Since most internal innovation programs don't yield significant results, and neither do investments in corporate venture capital, there has to be a better way for corporates to successfully innovate.
As such, companies serious about their future have started building new ventures. These new ventures are close enough to the core business to leverage corporate assets, yet far enough to not be absorbed by the machine designed to execute upon existing business models. Whilst this approach builds upon principles from VC's, there's more of a commitment and involvement from the corporate beyond a mere financial stake.
Here's what we learned from innovators responsible for this new approach, or heading up such new ventures, at Ford, P&G and Audi.
Our Innovators Insights session featuring Safir Jamal, Nicola Büsse and David VanHimbergen as recorded during Innov8rs Connect – Business Design & Venture Building, 12-13 May 2020..
Safir Jamal: The Right Structure for Innovation
Safir Jamal is an experienced innovator and strategist. As the Head of Strategy and Operations at Ford X, Ford Motor Company’s venture incubator, Safir has used innovation to help position one of the longest-operating automakers in the world for today’s changing transportation landscape.
Envision – Build – Validate
In a 2011 TED Talk, Ford Motor Company Chairman Bill Ford expressed his concerns about his company’s place in an evolving industry. He said “In the past, I worried about how I am going to sell more cars and trucks. But today, I worry about what if all we do is sell more cars and trucks?”
Ford gave voice to concerns that have plagued industry leaders across the board for the past decade. The face of business is changing and Ford had to consider what business it wanted to be in – in the long-term.
Although Ford has long been in the business of auto manufacturing, it needed to move from being in the business of manufacturing cars to being in the business of moving people and goods – becoming a mobility services provider.
Creation of Ford X
To bridge the gap between manufacturer and mobility services provider, Ford needed a whole new corporate approach, rooted in:
- New Talent
- New Metrics
- New Processes and Systems
- New Capabilities
- New Clockspeed
In 2018, Ford X was created to provide that approach. Ford X, Ford’s venture incubator, was created to “envision, build, and validate new mobility ventures and business models to shape the future of transportation”, for Ford X launches in-market ventures with its team of entrepreneurs, designers, and engineers across its three dedicated offices in Palo Alto, Detroit, and London. The incubator was founded upon the following three principles:
- Small Teams: Each team consists of 3 dedicated full-time employees from both inside and outside the organization.
- Small Budgets: Each venture team is provided with a maximum of $400k to cover all venture expenses, including salaries.
- Short Timelines: Aspire to launch an in-market pilot and validate the venture with paying customers within 90 days
Ford’s Venture with Jelly: Embracing Micromobility
Ford X used these principles to launch its scooter venture, called Jelly. One of the incubator’s venture teams discovered that 60% of all trips in the U.S. were 0-5 miles, which is a trip type that is well-suited for bikes and scooters.
Despite the fact that the company traditionally specializes in motor vehicles, Ford decided to envision, build, and validate a new scooter sharing venture. Ford X successfully built a new app, paired it with scooter hardware, and piloted the Jelly scooter sharing service with paying customers at Purdue University.
Based on the success of that pilot, Ford went on to acquire an existing electric scooter startup, Spin, illustrating how Ford X’s venture incubation work shaped a core pillar of its parent company’s strategic direction..
Safir’s 3 Gates for Successful Ventures
Based on his success with Ford X, Safir found that successful ventures must pass through 3 gates:
- Consumer Desirability: Is this the right solution to solve the customer’s pain point?
- Economic Viability: How profitable is the solution?
- Operational Feasibility: Do we have the operational capability to sustain this solution now and on an ongoing basis?
Nicola Büsse: A Beneficial Partnership
Nicola Büsse, co-founder of MOBIKO, has been involved in this Audi-owned startup from the beginning. MOBIKO is a unique mobility app that allows employers to provide a flexible monthly mobility budget to employees for both daily commutes and private trips. The budget is available for use on all types of mobility, from bus and train tickets to cabs and ride-sharing services.
A Meeting of the Minds
MOBIKO was developed by a partnership between Audi Business Innovation GmbH, a wholly-owned subsidiary of automaker Audi, and mantro, an established company builder for cross-industry digital innovation.
Much like Ford, Audi understood the need for innovation in order to stay ahead of the competition. Hence the purpose of Audi Business Innovation (ABI) is to “redesign the mobility of the future and to implement innovative business models”. With the help of mantro, they were able to achieve that goal.
MOBIKO’s Development Timeline
MOBIKO was developed over the course of 2.5 years, using a simple innovation timeline that allowed them to thoroughly explore and test the concept before they went live.
- Design Sprint: In February 2017, ABI defined their value proposition and identified the key components of the potential solution.
