The start-up way of working (often lean and fast moving) has proven to be successful in terms innovating and building impactful solutions, which is why corporates often partner with start-ups when in need of quick wins. However, in instances where partnering is not the optimal or preferred solution – what other options are out there?
As touched upon in our previous article on trends to look out for in 2020, there has been an emerging trend in what is known as ‘co-creation.’ This is a business strategy where large companies leverage the expertise or resources of external parties (start ups or venture building teams typically) that is gaining considerable traction. There are two key types: corporate startups and venture building. Increasingly adopted yet still nascent in the corporate world, both types of co-creation help corporates build out high quality, successful propositions and adopt innovation faster than through typical corporate incubators or accelerators.
Corporate startups enable organisations to take advantage of the power of entrepreneurs and specialists in their space to fuel their future growth by creating valuable propositions in a space that has been identified as strategically important by the corporate. Venture building is slightly similar. It entails the creation of new propositions and spin out opportunities with the help of external venture building organisations. While the nature of each venture building team differs depending on industry and desired outcome, the core activities venture builders engage in remain the same: they identify business ideas, build teams (corporates can even draw from current employees and get them engaged in innovation), finding capital, venture management, and providing shared services.
Both types of co-creation are gaining traction all over the world. At The Bakery, we are running our take on co-creation: The Start Programme and Startup as a Service in both the UK and Brazil.
The Bakery Start Programme takes individuals who are at a pre-idea stage in their entrepreneurial journey, and combines them with validated corporate innovation opportunities . These individuals could range from successfully exited founders to entrepreneurs with a varying range of experience who want to start their own business. By placing trust in entrepreneurs to find innovative new solutions to validated corporate problems, we ensure that they are tackling problems with a confirmed value while still maintaining the ‘start-up’ way of thinking in which they would typically solve a problem.
The Bakery Start-up as a Service is our newest programme which enables large organisations to take an idea or a theory, and incubate it within a venture building team in order to validate and launch, or disprove said idea. With Start-up as a Service, our venture building team controls all the elements, from design to creation and strategy. The programme is also executed with the guidance and input of our corporate partner, who not only have the marketing expertise but also a more comprehensive knowledge of the problem.
Innovation initiatives take on different forms depending on which stage a company is at in terms of their growth. So why do people choose to co-create? If we look at McKinsey’s Horizons of Growth framework, partnering is a great opportunity to improve on current performance (Horizon 1), but venture-building can provide longer term solutions to more complex opportunities (Horizon 2 & 3). Here, growth strategies are of higher risk but potentially higher reward. This can include the desire to create a new product and take it to market within the year (Horizon 2), or even more radically, to create a new business model and leap into new markets to protect your organisation from competition (Horizon 3).
Therefore, co-creation exists because there are, in some cases, limitations to partnering or a need for longer term goals in general. While partnering is often a good choice when you have an identified a problem and are aware of the various types of solutions that exist out there in the world (or an idea of what these solutions may look like), co-creation methods help solve problems which require a different way of thinking. The Corporate Start-up method, like our Start Programme, is great for longer term thinking.
It is often easy for large corporations to have tunnel vision and not appreciate the various ways that these problems can be solved. Entrepreneurs have fresh talent, are outside of the corporate bubble, and have yet to be programmed to think a certain way, so they can therefore address an existing corporate problem that you have been facing for many years in a way you have never done before.
Ownership is another key factor. While partnering can be very beneficial and quite light touch in terms of commitment (you don’t need to do something revolutionary in order to innovate and can rely on external experts), IP ownership is often a key barrier, as the start-up more often than not retains the IP through this approach. If any new proposition is likely to be a key differentiator and fundamental to a corporates success, they understandably look for innovation approaches that retain the benefits (agility, speed, ….) whist offering some ownership. Without typically time-consuming and tedious red-tape, co-creation teams are able to build solutions faster whilst also providing ownership. Venture building programmes like Start-up as a Service are great if organisations want to build something themselves that they want complete control over.
The case studies below, outline The Bakery Brazil’s projects that are currently in flight. These examples illustrate how Corporate Startups and venture-building can work in practice.
Client Background: Vale is a Brazilian multinational corporation and one of the leading logistics operators in Brazil. They are also one of the largest metals and mining companies in the world, leading in global production of iron ore and nickel.
