NVCA is teaming up with Bionic to host an exciting event on November 13 in New York City on how the mindsets and methodologies of venture capital and entrepreneurship are critical to grow and transform large enterprises. Leveraging themes from Bionic CEO David Kidder’s new book, New to Big, the evening will feature insights from innovation experts on the strategies companies can use to discover new opportunities and turn them into big businesses, just as entrepreneurs and early-stage investors do.
David Kidder spoke with us about New to Big and why you don’t want to miss our event next month!
What is New to Big? Most enterprises today operate on a “big to bigger” model. They’re built for that specific type of scale, and every aspect of the organization has been optimized for the specific type of efficiency that fuels the enterprise from operations to marketing to finance. What these enterprises lack is the capability to take a net new idea and turn it into a new (big) company. “New to Big” is an approach for scaling a new entity from $0-$50M, a process familiar to entrepreneurs and venture capitalists, not to enterprises.
What can entrepreneurs teach enterprise executives about innovation? What can VCs teach enterprise executives about innovation? Entrepreneurs have the permission to go fast. They fail quickly, pivot quickly, and iterate constantly. They start with a very specific problem and build a solution that customers actually need. Because enterprises are built to facilitate revenue and growth from their core offerings, new offerings, and businesses, and ultimately, transformation can get stuck in corporate hierarchy and slow decision-making processes. New, radical ideas are often stifled, and expensive failures are kept alive far too long (we call them “zombies”). Enterprises can, however, adopt the mindsets of entrepreneurship—starting at the C-suite level. They, too, can launch growth initiatives, identify serious customer problems that they alone have the proprietary gifts to solve, and make quick decisions that propel validated solutions into the market. Also, venture capitalists place a wide variety of bets within one portfolio. They know that over 60% of returns come from 6% of bets, which means that they need to place almost twenty bets to guarantee a big win. That number is a far cry from the few bets that enterprise portfolios typically place. Fortunately, enterprises can adopt this VC investment strategy, too.
How are the mindsets and methodologies of venture capital useful to legacy companies looking to grow? Any legacy company looking to grow requires adoption of new mindsets and methodologies based on venture capital. One mindset in particular can help with long-term growth strategies: high-conviction, low-consensus decision-making. Legacy companies often take a long time to make hard calls, especially when the cost of failure within the company can be so high. They stretch out the decision-making process so that all key stakeholders can agree on a decision. In doing so, they dilute the idea, make dangerous compromises, or delay getting a good solution into the market. The best decisions in venture capital are actually high in conviction but low on consensus. Several stakeholders should pound the table for the idea, but not everyone at the table should agree. Why? First, the table pounders often have special or proprietary understanding of the space. They believe in the idea because they understand the context that will allow for its success. Secondly, if everyone agrees on an idea, it’s likely that the idea already exists, that the problem isn’t a big enough problem, or that the solution is a mediocre add-on at best. Legacy companies looking to grow must embrace this type of disagreement.
How do you see the role of corporate venture in driving growth within the enterprise? Building startups within the core of an enterprise is critical to growth, to be sure. But in many cases, startups already exist in an enterprise’s space. Unless there’s a specific proprietary gift that the enterprise can leverage to solve a specific problem, it might not make sense to stand up a new startup to meet that need; investment might make more sense. Also, CVC allows enterprises to experiment. They can test the waters, play in a lot of spaces, and see what works for their company over time. Eventually, they might be compelled to stand up new, related startups that they’re uniquely positioned to build.
What can a CVC do to be most effective in fueling meaningful, sustainable growth within a large company? It all comes down to permissions and a radical mindset shift. Meaningful, sustainable growth cannot happen with narrow-minded investing. It’s not just about where an enterprise is currently playing; it’s about discovering a company’s meaning and investing in the spaces that speak to that purpose. A shoe company might think that its purpose is about giving people the supplies needed to walk and do sports, but its purpose might be enabling wellness. “Wellness,” for example, unlocks an entire space for the enterprise to invest in. Suddenly, it can think about its future differently and invest in a whole new world of bets. Also, successful CVC requires an entire growth community. Unless the C-suite is bought in and grants full permission to a fund to drive meaningful transformation and make creative investments, this work will most likely get held up in the enterprise, and it will typically fail.
To learn more about the upcoming event on November 13, visit the event website.