Outside Inside, Inside Around : Leveraging External Innovation Through Strategic Investment

Abstract

Because continuous improvement and company growth are fundamental for future business success, companies constantly look for ways to innovate. A large company must operate to augment core business and create industry innovation to succeed. However, decades of literature and company performance reviews have demonstrated that large companies often struggle to develop innovative products or to foresee disruptive technology and capture the market quickly and nimbly.

This thesis examines how a large company can effectively leverage external innovation for internal success. In an effort to stimulate the ideation process and internalization of bold innovations, a company can implement a Corporate Venture Capital (CVC) Team to evaluate, transition, and develop external innovation for internal company growth. A successful CVC understands the needs of the parent company, captures external venture capital (VC) opportunities, and facilitates the transition of new technology to support core business growth and develop industry innovation. By investigating the pathways through which innovation ideas evolve from a concept to fully integrated products, it is apparent that each method has its own merits and challenges. However, with a sound operating strategy, a large company can leverage the strengths of strategic investments. A CVC with an established and scalable process can facilitate the exploration and implementation of external innovation. Furthermore, the revelation that a CVC is essentially an internal sales team geared towards internal stakeholders provides a new framework for CVC teams to effectively engage internal stakeholders and portfolio companies to capitalize on external innovation for mutually beneficial growth opportunities.