questions you can ask yourself for each risk area along your validation journey, in order to ensure your corporate startup’s success:
Validate if you can build a feasible solution based on the core strengths of your organization:
Can we build and deliver the solution?
Are there any impediments (technical, regulatory, IP, or market access issues)?
Validate if you have a desirable solution that solves the right pain point and that your customers’ needs and wants:
Does the market/target group want this idea?
Does the idea provide value for the potential customer group?
Validate if you have a viable solution with a sustainable business case for now and in the long term:
Can your solution deliver long-term profit for your corporate startup?
Will potential users be willing to pay for your solution?
Can we make a sustainable business out of the idea?
Validate the organizational embedding of the corporate startup in the mother company.
Does this fit with the corporate vision, strategy, and portfolio? Do we have an unfair advantage?
In running this project, i.e., can we leverage our corporate assets in a way that secures us a competitive advantage? Is the idea within our core business model?
What is the required management commitment for this project? Is there a project sponsor?
Is there a logical home for the project now and in the future?
Do we have the required budget? Who is funding the project?
Should the corporate startup be ultimately transformed into a spin-off or be part of the mother company? Do we support a spin-off?
Discussing your idea through these four lenses ensures the success of your startup. We don’t recommend starting the project without a critical look at the corporate contextuality since the risk will become fatal sooner or later.
This is especially true for many projects running through corporate innovation programs. The innovation budget might still finance a successful proof-of-concept phase. However, once the project falls out of the program, discussions start regarding how to move on with this idea.
Curious to learn more about contextuality and how crucial it is in the success of your corporate startup? Download our Corporate Startup study.
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What makes corporate ventures successful
Practical insights on how to make your corporate venture a success from 40+ leading corporates in the German-speaking region.