“No company can afford not to move forward. It may be at the top of the heap today but at the bottom of the heap tomorrow, if it doesn’t.” ~ James Cash Penney

Steve Meller and Will Searle, international experts in blue chip venturing, will present master classes on corporate venturing at the SA Innovation Summit, taking place from 12 to 14 September 2018. They outline their views on whether South Africa’s big business sector is venturing enough.

Business, whether big or small, is under constant pressure to keep innovating and growing. The challenges for corporates in this regard are, however, markedly different from those of a small enterprise. “Their large size means they have all sorts of process controls in place that make it difficult to move at a fast-enough pace to match the rate of innovation outside the company,” says Dr Steve Meller, Managing Director at Creating Dots. “This is true of every single industry.”

Venturing, as applied to corporate business, is “the sharing of business opportunities, so that big corporates get the benefit of joining forces with small business,” says Will Searle, Founder of Axillium, ahead of his talk on Innovation Without Borders at the Summit next week. It is a corporate looking at investing in an independent venture to access the agile innovation happening outside the company. “Any one organisation, whether corporate or not, will have a missing piece – some technology that the market wants that the corporate doesn’t have. A smaller company is more agile and may have the technology that the corporate is looking for.” For this reason venturing is a growing trend, with approximately 1 000 venturing units in the world according to Meller.

Is corporate South Africa venturing enough?

Given the importance of venturing and the opportunities for expansion that it presents, is corporate South Africa doing so enough? Searle argues that the answer is ‘No’, and believes that South African corporates are either not venturing, or not engaging in the right type of venturing: “South African venturing is at risk of chasing technology driven outcomes rather than long term market advantage – successful venturing is patient and works toward a market opportunity rather than simply pushing a new technology.” Venturing for the sake of innovation is not the answer to growing sustainably.

Meller also says that, compared to Silicon Valley in the United States, South Africa is venturing far less: “If you are talking about the dollar value of traditional venturing investment, there is no question that the United States is the largest player in the venture game, and there is no question that Silicon Valley is the largest venturer. No other country compares to that.”

However, Meller argues that the dollar value of investment is not necessarily the only or the best measure of success in the South African context. He believes in finding ways of venturing that suit this particular market and environment. “If you are asking if South Africa is venturing enough, the answer is ‘No,’ but they don’t need to and shouldn’t try to. The best and only way for South Africa to maximise venturing is to find great opportunities for collaboration that can disproportionately leverage what they have.”

Challenges to venturing in the South African context

Some of the challenges to venturing, according to Meller, include South Africa’s geographic location, but also include an organisational mindset that hampers powerful collaborative relationships. “Corporates usually want it their way. The entrepreneur’s dilemma is that ‘I need the money, but what the corporate wants is slightly different from what this business was intended for.’ It is therefore critical to define the relationship at the outset. The thing is that the relationship can either be extremely successful or disastrous, especially for the SME who is taking the bigger risk. The lack of empathy from corporates for the SME in this regard is one of the reasons why these relationships often don’t do as well as they could or should, but it is getting better.”

Searle agrees that this is frequently a problem for big corporates who are used to throwing their weight around: “Too often the corporate mindset is one of ‘I can do it myself or I don’t need anyone else’. It may be challenging to the executive mindset, but being willing and open to look at suppliers as partners enables the venture relationship to gain mutual benefits.” The initiative to make this paradigm shift should come directly from the CEO and top leadership of a company to be successful.

Opportunities for making corporate venturing happen

There are opportunities for more venturing to take place though, should the mindset change. Searle suggests that big businesses “need to expand their ventures with new value chain models, where the value starts with a university student or a start-up and scales right into corporate. They need to look at how they can join with these young people and entrepreneurs for both parties to grow sustainably.”

Meller re-emphasises the importance of strong relationships both inside and outside of South Africa. “South Africa is not on the same level as the United States in terms of dollar value in venturing, but it is about us finding what works for us, especially by enabling relationships that will give us preferred access to what is happening in the outside world. Building relationships is not hard to do, but you have to put work and effort into it. A corporate may have a unit or department that focuses specifically on venturing and maintaining the health of those key relationships. It is a powerful tool, but the challenge is in maintaining relationships on the long term instead of expecting short term profits.”

Of course, as with small business, the right mindset and relationships are critical, but finding the funds for a corporate venture is no small feat. For this reason the SA Innovation Summit will host a CEO Lunch session introducing the Industrial Development Corporation (IDC)’s New Industries Strategic Business Unit, a primary investor in Corporate Ventures that THINK BIG. Pieter de Beer, Senior Industry Development Manager at the IDC, explains: “The IDC New Industries SBU will selectively invest in the creation and/or development of Industry 4.0 technologies and business models where SA has a clear comparative advantage, and which have the potential to be enabling and/or disruptive. Typical disruptive business models have exponential scalability and value is created through an asset base in an entire relationship network, not necessarily through the business’ own assets. In alignment with the IDC’s development initiatives there will be specific focus on black industrialists, females and youth.”

To find out more about the Innovation Summit and register, visit www.innovationsummit.co.za or follow SA Innovation Summit on Twitter (@InnovSummit) or Facebook (@SAInnovation).