Sustaining-innovation initiatives enable corporations to improve their core products and services. They factor in their research-and-development work, customer data, and market demands and insights to make upgrades.
It's an important part of how they operate and succeed.
But sustaining innovation isn't an enduring strategy. At some point, large enterprises must turn to transformative innovation to unlock growth opportunities and become more resilient.
Specifically, they must run fast, cheap, and weird experiments — and often.
Doing so allows them to explore new, potentially disruptive business models, generate and validate startup concepts, and create new companies — something that's nearly impossible when executed in-house.
That's because transformative innovation is often seen to be in competition with efforts to improve the core business.
Instead of tackling transformative innovation on their own, many organizations are turning to venture builders to create venture studios: a vehicle for them to systematically and efficiently launch startups that solve big problems.
Adopting the venture studio model to unlock growth and transformation
Creating companies via the venture studio model with an external venture-building partner is growing in popularity.
That's because it enables scaled organizations to:
- Find anomalies and surprises that can improve operations and provide new insights
- Create greater strategic optionality for the future, as they can 'take more shots on goal'
- Get a forcing function who can help them avoid engaging in an illusion of innovation
- Access a network of VCs who can back these businesses, lessening their level of risk
- In the case of corporations, build new businesses using balance-sheet capital, which affords them patience from leadership and allows them to take their time
Many scaled organizations we work with increasingly want to build new businesses in a repeatable way.
We help them understand the venture studio model enables them to build as many startups as possible for the lowest possible operating cost per startup launched.
A venture studio is proactive. It creates its own luck. It's designed to come up with business ideas, bring those startups to life, attach a strong founding team to the startup, and empower them with an unfair go-to-market advantage.
Meanwhile, accelerators, incubators, and venture funds are reactive. They wait for somebody else to launch a business and come to them for logistical, product-development, and financial help.
Our view is that scaled organizations know what big problems exist that they want to solve. This likely rings true at your organization. Assuming that’s the case, it begs the question: Why wait for others to go out and build companies that tackle those issues when you can?
The benefits of building a venture studio with an external partner
We get it. Running a venture studio independently is tempting. The common thinking is that, by going this route:
- The studio is owned and operated by your organization, giving you complete control.
- You maintain a higher equity share in any startups you ultimately bring to market.
The reality is there are complexities and barriers to building and operating a venture studio that scaled organizations just aren't equipped to navigate (or simply may not know how to address on their own). For instance:
- Determining the ideal business composition. Many corporations and universities excel in generating new ideas and intellectual property, but they often don't know how to structure early-stage startup teams, like which technical and leadership positions to prioritize now versus later.
- Securing funding from venture capital firms. Identifying VCs who could become limited partners is often difficult, as scaled organizations lack the fundraising networks and know-how to land outside investment.
- Accessing world-class entrepreneurial talent. Even the most successful organizations struggle to find top talent for critical roles, including founding team roles, because they don’t have a network of proven business leaders they can turn to for startup recruiting.
Add in confusion around concept decision-making and timelines, various legal and regulatory hurdles to navigate, cap-table construction, governance, and other factors, and it's easy to see why so many scaled organizations work with a venture builder to develop venture studios they can operate together.
We co-create venture studios with our partners, helping them navigate the nuances and roadblocks tied to creating them. Then, we assign a dedicated team to work with them on the end-to-end process of building new companies.
The value of a venture builder and the studio model: A prime example
Consider our work to help our partners ensure there's a strong product-market fit for startup concepts we explore:
- The three main criteria for evaluating a business model are feasibility, desirability, and viability.
- Corporations are great at assessing if new core-business products are worth bringing to market.
- But their strategy and innovation leaders often struggle to know if a startup idea actually addresses a market need and is worth exploring and advancing.
"When you need to work outside of that core strategy into an adjacency ... you're outside of your common knowledge area," High Alpha Innovation Managing Director Ryan Larcom recently explained. "Those processes that make you great at executing on the core actually restrict you from learning in those new areas."
Our team knows how to gauge an appetite for a proposed solution, based on customer and industry-expert interviews. Insights from these chats help us make fast, yet informed decisions about which concepts to move forward with.
This speedy but thoughtful approach helps us validate concepts, craft business models for 'finalists', and move preferred startup options into the launch phase.
What’s more, this concept-evaluation process — one scaled organizations struggle to do on their own — is also repeatable and scalable, when executed through a venture studio.
Look no further for proof than DIAL Ventures.
The venture studio operated out of Purdue and co-designed by our team has launched four agriculture-focused startups to date — Croft, Gripp, Oaken, and Make Hay. Each Build program tied to these companies enabled us to:
- Speak with experts in and out of the industry to get ‘on-the-ground’ insights from farmers, manufacturers, retailers, and other ag value chain stakeholders
- Understand the most pressing, revenue-generating, and venture-backable ideas for new technology solutions, based on these conversations and industry research
- Evaluate and build conviction in startup ideas that could move the needle in multiple areas in the ag sector and advance the top ones to become real companies
The coordinated venture-building approach out of the studio enables a rinse-and-repeat formula for assessing and advancing startup ideas, acting on our potentially narrow window of opportunity to get them into market before others, and addressing big problems at scale.
Getting started with your venture studio
Building a broad portfolio of companies efficiently and quickly to solve big problems is the end goal of the venture studio, and an achievable one, as long as there’s uniform agreement and a sense of urgency among your organization’s leadership.
However, based on our conversations with existing and prospective venture-building partners over the past few years, they often don't know the best way to get going on their journey:
- Corporations want to protect and future-proof their businesses but don't know how to efficiently turn customers' challenges, wants, or needs into new companies.
- Universities want to tackle issues facing their cities, states, or even the broader region by creating startups but lack an innovation 'engine' on campus to do so.
- States want to turn their areas into entrepreneurial ecosystems that attract top talent and private investors but don't see an obvious path to make this a reality.
Regardless of which organization you work for, a venture studio, developed and run with a venture builder, can help you realize your innovation goals and give you:
- Defined systems and processes to launch and accelerate growth
- A strong network of investors that offers direct access to capital
- Access to experienced, expert, and passionate entrepreneurial talent
- Financial structures and incentives to 'keep the flywheel spinning'
These are just a few advantages of operating a studio with a dedicated venture builder that can help your organization tackle societal issues, disrupt traditional industries and business models, and realize tangible transformation.