- 1st MVP: By September 2017, they were ready with a first MVP and validated the solution through interviews with potential users and experts. During this stage, ABI also began internal discussions regarding the possibility to spin-out the project.
- Foundation: Having started the innovation partnership with mantro in December 2017,in February 2018, MOBIKO was founded with its first name “mantro benefits GmbH”.
- Pilot: As of August 2018, the project was ready for a 6-month pilot phase. This phase was conducted with 4 companies within different industries throughout Germany.
- 1st Investment: Upon successful completion of the pilot phase in June 2010, ABI officially invested via a convertible loan, and the company was officially named MOBIKO GmbH.
- Go-Live: In July 2019, MOBIKO went live with their first paying customer and first contracted employees.
- Scaling: Today, MOBIKO is in a constant state of development to meet growing market needs.
Nicola’s 4 Lessons Learned
Over the three years that Nicola was involved with the development of MOBIKO, Nicola learned four important lessons:
- Dedicated Team: Ensure that your venture has a motivated and determined team from every organization involved in the partnership. You need employees who identify strongly with the product and are 100% focused on the future of the venture.
- Equal Partnership: Each partner brings specific expertise and financial backing to the relationship. Build trust within the team based on equal partnership, so that all developers are invested in the success of the product.
- Transparency: Keep leadership from all partnering organizations involved throughout the development journey. Provide consistent reporting on each stage of the journey, so that all parties are on the same page.
- Entrepreneurial Decision Making: To keep the process faster and more agile, make entrepreneurial decisions rather than adhering to corporate processes. This allows for sufficient freedom to create a healthy start-up environment.
David VanHimbergen: Diversification in Innovation
Former CEO/Co-founder of Tide Spin David VanHimbergen established his startup after more than 18 years with Procter & Gamble, the manufacturer of Tide laundry detergent.
His journey toward innovation began in 2012. As a P&G representative, David often worked closely with retailers, so he started to notice when Target, one of Tide’s strongest retail partners began to sell less.
“Software is eating the world. Will it eat ours?”
After careful analysis, they discovered that both P&G and Target were facing three primary challenges:
- Sales Were Down: Due to competition with Amazon and other retailers, Target’s comp sales growth (stores open >1 year) was slowing. Target started to shift away from Tide and towards more profitable or differentiated laundry sku’s.
- Technology Was Taking Over: Technology was replacing brick and mortar retail stores with online sources. This marketplace disruption was taking a toll on both Target’s and P&G’s bottom lines.
- Consumers Wanted More: After conducting consumer research by asking “what is the most frustrating thing about laundry?”, David discovered that what they really wanted was to not do laundry at all. All he had to do was figure out how to capitalize on this.
The Innovative Process
The key insight David brought to P&G leadership’s attention was that the total addressable market for laundry in the U.S. was really $25 billion…twice as large as P&G considered it to be. The market can be divided into two sectors: Do It Yourself (DIY) and Outsource. While Tide products held more than 50% of the market share in the DIY half of the market, they had virtually no share in the Outsource market, which included professional laundry services, dry cleaners, and laundromats.
To address this lack, Tide developed and piloted a laundry service business in Chicago. Since they had already established dry cleaning franchises in the area, it was a low-cost option to convert unused space into a laundry service facility.
To obtain customers for their pilot run, Tide offered free laundry services and dry cleaning to Walgreens employees, and they received over 100 bags from willing participants.
In order to keep the operation running smoothly, Tide created a separate home office in Chicago dedicated to Spin operations. They then developed special branding and personal elements to set Spin apart from the competition, and their efforts were successful. The pilot ran for 2 years, at which point the company financed the purchase of an existing laundry service to scale operations.
David’s 6 Suggestions for Corporate Startups
After two years of hands-on development of the Tide Spin startup, David has six suggestions for corporate ventures:
- Diversify: Your innovation portfolio should encompass various business models and a mix of long and short term investment “bets”.
- Dedicated Team: The team that is dedicated to the future of the company must be different from your core operating team. Processes that maintain the core operations can be a liability to innovation. Rather than controlling, senior managers should embrace the process and stay out of the way.
- Focus: To innovate, you need a team that is fully dedicated and immersed in the project. Don’t make your innovation team wear multiple hats.
- Problem First, Solution Last: Study and define the problem you are trying to solve, and then validate your ability to solve the problem using the solution you have created.
- Discipline: Have an organized plan with a sound financial model and operational inputs. List your assumptions, and be sure to follow the path you have created.
- Good Enough: When starting a new venture, speed and agility are key. You will not have time to perfect before you launch, and you should be willing to make mistakes.
Finally, David suggests that innovators should always be looking forward. Look toward where the world is going with disruptive technology and be willing to change in order to stay ahead of the competition.
