Signals of Corporate Innovation
In recent years, it is becoming increasingly apparent that corporate innovation is crucial for the survival of any business. There are many cases in which big corporations of the past end up being replaced by startup newcomers that offer newer and more innovative value propositions. These startups have shown to have the capacity to disrupt entire industries and capture a great deal of market share that these larger corporations previously held. Considering the gravity that innovation holds for large companies to maintain their market share in their particular industries, companies need to begin establishing the right corporate innovation systems and structures in order for them to thrive in the long run.
To enable corporate innovation to develop extensively in organizations, corporate leaders must focus on the application of Strategic Foresight and Futures Thinking in the way they operate. Strategic Foresight is about developing a strong understanding of the various trends that can emerge amidst vast amounts of information. Identifying these trends is key in creating hypothetical futures with opportunities for innovation that organizations need to be capitalizing on. One critical aspect of Strategic Foresight would be the identification of signals. Signals are typically small or local innovations that have the capacity to grow and expand in terms of scale and distribution. They can take the form of new technologies, practices, policies, and even marketing strategies. They act as a stimulus that highlights emerging trends with implications for many companies across different industries.
Importance of Signals in Navigating Through the Volatility, Uncertainty, Complexity, and Ambiguity of the Covid-19 Landscape
The term VUCA is an acronym that refers to the combined characteristics of volatility, uncertainty, complexity, and ambiguity. In the 90s, the military coined the acronym to describe a geopolitical landscape in a state of constant rapid change (Silverman, 2020). Today, VUCA is often used to describe the state of the world brought about by the COVID-19 pandemic that business leaders must navigate through to survive (Silverman, 2020). In a VUCA world, business leaders must possess the leadership skills necessary for traversing through a myriad of uncertain circumstances. How well leaders are able to utilize their skills in this regard can spell the difference between the success or failure of businesses.
While operating businesses in a VUCA world does present numerous challenges, it also provides many opportunities to explore new business models and push the boundaries of innovation for many industries. The potential that a VUCA world presents further emphasizes the importance of signals for businesses. Signals provide foresight into the possibilities that lay ahead in a future that can be difficult to predict. This foresight is crucial in understanding the changes and business strategies that companies will need to undertake and apply for future success.
A Signal of Philippine Corporate Innovation – Establishment of Formal Venture Capital (CVC) Divisions in Major Corporations
Corporate Venture Capital (CVC) is the practice of directly investing corporate funds into smaller high-potential external startups often possessing very innovative qualities. Companies that often invest in these startups do so through entering into joint-venture agreements and the acquisition of equity stakes. In addition to providing funding for these startups, companies that practice CVC often also provide their expertise in management, strategic direction, and marketing as a means to further the growth and maximize the potential of the startup they are working with. The level of direct involvement that corporations have in the operations of the startups that they invest in highlights the fact that CVC is very strategic in nature. A strategically-driven CVC aims to meet the overall company objectives through directly working with startups that possess new technologies and resources that the venturing company seeks to leverage as a means to further its reach. As a whole, CVC enables incumbent and well-established corporations with the nimbleness that startups often have in terms of innovation and disruption. Many companies that engage in the practice of CVC are able to navigate through business environments significantly faster and cheaper through CVC than they would with R&D (Lerner, 2013). The practice of CVC enables companies to respond to changes with regards to utilizing emerging technologies and innovative business models much better than they would without it (Lerner, 2013).
Over the past decade, many established corporations have launched their own corporate venture capital arms. A notable example is the case of Kickstart Ventures, Inc., a wholly-owned subsidiary of Globe Telecom. Kickstart Ventures, Inc., was put in charge of managing Ayala Corporation’s $150 million Ayala Corporation Technology Innovation Venture (ACTIVE) fund (Globe, n.d.). This venture capital fund is to be used to invest in innovative startups that deal primarily with fields such as data analytics, artificial intelligence, fintech, retail, and real estate (Globe, n.d.).
Another example of the establishment of a formal corporate venture capital arm in a Philippine-based company is the case of JG Summit Holdings, Inc. The corporation created JG Digital Equity Ventures to handle its $50 million fund meant for investments in emerging technologies and digital ventures from Southeast Asia (Charm, 2019). Its investments primarily deal with new media, retail, consumer sector, financial services, digital health, and logistics (Charm, 2019).
Despite some Philippine companies not establishing formal venture capital arms, other big corporations still invest in startups through merger and acquisition deals and the deployment of capital. To name a few, (1) ABS-CBN and Summit Media investing in Kumu, a Filipino live streaming platform startup, (2) Ayala Health investing in AIDE, a home care mobile app, and (3) 2GO Group, Inc. investing in Mober, an on-demand delivery platform (PwC Philippines, 2020).
The support that these corporations have shown towards innovative startups can serve as a signal for a much bigger trend in technology and its importance in the survival of businesses moving forward. Through these numerous corporations’ investments, it is clear that a lot of value is put in the services, resources, and technologies that many startups specialize in. Investing in these innovations early on may serve as an indicator for the intent of corporations to maintain their market share for the long run and help them become forerunners of what eventually becomes the norm of the industries that they deal in.