CEOs embrace venture-building to drive corporate innovation

Over half of CEOs now rank it among their top three priorities, according to McKinsey.

As tech disruption accelerates across industries, venture-building is becoming a core growth strategy for business leaders. According to McKinsey, over half of CEOs now rank it among their top three strategic priorities—a signal that traditional R&D models no longer meet the pace or scale of modern innovation demands.

For Nicholas Cocks, Partner at Velocity Ventures, this shift stems from a fundamental change in where innovation happens. “What happened more recently is innovation is happening external to corporations, and most CEOs realise that to tap into that, you need to access that external innovation, and having a corporate venture program is one way of doing that,” said Cocks

Scott Michael Krivokopich, Director at 1982 Ventures, agreed—adding that internal innovation has grown increasingly difficult. “CEOs realise that they need to drive innovation, and oftentimes, driving it within their organisation is more difficult,” he said. “So for most CEOs... they have to start to build [ventures] in a way that's a little bit outside the organisation, still plugged in, but building them as separate ventures.”

But while interest in venture-building is rising, so are the missteps. According to Cocks, one common mistake is overengineering the alignment with the core business too early. “If too much time is spent doing that, then the opportunity is lost,” he warned. He also pointed out that corporations need to rethink how they approve investments. “Venture capital firms move very quickly... Corporates need to adapt to that kind of decision making environment.”

Krivokopich said a lack of early strategic clarity is often to blame when ventures fail. “Is this something that's going to just benefit us, or do we want this to be its own line of business and its own commercial operation? And you have to decide that really early.” He also stressed the importance of founder-level ownership. “The people that are running it… need to have some ownership in it. And it can't be, you know, two or 3%—they can't see themselves as employees.”

Cocks identified three must-haves for a successful venture-building unit: “There’s got to be risk taking... deep knowledge of the space... and people who can navigate the corporate structure and get things done quickly. A large part of this is about speed.”

For Krivokopich, autonomy and access must coexist. “It has to be separate enough from the mothership... but plugged in enough to the organisation to get access,” he said. “And you have to have buy-in that this is something the CEO believes is going to be valuable to the business in the long run.”