Creating Hyperawareness

Digital Business Transformation

On stage at the CB Insights Future of Fintech Conference, renowned venture capitalist Fred Wilson once stated that corporates should buy companies, but should not invest into startups. Corporate investing was dumb. If you haven’t watched the video yet, here is the link. It’s great.

Fred makes some very viable points and I indeed share some of his thoughts about corporate investing. At the same time, I do believe that you need to distinguish between two aspects of corporate investing, the Why and the How. There are many very good reasons Why corporates should invest into startups. Unfortunately, many corporates do not manage to successfully answer the How question. How to attract the right people? How to establish the right structures and processes? And so on. However, those corporates that do successfully answer the How question can create substantial value for startups, investors and all other stakeholders.

In a series of short articles, I would like to touch upon the Why question and share with you some reasons why I believe corporates cannot refrain from investing into startups anymore. In the second series of articles, I would like to elaborate on the How and share with you, my corporate venturing playbook and my view on how corporates can successfully invest into startups, hopefully in the process might even inspire Fred Wilson to co-invest alongside these corporates.

Corporate Investing Creates Hyperawareness

You may certainly still use Michael Porters “5 Forces Model” in order to analyze the industry your company is doing business in. But on the basis of this analysis, will you really become comfortable as regards to threats, opportunities, strengths and weaknesses of the industry and the respective industry players? Probably not. You will probably end up with the feeling of having finished your analysis without really knowing whether you have missed something. Why is that so? Because of the fact that the digital age provides for digital tools and digital business models that are used by startups to create incredible customer value and that allows for unbelievable growth rates. As a consequence, seemingly out of nowhere a new competitor in form of a startup may enter and disrupt your entire industry. I know, you do not want that.

I do not want to say that the five forces are dead. But you definitely cannot refrain from going a step further by also thoroughly scanning and analyzing the startups active in your industry and adjacent industries. And this is not done by doing desktop research. You may start there. But if you really want to understand what is going on in your industry, what kind of new products may convince your customers, what kind of new business models may change how business is done in your industry and who is out there trying to steal your customers and revenues, you must get engaged deeply. You need to become part of the startup ecosystem by working with startups, business angels and investors and by eventually also investing in startups. If you get engaged so deeply, you will definitely become hyperaware of new industry trends and potential disruption scenarios. Becoming so hyperaware in turn enables you to not only cope with a potential digital disruption threat, but to become the disruptor yourself. I know, you want that.

Next in this series, I will discuss – Corporate Investing Enhances Innovation.