While we can question the hyperbole of Peter Drucker’s famous declaration, “innovate or die,” the sentiment remains true – organisations’ biggest challenge is to stay ahead of the pace of change, or put the company’s survival at risk.  

Despite the truth behind this statement, incumbent market leaders with the most to lose are the least likely to change: this observation was made by Edward H. Bowman over four decades ago. In an attempt to combat this, there has been an explosion in large organisations collaborating with start-ups, in an effort to unlock innovation and stay ahead of the curve. The number of new corporate venture capital groups grew by almost 300% in just five years, from 2010 – 2016.

In this article, we’re taking a look at “corporate venturing” – how large organisations engage with innovative start-ups. While typically these collaborations aim to innovate consumer-facing products and services, they can also be used to disrupt organisations internally as well. We look at a specific example of this from Unilever, a large organisation that developed their internal Talent Marketplace with HR tech start-up, Gloat.

1.      What is corporate venturing?

2.     Finding the balance between speed of innovation and cost

3.     Open innovation with HR tech start-ups

4.     Understanding short-term returns and long-term gains

5.     How Unilever collaborated with Gloat to develop FLEX Experiences 

They say opposites attract and maybe this is true for large corporations and nimble start-ups. While large organisations are at greater risk of being slowed down with process, bureaucracy and risk aversion, start-ups set out to challenge the status quo, and are nimble enough to consider a continuous flow of new ideas.

Corporate venturing is used to describe large organisations approaching start-ups to explore innovation opportunities and collaboration. There are many different methods of engagement, which can be organised by 1) size of the start-up, 2) amount of investment required and 3) time to get results:  

Organisations can have teams dedicated to exploring these opportunities, for example IBM launched ‘IBM Venture Group’ in 2000. The team sits within Corporate Development, which is responsible for IBM’s M&A activity. IBM were one of the first out of the gate in creating this type of function, with research showing that the majority of companies have set up these units in the last 10 years. 

Alternatively, organisations could approach collaboration opportunities on a needs-basis. At Unilever the intention was to create a culture of agility in the organisation, stimulating employees to work on their skills and adopt lifelong learning.

“it is not about the technology; it is about the culture that we want to create… Flex Experience is a tool that solves the friction of opportunities and where you want to develop yourself. So, it was a module, a building block in that bigger vision” Jeroen Wels, Unilever

When embarking on a collaboration with a start-up, “copy and paste” strategies deployed by other organisations are not the way to go. Each engagement requires a different set of resources, cost and time and value can be achieved at different phases of the engagement.   

In his experience, Jeroen had to find the balance between how fast you want to innovate and cost. He recommends finding a select few – four or five - areas where you want to set your organisation apart and home in on those. It is in those areas that you have to be willing to go faster, at a potential higher cost than if you waited for the big players to optimise their platforms to do the same thing for less investment. By that time, you become one of the many.  

“There is an equilibrium that you need to look for, how fast do you want to innovate? What are the areas where you want to be leading edge?... If you are going to experiment with everything, then you are going to create chaos.” Jeroen Wels, Unilever

The difference between closed innovation and open innovation is the organisation’s willingness to partner with experts, innovators or entrepreneurs outside of the organisation.

In the diagram below, developed by the academic Henry Chesbrough, who developed the distinction in the early 2000s, you can see the rigid firm boundaries in the “closed innovation” model on the right, and the open firm boundaries in the “open innovation” model on the left, which allows for external resources to collaborate and can potentially lead to entering new markets.

Chesbrough also developed a set of six principles for both types of innovation, which expand on the distinction:

This summary was based on Chesbrough (2003), and developed by João Paulo Coelho Marques (2014)

In his discussion with David Green, Jeroen described the decision to partner with start-ups, and the adoption of the first principle of open innovation “not all the smart people work in our organisation”:

“I remember that I was a little bit nervous because I needed to talk to all these bright cookies that knew everything about people analytics, that is definitely my passion and interest, but it is not my strength, so to speak” Jeroen Wels, Unilever

The team at Unilever went on what they called a “digital safari” to five cities, to speak with leading HR tech start-ups to collaborate on solutions to create a culture of agility in the company.

Hear Jeroen talk about their digital safari in the clip taken from his conversation with David Green on the Digital HR Leaders Podcast

As you heard in the video clip above, it was important for Jeroen and his team to think about what kind of pilot to set up, the short-term returns as well as the long-term gains. According to recent research, 40% of organisations engaging in corporate venturing were focused only on short-term returns, which could see them miss out on lucrative long-term gains.

To avoid this mistake, Jeroen offered a framework for considering the impact three-to-five years down the line:

• Horizon One. You need to deliver in the year to come and three, six, nine months are absolutely critical to create the business results.

• Horizon Two. Then halfway through you to start thinking about the next year and the year after, what is it that I need to deliver?

• Horizon Three. You also need to let yourself be guided by what is possible in the future, three to five years out.

In Jeroen’s example of corporate venturing, his team partnered with Gloat to develop one of the stand-out examples of Talent Marketplace, Flex Experiences. After their “digital safari”, the team kicked off the programme with a pilot around three years ago. You can hear about the progress over the last three years by tuning into the full episode in which they discuss building a culture of internal mobility.

Excitingly, Jeroen shared where Flex Experiences is heading next in what might be considered the third horizon. And the answer is: External. Currently in an experimental phase, Unilever are aiming to offer the development programme that they have built internally, to people outside the organisation as part of Unilever’s social commitment to train up 10 million youngsters who are at risk of being unemployed.

There’s a benefit to the organisation as well – if Unilever can understand the skills and experience of people who sit internally as well as in what they call their “outer circle” – people who are already connected and have shown interest in the organisation – then they can tap into that talent pool more efficiently in the future.

It looks like Unilever isn’t just blurring organisational boundaries for the sake of innovation, but the sake of agility too.

“So, the next big thing for me is how can you resolve the friction of an organisational boundary? And if we translate that to the talent marketplace, how can you resolve the friction of an internal talent marketplace with an external talent marketplace? And if we do that, I think we open up the real future of work.” Jeroen Wels, Unilever