Recent years have been marked by unprecedented global challenges, from the environmental crisis to increased uncertainty to rapid market shifts, leaving many corporates struggling to adapt. While this head-spinning pace can be challenging to navigate, companies that position themselves to take advantage of new opportunities can successfully navigate even the most unpredictable of market conditions.
The best way to do it? Corporate venturing.
Startups are renowned for their speed as well as for accessing, utilising and producing next-generation solutions, business models and technologies. By partnering with them, corporations gain direct access to these advances, which can be leveraged to:
- Create and launch sustainable products and services
- Overcome uncertain market conditions
- Build reliance and future-proof through diversification
By integrating the speed, innovation and nimbleness of startups into their already vast resources, these corporates are not only fortifying their position as market leaders but also expanding growth beyond their core businesses. To give you a better idea of why companies are betting big on corporate venturing, let’s take a closer look at how it can help you tackle sustainability, overcome uncertainty and build the resilience you need to thrive in today’s market.
With the repercussions of climate change increasingly taking centre stage for governments, businesses and consumers worldwide, corporations are under more pressure than ever to create solutions and operate more sustainably. This can be a challenge within existing corporate business models, which tend to focus on core offerings and are often slow to change due to long chains of command and bureaucratic delays.
This is where corporate venturing comes into play, enabling corporates to build, buy and partner with cutting-edge startups to boost innovation with unprecedented speed. By nurturing a culture of collaboration and investing in these fledgling ventures, companies are building greener portfolios and fast-tracking sustainable initiatives, products and services—all with startup speed.
Example: PepsiCo and SodaStream
“Fundamentally transforming the traditional beverage consumption model will require making reusable and refillable options accessible and convenient, at scale, for consumers—and that’s what PepsiCo aims to do. PepsiCo will accelerate our investment in disruptive innovation and advocate for policies that allow us to scale up reusable packaging options, platforms, and programs so that we can offer consumers a wide variety of alternative ways to enjoy their favourite beverages while moving away from reliance on single-use packaging.”
Here are just a few of the ways the move is helping PepsiCo boost sustainability:
- Promoting reusability: SodaStream reduces single-use plastic consumption with its reusable bottles, aligning with PepsiCo's sustainability goals.
- Reducing carbon emissions: By allowing at-home beverage creation, PepsiCo decreases the carbon footprint associated with transporting bottled drinks.
- Enhancing brand image: The acquisition emphasises PepsiCo's commitment to eco-friendly alternatives.
- Expands market: It caters to changing consumer preferences and the growing demand for sustainable products.
PepsiCo's strategic purchase of SodaStream highlights how companies can tap into new markets and diversify their offerings with more sustainable options by acquiring startups with a built-in user base.
Recent years have been marked by high levels of uncertainty, making it a challenge for innovators and entrepreneurs to predict the next big market shift. Some of the factors fueling this market unpredictability include:
- Disruptive technologies
- Shifting customer demand
- New market entrants and cross-over players
- Political or regulatory variations
So how can corporates overcome uncertainty? Well, to start, companies that position themselves to take advantage of new opportunities are often better equipt to navigate even the most unpredictable of market conditions—and corporate venturing is a great place to start.
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 future-proof, adapt and compete. In essence, corporate venturing enables companies to tap into external startup ecosystems, diversify their offerings, and create new revenue, all while leveraging existing resources.
Example: Toyota and Grab
The automobile industry is facing a paradigm shift in which traditional car ownership is being reconsidered in many urban areas in favour of shared mobility solutions. Recognising the growth and potential of ride-hailing platforms in the current landscape, Toyota decided to invest in and partner with Grab, a leading ride-hailing company in Southeast Asia. Here are just a few ways the move is helping Toyota navigate uncertainty:
- Adapting to a changing landscape: Toyota's investment enabled it to adapt to the shift from traditional car ownership to shared mobility solutions.
- Data exchange: Toyota offered maintenance via its Total-care Service to Grab's fleet, gaining valuable driving data insights from Grab in areas like driving patterns, wear and tear, and other essential metrics.
- Expanding financial services: Toyota provided Grab drivers with better access to vehicle lease and purchase options, broadening Toyota's customer reach while supporting Grab drivers.
- Future-proofing: By aligning with a leading ride-hailing platform, Toyota positions itself advantageously for a future where autonomous ride-hailing might become the norm.
The venture with Grab showcases how traditional companies can harness corporate venturing to adapt and innovate amidst industry shifts.
Innovation to meet the needs of the future requires resilience—both strategic and operational. Corporations often possess inherent resilience due to their size, resources, and established market positions. However, in a rapidly changing world, the ability to adapt quickly and push the boundaries becomes a significant advantage.
This is where collaborative relationships with startups can be truly transformative. By engaging in corporate venturing, large corporations can tap into and learn from the agility and flexibility of startups, allowing them to break free from bureaucratic inertia and embrace a culture of constant innovation.
Example: Goldman Sachs and Circle
In many cases, resilience isn't just about weathering storms but about staying ahead of industry transformations. That’s what led Goldman Sachs to invest in Circle, a cryptocurrency-focused financial services company, back in 2015. Here are just a few ways the move helped Goldman Sachs ensure resilience in a rapidly changing industry:
- Diversification: Goldman Sachs secured its foothold in the emerging cryptocurrency sector, ensuring adaptability to market shifts.
- Tech integration: The partnership brought cutting-edge fintech tools and methodologies to Goldman Sachs, enhancing its technological agility.
- Risk insight: Associating with Circle offered a firsthand understanding of cryptocurrency risks, enabling proactive risk management.
- Mutual benefits: While Goldman Sachs tapped into fintech expertise, Circle gained market credibility backed by a financial giant, boosting the success of both partners.
The venture enabled Goldman Sachs to remain nimble, adaptive, and resilient in an industry being rapidly transformed by technology and new consumer expectations.
Corporate venturing is no longer a buzzword; it’s become a proven strategy embraced by top companies worldwide. With a growing number of corporates and startups partnering to tackle shared goals and targets, the possibilities for positive change are virtually endless.
There’s no better time than the present to make your business more sustainable, adaptable and resilient, so don’t wait too long before starting your own journey.
Are you a corporate innovator looking to fuel innovation through corporate venturing? We can help you create a detailed strategy that leverages your unique corporate assets to create a pipeline of profitable new ventures.