Economic downturns offer forward-thinking companies unique opportunities to invest in the future. Many of these opportunities present themselves only during economic downturns, and missing out may mean not only forgoing tremendous upside potential but also ignoring a potential future existential threat.
The upcoming economic crisis is setting the table for two converging forces to produce an attractive environment for corporate venture investing.
Corporate venture capital drives enterprise transformation and growth
No company is immune to disruption. Dramatic changes to business models are forcing companies across all industries to reinvent themselves to remain competitive and unlock opportunities for future growth.
Corporate venture capital complements existing transformation initiatives by opening the enterprise to embrace and absorb the innovation taking place outside the company.
It’s reasonable to argue that in today’s rapidly transforming and uncertain environment, not participating in CVC programs carries far greater long-term risk to an enterprise than participating in CVC.
A carefully implemented and well-managed CVC program offers incumbent companies five critical advantages in navigating their transformation journeys and ultimately leapfrogging their competitors.
All enterprises differ from each other, and the value they place on the advantages of CVC investing will affect how they set up and operate their CVC programs.
The current environment makes setting up and operating a CVC program the right way more critical than ever, and CFOs must rely on the unique expertise of experienced investors who have consistently delivered returns from venture investments. Experienced investors know how to develop and execute a CVC strategy that will effectively balance the strategic goals of the enterprise against the need for strong financial returns.
A framework such as EY Foundry’s Enterprise Innovation Architecture (EIA)™ can be extremely helpful in defining a company’s comprehensive “Innovation Agenda” and aligning it with the overall corporate strategy.
Summary
Now more than ever, a company’s ability to recognize and extract value from innovation will separate success from failure. Corporate venture capital offers the most direct path to reap strategic and financial rewards from new business models, emerging technologies and disruptive innovation.
Recognizing the potential impact that a well-built and well-managed CVC program can offer companies — especially in tumultuous economic conditions — C-suite executives must answer the critical strategic question: can we afford not to participate in CVC?
