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Corporate Venture Sales – How to overcome the impossible

Whitepaper

Corporate Venturing in DACH – we have a commercialization problem


Going a few years back in time, Corporate Venturing was the Buzzword when talking about new innovative approaches for corporates to rethink, adjust or extend their business mod- el. One of the then most promising examples was Coup, which used to be an e-scooter sharing company initiated by a corporate together with a venture builder just like us. However, Coup’s operations were terminated in 2019 and its most valuable assets, the e-scooters, were ultimately bought by Tier, as an extension to its micro mobility service offering. Coup serves just as one example for a group of corporate ventures that, despite their promising business cases, did not live up to their expectations. The reasons for this development, the underlying problems and challenges are manyfold:

First, what they all had in common is that they were and are striving for long-term goals and visions with a time horizon of 5–7 years at least, which stand in conflict with the shorter period of 3–5 years mostly required in corporate goal setting. In the following chapter we will dig deeper into this challenge.

Second, due to the hype regarding corporate venturing, many decisions were not taken based on thorough evaluation and planning, but were driven by the fear of missing out on a promising opportunity, leading to wrong decisions and exaggerated expectations.
Third, too much focus was put on the product. The MVP has its justification in being the first viable product version, but it shouldn’t be overengineered.

Finally, corporate ventures have often never learned how to commercialize their product and often never had the pressure to do so. Both aspects will be picked up again in a later chapter.
With the 3–5 year goals not met or at least being at risk not to be met, a first group of companies started to divest from their corporate ventures. This development was further accelerated by the german automotive crisis, which had been one of the initial drivers of corporate venturing, and was amplified even more by the outbreak of the Coronavirus. As companies more and more focused on their core activities, despite better knowledge and the need for anti cyclic investments especially in times of a crisis and an economic downturn, other non-core activities and business model innovations were canceled as well.

While these developments still have a huge impact on many industries, corporate venturing remains the most promising approach to innovate the over 1.000 DACH hidden champions that have lost their entrepreneurial spirit over time and are now in danger of being disrupted by new digital players. Despite the obviously mixed history and outcomes, there is just no other approach that solves as many problems at once: Bringing back entrepreneurial thinking, digitising processes and business models, driving innovation and potentially developing successors are all tasks that are supported by the corporate venturing approach.

With the benefits being even more relevant than before, the one general underlying issue remains and needs to be solved: Short– to mid-term commercialization of the new generation of corporate ventures!


At the beginning was a realistic business case


On the way towards a successful commercialization and thus a successful corporate venturing case two types of alternative investments must be considered:

1) Corporate internal investments with a limited time span of approx. 3–5 years

2) High-risk-investments in startups, potentially turning into unicorns

While these two types of investments have a widely differing risk as well as profit profile, corporates often do compare them directly and evaluate them based on a uniform framework. While corporates expect a return or at least a break even within 5 years at most, they have the impact and upside of a potential unicorn in mind. This startup case, however, requires investments of hundreds of mil- lions before turning profitable with a time horizon of 10+ years. While both approaches can lead to successful outcomes, it is nearly impossible and a gamble at best to combine them. Therefore, it is necessary to align expectations and decide which option is the most suitable for the situation and requirements at hand. Ultimately, the solution is obvious, yet most corporates do ignore it:

A Be realistic – a focus on a five year return on investment will not turn the investment into a unicorn and vice versa

B Choose wisely – certain business models are not the right ones for corporates with limited time horizons

C Stay focused – concentrate on building the next “Mittelstand” player with a business model that allows for a break even within five years

D Build trust – launching business models with staged approaches, during which the break even possibility can be shown and trust can be built up, allows for asking for new investment tranches and a faster scaling in a second stage


Avoid the German mistake


In the last centuries German economy thrived, among other factors, due to the German engineering wizardom. The aspiration to always create and develop the best possible solution resulted in the famous “made in germany” tag, which, at least in some industries, still is a strong tool for market- ing purposes. However, when developing an MVP, this perfectionism often comes at a cost. While focusing on the MVP and trying to turn it into the perfect solution – resulting in huge budgets, long development cycles and more often than not failing customer expectations due to missing customer focus and agility in the development – sales is often neglected. In fact, sales is still frowned upon, which is reflected in german universities, as well. Most do not have a chair for sales, while marketing usually has a strong focus on product and market analysis, but not on market entry.


The neglect of sales can be seen in DACH corporate ventures as well. The initial focus is mostly on the MVP, that should be turned into a viable product as quickly as possible. Sales on the other hand is often deprioritised and transferred to corporate sales teams, who are often neither qualified nor interested in selling the venture product and taking responsibility. At the same time, the corporate becomes the first customer, as a means to help the venture, thus providing the venture team the ultimate excuse to focus even more on the product. Furthermore, even in case of missing the sales goals, corporate employees never feel the same pain as in startups, as their income is secured by the mother company. This development results in a highly developed product, which unfortunately lacks market fit and, due to missing sales, has zero proof of concept. Yet again, the solution is easy to grasp: Embrace the need to sell and set the focus on the commercialization of the product.


