Our corporate landscape is moving at a head-spinning rate, making it harder than ever for innovators and entrepreneurs to anticipate the next big market opportunity. Some of the factors fueling this unpredictability include:
- Disruptive technologies
- Economic fluctuations
- Shifting customer demand
- New market entrants and cross-over players
- Political or regulatory variations
While caution during times of uncertainty is warranted, history has shown us over and over again that fortune favours the bold - because uncertainty breeds opportunity. In other words, companies that position themselves to take advantage of new opportunities can successfully navigate even the most unpredictable of market conditions.
Corporate venturing is an effective way to achieve that goal because it enables companies to tap into external startup ecosystems, diversify their offerings, and create new revenue while leveraging existing resources. By strategically investing in, partnering with, and building new startups, companies can quickly gain access to new technologies, capabilities, and markets, making it easier to adapt and compete. Find out how Bundl can help you achieve those goals here.
Let’s take a closer look at how corporate venturing can help you overcome each of the factors above, with real-world examples of companies that have done it and thrived amidst uncertain odds.
Disruptive technologies
In recent years, a flurry of disruptive technologies have greatly impacted and transformed our landscape. While many of these technologies have been around for a while, it’s only recently that they’ve become fast and advanced enough to really change the way we live and work (the pace of change greatly accelerated during the pandemic). From AI, to the metaverse, to blockchain (just to name a few), these technologies are creating new opportunities for businesses, enabling them to:
- Build and launch new offerings, creating a more diversified portfolio
- Improve efficiency and productivity through automation
- Enhance customer service and experience
- Reach more customers
- Compete more effectively with new market entrants
On the flip side, companies that fail to adapt and take advantage of these opportunities risk falling prey to disruption. Corporate venturing can help companies stay ahead of the curve by investing in startups that are developing these technologies or leveraging them in game-changing ways.
Example: Shell plc, leveraging tech to boost clean energy
With the climate crisis on everyone’s mind, a growing number of customers are choosing companies that offer circular models, sustainable products and clean energy sources. For a multinational oil and gas company like Shell plc (formerly Royal Dutch Shell), this means adapt or be disrupted.
For years now, Shell Ventures (Shell’s corporate venture capital arm) has been investing in promising startups to help diversify Shell’s portfolio and tap into cleaner energy sources. Areas of investment include power, mobility, digital technology and emissions management, each investment adding to Shell's portfolio, expertise and capabilities.
Just last year, it partnered with EV Equity Partners and SWEN Capital Partners to accelerate the growth of Noova, an energy-efficiency software company. The solution enables B2B companies to optimise their energy consumption by analysing electricity usage and identifying actionable steps to become more energy efficient.
Economic fluctuations
Economic fluctuations prompted by factors like inflation, decreased stock prices, and the threat of recession can have a significant impact on business operations, ultimately affecting a company’s bottom line:
- Inflation can lead to increased production costs, reduced purchasing power, and eventually reduced profits.
- The threat of recession leads to cautious customer spending and reduced demand, increasing the chance of financial risk.
- Decreased stock prices lead to reduced access to capital for companies.
Corporate venturing can be a powerful tool for companies to overcome these challenges, enabling them to:
- Diversify revenue streams, offsetting any losses in the core business.
- Develop and launch cutting-edge offerings to stay ahead of competitors.
- Take advantage of M&A opportunities with companies that may be more willing to sell.
Example: Microsoft, diversifying in response to uncertainty
In 2020, during the height of the pandemic, Microsoft announced a new initiative called Microsoft Cloud for Healthcare. It’s a cloud-based solution to support healthcare organisations by providing a secure and compliant platform for managing healthcare data and workflows. Some of its features include telehealth capabilities and patient outreach tools. It also provides analytics and machine learning capabilities to improve patient outcomes and boost operational efficiency.
The move enabled Microsoft to tap into a growing market for remote healthcare services and diversify its portfolio during a time of extreme uncertainty.
