Dave Behringer on venture management as a multidisciplinary approach that consists of specific competences for monetising, derisking and accelerating innovation
Where do innovative ideas reside in your organisation? Being driven into market by your passionate innovation teams? Stuck in a “closet of interesting ideas?” Swirling in a whirlwind of activity that goes nowhere?
Many healthcare organisations desire to infuse a robust innovation culture into their organisations that can rapidly take their great ideas and turn them into successful new businesses. Unfortunately, many of those innovation processes lead worthy ideas into a black hole resulting in frustrated “creators” and dampened enthusiasm for innovation.
Truly disruptive innovation has never been an easy job. Along the journey of bringing a breakthrough to market, there are many pitfalls that can quickly strand the new venture, investment and innovation spirit of those leading the project inside the corporate walls. Within Global Innovation, there is no lack of investment. The world’s largest corporations spent $680bn on research and development in 2016 and that spend has been growing at almost 5 percent a year over the last 11 years. This innovation spend results in the creation and investment in thousands of ideas.
Unfortunately, there is no relationship between R&D budget and corporate performance and many great ideas get stranded inside corporates, never to be experienced by the target consumer.
Some of the reasons for this waste include:
- Change of corporate strategy
- Poor communication of the technology benefits and consumer relevance
- Too disruptive to fit within a corporate’s product portfolio
- Lack or loss of internal champion
- Inability to scale the innovation across the organisation
- Change in leadership
- Inability to exploit the IP within existing business and no incentive to license
- Shorter term, lower risk projects given higher priority
- Corporate bureaucracy and/or turf wars
- Complex innovation processes stalling the opportunity
- Innovation before its time.
The stranded ideas are often market disruptors that do not fit neatly into the current corporate framework, are farther from the core or disruptive to the current product portfolio. To bring these ideas to market, the corporate has to navigate the triple challenge of:
- Iterating the business models and technologies required for the new venture
- Simultaneously evolving the capabilities needed in the core business and building the new capabilities required for the venture
- Successfully balancing “What you already have” with “What you will need in the future and how you will get there”
Farther from the core = Harder but more valuable
As a result, transformational technologies and early stage ventures are deserted in what is known as the “Valley of Death”, a place where great ideas, millions of dollars, hard work and innovation passion languish. An estimated 1/5 to 1/3 or $140 to $250bn worth of these investments become stranded. Abandoning investment and moving along has become common and accepted by many organisations as the “cost of innovation”.
Not all stranded ideas are worthy of being launched – some are halted for good reason. But many are funded longer than they should be and contribute to wasted spend. Abandoning non-viable ideas earlier in the innovation process can unlock valuable innovation resources and redeploy them towards accelerating viable new ventures to market.
On the other side of the coin, if the stranded innovation is truly viable, valuable and financeable, then billions of dollars in revenue are being left in the corporate file cabinet. This is the real opportunity cost of stranded innovation. At an internal rate of return of 20 percent or a multiple of 3X, a staggering $750bn per year or two trillion dollars over a five year period is locked in the Valley of Death.
A new enterprise discipline, venture management, is required to extract the value from these stranded opportunities. Venture management increases return on investment on Innovation investment by transforming stranded assets into revenue generating vehicles and eliminating ideas that are not viable, valuable and financeable before over-investment.
Venture management is a multidisciplinary innovation approach that consists of specific compentcies for monetising, derisking and accelerating innovation.
Five core competences of venture management
Venture management organisations:
- Originate and Validate: identify and validate the viability of early stage technology
- Generate: monetise stranded assets
- Commercialise: develop and execute “Go To Market” plans and new entities for pilot testing innovation prior to full scale launch
- Accelerate: source collaborative partners and co-investment required for undercapitalised products and portfolios to achieve their full potential
- Create: Build a systematic “disciplined entrepreneurialism” culture of innovation that accelerates value capture from IP, early stage technology, incubators and start ups.
GE HealthCare Partners and Pilot Lite Ventures have a specialised toolkit consisting of seven proprietary capabilities spanning from “originate” to “create” that we utilise to help organisations successfully implement venture management.
Implementing venture management is not easy. Many aspects of the methodology are a significant departure from traditional innovation approaches and it takes time for the organisation to embrace this capability. With patience and persistence, practicing venture management reduces wasted investment, captures latent value in stranded ventures and accelerates the path to market for innovation. Through our venture management process, we boast innovation success rates 2.5 times that of leading investment firms and 10 times better than corporate venture capital.
This leads to the obvious question of what to do next. The right approach for many organisations is to look in the mirror and assess how impactful their innovation agendas and processes has been to the bottom line. If organisational spend and effort significantly outweigh market results than it is likely you have a lot of stranded or soon to be stranded innovation within your corporate walls.
Many of those projects are worthy of another look and have significant market value that can be recaptured and invested into new programmes. Other ideas are headed to the “Valley of Death” but can be course corrected to a viable path to market before the innovation becomes deserted.
This is a perfect opportunity for a venture management pilot that can help you reset your innovation culture to a systematic “disciplined entrepreneurialism” approach that accelerates value capture and shareholder impact from your innovation investment. Don’t let your innovation desires fall into the closet of interesting ideas.
This article underpins a major market presentation given by Dave Behringer, CEO of PilotLite Ventures (PLV) USA at the recent IFT conference in Las Vegas. PLV is a strategic partner of GEHCF and with them, we offer the same Venture Management capability to our clients in the UK, EU and Middle East in all areas of healthcare.
Please contact Jonathan Pearson to discuss our track record of successful assignments together and see how Venture Management can help your strategy and innovation teams unlock and accelerate the monetisation of early stage ideas, IP and ventures.