The 6–step approach to a successful venture commercialization


The way towards successful corporate venture sales has multiple obstacles to cover, but can be broken down into 6 steps that allow a successful commercialization. Following these steps does not guarantee success, but it helps creating the most favourable conditions:


1. Think in milestones and share responsibilities


Developing and building a venture usually does not follow a clear path from the ideation until the incubation. Thus, it is important to avoid inflexible waterfall planning, and instead define milestones and allow for the maximum amount of flexibility. Reaching those milestones is highly encouraged when sharing responsibilities among team members and giving each member a feeling of having impact and being valued.


2. Think in MBPs


As the commercialization of the product is the ultimate proof of concept, the product development should not focus on the MVP, but on the MBP – the minimum billable product. While the MVP can be perfectly used to test assumptions and demonstrate market proof, it should never be forgotten that customers may require different functionalities when asked to pay for the product. Only if these requirements are fulfilled, the product can be successfully commercialized.


3. Think about the customer journey


The product is not the only component required when trying to sell – it is as important to sketch the underlying customer journey. Why is that? First, it helps to better understand why someone is interested in and finally buys the product. Second, one receives more insights into how the sales process really looks like and which sales material is required. Ultimately, it provides the perfect opportunity to learn more about the customers’ pain points and the persona behind. Thus providing the opportunity to continuously readjust the product, potentially extend the product offering and add services, and finally reevaluate the way the customer is addressed and how the brand is positioned.



4. Define a sales funnel


Once the customer journey has been mapped, it is time to think about the underlying sales funnel. The sales funnel serves multiple purposes. First, it helps to determine the length and duration of the sales process. Second, one can deduct which persona or gatekeeper needs to be convinced at what stage of the funnel and, most importantly, which arguments are needed. Third, based on conversions between each funnel step, the number of leads that need to be contacted in each phase can be defined. This allows for sub-targets in long sales processes and a transparent foundation for all following measures.



5. Plan everything according to the sales funnel


With a detailed sales funnel in place, all other required measures can be planned and defined against it. First, measuring KPIs and setting goals not only provides transparency, but also allows for adjust- ing required marketing and sales measures and channels, as well as sharing responsibilities among all team members. Second, having a good understanding of which persona needs to be convinced in each phase, allows to adjust all sales material accordingly and respond to individual needs. Thus, sales cycles can potentially be shortened and – more importantly – conversions can be significantly increased.


6. Start selling NOW


Planning and deriving a sales funnel, with underlying strategies and customer approaches is necessary to create a foundation for all following initiatives. However, this planning is all theory and even if it is based on experience it needs to be tested and validated for the specific case at hand. Accordingly, the most important task is to start selling as soon as possible and test all assumptions with real customers. This phase can already be started in parallel to the previously mentioned steps. Making mistakes is part of this process, all learnings can and should be used to iterate accordingly.


Ensure a plan B: Growth Hacking


As outlined in the previous chapter, following and filling the sales funnel is great and allows for a comparably high reliability if done correctly. However, sometimes, the sales cycle might take significantly longer than expected. To avoid the project being put on hold by the corporate, a plan B needs to be ensured – the personal growth hack! What could this look like? By using known customers, colleagues, friends and family one can jumpstart the first steps in the funnel. Thus, traction can be shown early on and pressure can be taken from the sales team. But be aware: while the whole team hugely benefits from the first customer, the sales team still needs to make sure customers pay and to not offer the product or service for free! Otherwise a wrong incentive might be set.


Do not hold on to unsuccessful ventures


If even the plan B does not work, if hypotheses can only be falsified and pivoting the business model does not yield the desired results one should not stick to the venture. In such cases it makes more sense to divest from or cancel the project early on and learn from the mistakes made. While this decision is usually not an easy one, it is strongly recommended to have a disciplined approach to divesting, as it frees up resources for other, potentially more successful projects and investments. Furthermore, it also creates trust within corporate leadership, which may serve as a foundation for future projects.



Conclusion


Despite the obviously mixed history and outcomes of corporate venture building, it still remains the most promising approach to innovate the over 1.000 DACH hidden champions. However, to ensure a successful approach, more focus should be put on sales activities. Only then one can ensure that (A) all customer requirements are met and (B) that the product can successfully be commercialized. Our 6–step approach allows the implementation of a sales process that lays the foundation for not only reaching corporate goals and expectations, but turning the venture into a success story, too. We at Bridgemaker have extensive experience in not only identifying new venture ideas but also successfully commercializing them. Feel free to contact our experts and ask for a free sparring to jointly enhance your approaches and thoughts at any time.



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Get in touch:


Kilian Veer
Partner at Bridgemaker
kilian.veer@bridgemaker.com


Felix Weyer
Senior Venture Architect
felix.weyer@bridgemaker.com