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Sustainable growth for SMEs through corporate venturing

Corporate venturing

by Vincent Molly, Professor of Entrepreneurship & Family Business and Andries Reymer, Business Innovation Coach, Antwerp Management School

In this era of fast-paced change, new technologies and disruption, there is plenty of opportunity to let entrepreneurship thrive. Evidence can be found in the thousands of startups being launched every day all over the world, of which many are currently underway to change every single industry significantly in the next coming years.

Disruption is not a new phenomenon, but at least one aspect has significantly changed over all these years: the clock speed of change has increased dramatically. While the first Industrial Revolution that started in the 18th century with the transition to mechanization and steam power took about 80 years, the third Industrial Revolution with the introduction of the personal computer and the internet started only less than 40 years ago, and the fourth revolution with Industry 4.0 is already underway.

Although this trend is usually considered as a threat to incumbent corporations, including SMEs, this evolution could actually represent a major opportunity. If SMEs want to stay relevant and want to safeguard their future growth and long-term success, they will have to put innovation high on their agenda. And at the same time, looking outside their walls will no longer be a choice but an absolute requirement.

Instead of fighting against the disruptive ideas and business models of startups, SMEs could actually get benefit from working together with them. If both parties manage to cooperate strategically, a phenomenon which is called corporate venturing, a clear win-win could be realized. In fact, many large corporates such as GE, AXA, IBM, Microsoft, Intel, Cisco, Cargill and Walt Disney already practice corporate venturing, in some cases already for many years. But think about the huge potential that largely remains to be unlocked for small- and medium-sized companies in setting-up a cooperation with startups. After all, SMEs still comprise the vast majority of companies in every country around the world.

If you look at the strengths of both types of firms, they are actually quite complementary. Startups are by definition very innovative in the use of technology and/or business models, while SMEs have a rich customer base, a strong reputation, plenty of industry knowledge and resources developed over decades. SMEs are also very well placed to engage in corporate venturing because of the entrepreneurial orientation that is often part of their DNA.

By cooperating with startups, SMEs will learn much faster and at a lower cost and be able to accelerate innovation drastically within their organization. No matter how long they are already in business, or how skilled the people are within their organization, they have to understand that there is just more knowledge available and things happening outside of their business than within. Opening up and working together with startups, of which the founders were raised with digitalization, provides them a window to the world to keep track of breakthrough technologies and disruptive economic changes. It will also enable them to create a stronger entrepreneurial, innovative and agile mindset that not only gives energy to their business, but to the people within their organization as well.

Corporate venturing can thus be used as a tool to let SMEs think strategically about their business. It can support them in finding significant growth sectors, in developing new markets and in discovering new ways of doing business in partnership and joint development with startups which are by nature passionate about changing the status quo. If they manage to set up a successful cooperation, they can create value that no single company could have ever accomplished alone.

For this reason, Antwerp Management School recently launched the research project The Art of Corporate Venturing together with PwC and several other partners to explore best practices in how to set up corporate venturing in a structured and successful way. If you are interested to be involved in our project, please visit us here.