During the Corporate Startup Stars Awards Ceremony, held in London at the iconic Gherkin building, Mind the Bridge launched the Report “Evolve or Be Extinct. Open Innovation Models for the Future – Season 2022 – Highlights from Corporate Startup Stars” that analyses how companies are evolving the models of interaction with startups and scaleups.
“The news is that Open Innovation is no longer a black box. That said corporates need to master multiple complementary approaches and models targeting different goals and innovation horizons. The Corporate Startup Stars initiative gathers best practices and set the standards for corporate-startup collaboration in a manner that is practical, comprehensive, and able to capture the new approaches that are constantly emerging. Siemens, who secured first place in 2022, has been at the forefront of corporate innovation for several years and now Siemens Innovation Ecosystem is a central platform which enables fast tracked innovation with startups and external contributors.”, Alberto Onetti, Chairman of Mind the Bridge, commented.
Open Innovation Models
Open Innovation models are constantly evolving over time, as highlighted in the Report. Let’s see how.
1) Outposts: To get exposed to the latest technology trends and business models, 76% of Corporate Startup Stars put boots on the ground in Silicon Valley and Israel. About 80% of innovation outposts established in Silicon Valley are lean structures (Antennas and CVC Offices), while in Israel there are more structured Corporate R&D Centers (33% of the total vs 22% in the Bay Area).
The vast majority of outposts have been established in the last decade (about 80% in Silicon Valley, 54% in Israel) with a strong acceleration in the past few years. Beyond the two largest tech clusters, Corporate Startup Stars are opening outposts in emerging hubs in the Americas, Europe, Middle East and India, the Far East and Australia.
2) Intrapreneurship programs have been progressively revamped. They are increasingly led by the Innovation Unit rather than the HR department and the integration with the Venture Builder is growing. The majority of the Corporate Startup Stars screen about 250-500 projects per year. Implementation includes between 5-10% of total.
Performing Intrapreneurship Programs are ENGIE Innovation Trophies, the global collaborative innovation program of the French multinational utility company; Ericsson ONE, the intrapreneurship and venture builder of the 150 yrs old multinational company; and SAP.iO, that utilized its eight years of experience to transform its Intrapreneurship approach after a first pilot in 2014.
3) Corporate Accelerators are currently under reconsideration. 65% transitioned to more hybrid models. The programs are moving from Early Stage Startups to Scaleups, going virtual, and increasingly abandoning the batch model.
Interesting benchmarks are Rise, created by Barclays and launched in 2015 as a global network for FinTech founders and innovators; Honda Xcelerator, born in 2015 as Honda’s way of developing relationships with startups and the innovation community; Mastercard Start Path, now a digital program aimed at reaching companies in every corner of the world.
4) While only about 20% of Corporate Startup Stars have a Venture Builder, the model is on the rise, although still relatively new (on average 3 years old) and with significant differences from company to company in terms of goals, outcomes, origination and level of corporate ownership.
Worth of mention are 1886Ventures, started as the innovation driver for Mercedes-Benz in 2008 and now fully externalized; Wayra Builder, Telefonica´s investment vehicle whose goal is to increase the value of its startups portfolio through the creation of new companies; ZER01NE by Hyundai, based on providing an efficient framework to incubate and accelerate employees’ ideas, and scale them into flourishing businesses, either internally or externally.
5) The Venture Client model, where the company takes no equity but becomes the first client for the startup, is recognized as the most effective tool for onboarding innovative solutions from startups and scaleups. All Corporate Startup Stars have a Venture Client unit in place. Scouting activities generate a large deal flow (typically between 1,000-2,500/year).Outcomes (i.e. high value, long term collaborations) are very selective: about 20 per year. Only about 1-2% of the initial startups reach the final phase.
BMW Startup Garage pioneered the venture client model in 2015 and has no shortage of success stories; Enel Open Innovability aims at creating a new energy era by putting Innovation Managers inside each Global Business Line and leveraging startup collaboration through a global network of 10 Innovation Hubs; Open Bosch, launched in 2018 with the goal of making use of top startups as a source for innovation and competitiveness, designed to enhance the CVC business of Bosch.
6) 84% of the top 100 2022 Corporate Startup Stars do invest in startups through a Corporate Venture Client (CVC). Over 58% of them operate with funds larger than $250M. Annual investments are on average between $25 and $100M. An interesting emerging trend is companies (one out of ten) spinning out their CVC arms.
Allianz X, the digital investments arm of the Group launched in 2016, has housed 11 unicorns in its stable so far and currently manages over EUR 2 billion AuM; EQT Ventures (part of EQT Partners, a Private Equity company that raised over $80B) announced its III Fund, amounting to €1.1 billion; POSCO has been at the forefront of startup investments for several years, launching several funds, i.e. “POSCO GEM 1st FUND” and the “POSCO New Growth Fund”.
7) Startup M&A: established corporates are relatively less acquisitive on the startup front. Only 19% buy more than 3 startups per year on average. 40% of disclosed deals4 are between $100M and $500M. 80%+ of the deals are mainly acqui-hires or technology plays with a ticket below $20M.
Good example are Adobe, who built up a reputation for buying the biggest tools in the creative space; Visa, whose M&As and strategic investments complement internal development and enhance partnerships to align with Visa’s priorities; Walmart, who increased its number of startup acquisitions to expand its reach in retailing technology and create new digital experiences.
Open Innovation does not happen on its own but requires a proper organization. All Corporate Startup Stars have a dedicated Open Innovation Unit. An emerging trend among a subset of the Corporate Startup Stars (mostly Oil and Gas and Energy) is combining OpenInnovation (and Digital) with R&D and/or Technology, Engineering/IT. Finally, a strong top-level buy-in with adequate KPIs to track progress, is a must-have.
Interesting innovation-enabling organizations are Eni, Volkswagen Group, and Xiaomi.