Shifting customer demand
Customer demand is constantly evolving, and it’s never been more palpable than in recent years. Some of the factors contributing to this rapid change include:
- The pandemic, which led to a heightened focus on health and e-commerce.
- Tech, which is changing the way we interact with businesses and their offerings.
- Social/cultural shifts leading customers to seek companies that align with their values.
- New market entrants, causing shifts in the preference of products and services.
In order to survive, companies need to adapt fast and meet evolving needs. This can mean adjusting production schedules, changing supply chain strategies, boosting customer experience or even pivoting to a completely new business model. Corporate venturing can facilitate the change in a relatively low-cost and low-risk way.
Example: General Motors, new offerings to meet new demands
In 2021, General Motors launched BrightDrop, with the goal of “reimagining commercial delivery and logistics for an all-electric future”. It offers an integrated ecosystem of electric products, software and services to help companies:
- Do first and last-mile deliveries
- Maximise productivity
- Improve employee safety
- Increase freight security
- Operate more sustainably
The move enabled GM to further its expertise in electrification, mobility applications and fleet management as well as capitalise on the growing demand for sustainable delivery solutions.
New market entrants and cross-over players
New market entrants and cross-over players (e.g. Amazon entering the healthcare industry) can disrupt established businesses and threaten their market share, forcing them to:
- Find new ways to differentiate themselves (e.g. lower prices, improved offerings).
- Adapt to new technologies or find new ways to deliver value (e.g. new business models).
- Accelerate their pace of change (e.g. reach growth targets sooner).
Corporate venturing enables companies to turn these challenges into opportunities by partnering with new players to access new revenue sources, technologies, business models and markets. All in a fraction of the time it would take to build these capabilities internally.
Example: Unilever, taking back market share with new offerings
In 2021, Unilever announced the acquisition of Onnit, a Texas-based wellness company aimed at “total human optimisation”. The company takes a holistic approach to health that encompasses physical fitness, mental performance, and emotional wellness - using supplements and fitness equipment.
The move was a response to the growing competition in the wellness market from new entrants and cross-over players like Peloton and Lululemon. As explained by Peter ter Kulve, President of Home Care at Unilever:
“With its holistic health offering and digital-first model, Onnit perfectly complements our growing portfolio of innovative wellness and supplement brands.”
Political or regulatory uncertainty
Political or regulatory uncertainty (e.g. changing laws or government policies), can create significant challenges for businesses, including:
- Difficulties making investment decisions for the future
- Keeping up with compliance requirements
- Increased legal and financial risk
- Supply chain disruptions due to changing policies
Corporate venturing can help companies mitigate these challenges by spreading the risk across a range of ventures. If one slows down due to regulatory shifts, you can lean on the others and avoid a total shutdown.
Example: BP Ventures, diversifying in response to uncertainty
BP Ventures is enabling BP to diversify its portfolio by investing in emerging markets like China and India. It's also enabling BP to expand into the following segments:
- Production and operations
- Low carbon energy
- Trading and shipping
- Innovation and engineering
By investing in these new venture segments, BP is effectively reducing its exposure to political or regulatory changes that may affect its existing oil and gas business.
Final thoughts
Corporate venturing is the key to success in today's uncertain landscape, enabling companies to thrive even in the most unpredictable of times. The proof is in the pudding, with almost 100 companies in the S&P 500 active in corporate venturing and new venture arms popping up every year. These are just a few of the most recent:
- Suzuki Global Ventures launched in October 2022
- Christie’s Ventures launched in July 2022
- Home Depot Ventures launched in May 2022
- Chipotle's Cultivate Next launched in April 2022
- Stellantis Ventures launched in March 2022
By embracing corporate venturing, you can also diversify revenue streams, stay ahead of disruption, and create new growth opportunities, and there’s no better time to start than the present.
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Whether you're looking to diversify revenue streams, stay ahead of disruption, or boost growth, corporate venturing can help you achieve your targets fast. We can help you build a tailored strategy that fuels company-wide innovation by leveraging your unique corporate assets.
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