Context: While mining provides huge economic benefits and is undeniably needed for resource extraction, the process remains often difficult and risky. Potential accidents such as infrastructure failure remains a key consideration, and should said accidents occur, there will be a large impact on the local ecosystem. Given its risky nature, sections of the mining industry are striving to improve safety standards and reduce their environmental impact.
Programme Overview: The Bakery is running a Start Programme, The MINE Program (Mining Innovation for a New Environment), with Vale in order to prioritise viable challenges and identify quick wins in the mining space. As a leader in the mining industry, Vale is determined to be at the forefront of making mining safer for people and for the environment. Therefore, The Bakery is helping Vale build a portfolio of new ventures, with the goal of creating and adopting innovative technologies to improve the environmental and social impacts of their operations. The MINE program leverages both the startup and academic community, to deliver solutions that are ready to scale. Participants of the MINE program will undergo a series of workshops, including a Sprint week, to develop innovative solutions to a number of Vale’s targets: improved safety of mining infrastructure and operations, and the reduction of the environmental impact of mining. The goal of the cohort is to have their solutions ready for Vale by June.
Why Venture-Building?: The Start Programme helps harness the skills of a broad range of talented entrepreneurs – creating multiple teams that can quickly build out solutions relevant to Vale. As mentioned, the Start Programme is good for when a large organisation faces complex and big problems that they do not have answers to. Start, in effect, enables organisations to leverage the minds of many individuals to build solutions and work on solving the problem at once.
Client: Grupo Pizolato
Client Background: Grupo Pizolato is a Brazilian construction company based in Minas Gerais.
Context: The Brazilian construction industry has been slowly recovering over the past year. However, low-income individuals, who are an untapped market with great potential to boost the construction industry, cannot afford to buy property.. The majority of the population must apply for financing programmes in order to afford to buy a house. Minha Casa Minha Vida, for example, is a government initiative focused on helping low-income individuals obtain loans. However, while these financing initiatives are essential in helping Brazilians purchase their first homes, in practice, the vetting process is a key barrier to getting these loans approved. This is particularly difficult for individuals without a steady source of income.
Programme Overview: The Bakery is running a Startup as a Service Programme with Grupo Pizolato. The aim of this programme is to transform the property purchase process in Brazil. Together, we have created Bem Nosso, a digital platform that makes it easier for unbanked individuals, who typically work cash-in-hand jobs to get on the property ladder. By cutting out the middlemen, Bem Nosso enables low-income individuals a chance to own their own housing through a monthly rental system that counts towards the overall property cost. The process is completely digital and makes it easier for individuals to apply. The Bem Nosso project is currently in the developmental phase, with the platform currently being tested with a group of users. The platform is due for public launch in February.
Why Venture-Building?: The Startup as a Service model approach enables Grupo Pizolato to develop their own proposition in which they have complete ownership. While Grupo Pizolato is a construction company, this project is complementary to their main offering and will also help them access a new market: low income individuals while cutting off middlemen who traditionally cut into their margins.
While we’d love to discuss our UK-based programmes further, these programmes are currently in flight and under NDA. However, we are seeing evidence that co-creation and venture building is gaining traction worldwide. If you’re interested in UK examples then check out Jaunt, a short term motor insurance brand launched by BGL, as a good example of venture-building happening in the UK. BGL launched Jaunt as a response to consumer demand for short-term insurance (anything from 1 hour to 30 days) on borrowed vehicles.
It’s also worth mentioning that with any new innovation initiative, it is essential to have employees dedicated to thinking innovatively, to ensure these ventures come to fruition. Partnering, as mentioned, is a quick way to test propositions and scale, but it may not truly change your company’s culture over the long term. As discussed in our November blog post, meaningful change comes from a well established innovation culture within an organisation. With co-creation, organisations can ensure that their teams are steeped in innovation culture by involving them in co-creation teams. This helps staff to adopt a different, start-up-like way of thinking, that, in general, is drastically different from the way most corporates think. By putting employees into co-creation teams, an organisation is investing time and resource in innovation and innovative thinking that will pay off long term.
Ultimately, co-creation enables corporations to take advantage of their unique resources corporates, avoid internal red tape and offers more ownership than partnering. Therefore, co-creation is, if you will, an effective hybrid, incorporating the benefits of both corporates and startups. Venture building and co-creation can help your team become more innovative, learn to adapt a new way of thinking, and gain a start-up style perspective that could be helpful towards large organisations.