Why should your company be building startups?

Pedro Waengertner, the founder of ACE, poses an intriguing challenge: “Kill your own business.” It may seem contradictory at first glance, but the essence of this thought is crucial. Your business may be thriving today, but what about tomorrow? Netflix is an emblematic example: it realized that its model was destined to become obsolete and boldly reinvented itself to ensure its future.

With the rapid evolution of artificial intelligence, we ask ourselves daily: will today’s jobs exist tomorrow? And the companies?

The answer may lie in the idea of an ambidextrous organization.
Entrepreneurs are familiar with the duality between exploiting the existing model (“exploitation” in the traditional sense) and innovating (“exploitation” in the sense of seeking the new). However, understanding this power often does not translate into practice.
An ambidextrous organization is one that can operate efficiently in the traditional model, seeking continuous improvements while investing in changes and innovations. It maintains stability and efficiency but constantly advances towards development and market leadership.
The three approaches of ambidexterity:
The main challenge lies in managing the relationship between the corporate startup and the parent company. Organizational ambidexterity is the process of optimizing the existing business and creating new ones, and there are three ways to organize it:
Structural Separation: Establishing two distinct structures, one focused on exploiting the existing business and the other on exploiting new opportunities. Each unit follows a specific management approach to its context.
Temporal Separation: Alternating periods of “exploitation” and “intensive exploitation.” During disruptive phases, the company focuses on exploitation; during maturation moments, it concentrates on the parent business.
Contextual Separation: Creating an internal environment that encourages teams to dedicate time to both exploitation and intensive exploration. Here, people carry out both activities simultaneously.

The concept of corporate venture building:
In simplified terms, it is the practice of creating and developing a new business, independent or complementary to the core business, from a parent company. This initiative acts as a hub for external innovations, following the process of venture builders or “startup factories.”

Corporate Venturing: Strategies for developing new businesses:

Incumbents have three ways to organize themselves to create “corporate startups”:

External Corporate Venture – CVE: Involves new businesses created by parties external to the organization, later invested in. It can be done through minority investment in independent startups, as well as through joint ventures with other companies. CVE results in the creation of autonomous or semi-autonomous structures outside the company’s structure and, therefore, allows access to new knowledge and the development of new skills.
Internal Corporate Venture – CVI: Focuses on creating internally developed businesses, owned by the corporation, that reside within the existing corporate structure. Businesses are created and allocated within the firm’s limits, even if they are operated semi-autonomously. It is an interesting way to develop new capabilities and generate results by leveraging existing resources in new contexts.
Corporate Venture Building – CVB: Combines internal and external resources to develop new businesses. In this model, internal teams, a resident entrepreneur, and external teams collaborate to create and scale new businesses in which the incumbent will be the controller. The topic has been widely discussed. CVB is a new way of venturing within large companies in the model that Edward Roberts called “new style ventures” in the 1980s.

Does Corporate Venture Building work?

According to McKinsey, 52% of executive managers see creating new businesses as the best strategy for post-pandemic growth.
The “new era of innovation” that McKinsey names is driven by this approach. Companies like BCG Digital Ventures, a pioneer in Europe, indicate that approximately 90% of the 150 companies built by its team have survived.
However, as one of the partners highlights, “a great founder is just one aspect of creating a great startup. You also need a great idea, a strong team, and excellent execution.”

The demand for professionals capable of creating new internal businesses is rapidly growing, reflecting the importance of this approach.

By Danilo Brito, QTC.ONE