Why Large Organizations Should Seek Innovation Partnerships With Venture Studios

Innovation is at the heart of every organization. It’s the lifeblood of every company fighting its way to the top of its industry. And yet, it can be one of the most difficult things to facilitate, as most companies often get in their own way of facilitating organic innovation within.

Innovation from within is challenging to do for a multitude of reasons.

Most large organizations don’t have the capability to make quick decisions and pivot when a change in the market occurs. This leaves companies in the dust as they try to be responsive instead of anticipatory. It also creates chaos for those trying to innovate, as the red tape and delays in decision-making eat away at the runway and ability to execute.

Institutional control and the lack of experience in scaling up internal innovations results in lost opportunities in the marketplace as well. Sadly, this hinders decision-making by those attempting to innovate within, leading to lost dollars, frustration, and eventual demoralization if companies don’t act quickly when markets shift.

If you’ve read Clayton Christensen’s foundational textbook “The Innovator’s Dilemma,” you know exactly what we’re talking about.

Controlling Your Destiny Is Counter To Success

The following statistics should raise the hair on your neck.

Companies that have been successful at internally launching at least four new businesses over the last decade have created returns twice as often as those who haven’t done so. Their returns have generated massive opportunities for growth into new markets and helped pave the way for future disruptive technologies.

Statistics like this aren’t surprising. We know that true innovation can yield significant dividends down the road for those who can get out of their own way.

Speed also matters in this context, especially when we take a look at some recent trends that have emerged from the evolution of companies listed on the S&P 500. In the 1970s, the average listing for a company on the index was approximately 35 years; Today, that number is closer to 20.

Innovation is elusive, especially in corporate America where companies don’t have the internal resources or systems to create innovative products and services from within. That doesn’t mean they don’t want to do so; It just means that it’s far more difficult to do so.

This lack of innovation can also be a costly error for these corporations, as mergers and acquisitions have only increased in size over the last few decades. In 2022 alone, there were over 49,622 mergers and acquisitions made worldwide.

And while 2023 was a year where everyone struggled, 2024 could be a very lucrative year in the M&A sector, especially with the rapid growth of companies in emerging technologies like AI.

Strategic partnerships have always been a valuable component of building business and scaling industries. Innovation partnerships are no different, especially with how quickly technology is changing. And this is where venture studios can be an ideal match for large organizations who want to stay competitive in their field.

Venture Studios Are The Perfect Innovation Partner for Large Organizations

Venture studios have been around since the mid-90s, initially starting with the inception of Bill Gross’ Idea Lab, which has on boarded over 5,000 ideas, created 150 companies, and had 50 successful IPOs and acquisitions.

The space has vastly expanded since then, ballooning to nearly 850 venture studios worldwide (and growing). Interestingly, the venture studio model has created some of the most iconic brands known today, including companies like Snowflake, Dollar Shave Club, Hims, Giphy, Bitly, and many more.

Venture studios create companies from scratch by using repeatable systems to take an idea and turn it into an enterprise via a series of steps to validate, build, and test hypotheses. By systematizing the entire process of company creation from ideation to launch, scaling, and even acquiring external capital, venture studios can control every step of the process to optimize a startup’s chances of success. And they’re doing it better than any other vehicle out there today.

Compared to traditional start-up models, venture studios are achieving a 30% increase in success, while also vastly improving a startup’s chances of going onto seed and Series A rounds. By controlling every aspect of ideation, conception, creating an MVP, optimizing, and eventually scaling, they can control the destiny of a start-up or idea. They’re also able to pivot or kill a project if the landscape changes as well.

Venture studios like Nobody Studios are perfect partners for large organizations because they can create companies with speed and efficiency, which allows them to provide massive value to the marketplace and their strategic partners. They’re also invaluable in being able to test hypotheses and ideas in a timely manner, which can provide conviction to move forward or showcase evidence that the marketplace isn’t ready for it yet.

It’s the ability to move quickly and validate ideas that provides venture studios the edge on their bigger corporate competitors.

Why Should Large Organizations Look Externally at Venture Studios For Innovation?

Statistically speaking, most large organizations struggle to create true innovation internally, for a multitude of reasons that aren’t necessarily their fault.

Large organizations are intentionally set up to protect their shareholders, follow governance, and use repeatable systems that allowed them to scale in the first place. But as we’ve discussed, those factors can also stifle innovation through the processes of corporate compliance, multiple levels of decision making, delays in communication, and the fear of abandoning existing products with market share.

So if companies are unable to innovate within, they should seek out external partners. Why?

The world is changing faster than ever before. Case in point: ChatGPT and the rise of AI over these last few years.

As many already know, AI has been a field of study for decades, dating back to the early days of computing and machine intelligence with both Alan Turing and John McCarthy and his colleagues at Dartmouth back in the 1950’s. And while AI has had its moments of boom and bust over the last 70 years, we’re seeing unprecedented growth in the field that will change the way companies are built forever.

Now that this technology is readily available for the average person to use and consume, the playing field has been leveled. The competitive edge large companies used to have by hiring top software developers and engineers is no longer to their advantage when one can find that on a webpage. Right now, it’s even more important for companies to focus on investing into innovation and strategic partnerships to increase their chances for survival.

Businesses focusing on internal development often outpace their counterparts, demonstrating enhanced adaptability to market fluctuations and economic disturbances. With increased experience in business creation, their success rates should improve. By allowing venture studios to kickstart a startup, large organizations can leverage their existing networks and market share to scale early stage companies and generate massive returns for their shareholders.

Case in point: According to data from the US Venture Capital sector, two-thirds of the value of a company is created during the scaling phase of its development where it’s able to penetrate a large portion of its target market.

However, as one would expect, not every company thrives; just 24 percent of the new businesses established in the last decade have grown into viable, large-scale operations today. Venture studios could turn these statistics upside down and completely change the way innovation is created internally at a large organization.

How Large Organizations Can Have Their Cake and Eat It Too

Large companies don’t need to take the risks of creating start ups internally, as there are already vehicles to do that for them via venture studios. Plus, when you take a look at the research about the start-up landscape, the early-stages are where most of the risk lies, especially in the pre-revenue stages of an enterprise.

By partnering with venture studios, large organizations can truly have their cake and eat it too. Protecting shareholder value, optimizing existing market share, and increasing efficiency will never be a bad play, but you should always focus on continuous growth and innovative thinking.

Everyone wants to be the next Netflix, but too many are stuck as the archaic Blockbuster.

The scariest statement one could ever make in business is “we’ve always done it this way,” because at that point, your competition is probably already outpacing you in driving innovation.

Partnerships are an essential component of building great companies, and early stage innovation is an opportunity for every large organization to get involved in, regardless of where they stand on the global scale of things.

If venture studios can genuinely live up to their expectations, then we are going to see a vastly different world of business over the next 5-10 years. And the decision you make today will have a ripple effect across your organization for years to come.

Written by Dr. Erik Reis.

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