The traditional corporate environment is hardly fertile ground for innovation. With entrenched thinking, rigid management structures, and an established way of doing things, it is often difficult to convince employees to embrace innovation. In some cases, where the competition is usurping a company’s market share, innovation is usually more of an act of survival than a preemptive strike. However, companies that have a strong market position may end up resting on their laurels, exposing them to rapid disruption from forward-thinking competitors or startups. To avoid being disrupted, traditional corporations must embrace corporate innovation.
Mathieu Guerville heads up the venture capital arm of UL, a company that has been around for over a century and that is deeply entrenched in the safety testing niche. “The safety industry has evolved from people being worried about getting electrocuted by their kettle to people worrying about cyber threats,” he says, “and so having been stuck in its ways for all those years, UL has had to redefine what safety means and what it means to assess safety.” This reassessment and realignment led the firm to start UL Ventures, which invests in startups involved in the safety assessment and testing field. From his experience heading up this unit, Mathieu shares what he believes are key elements corporations must adopt to foster corporate innovation within their ranks.
Stay Committed to Your Mission Statement
“Whenever we go looking for startups or other businesses to invest in, we first ensure the companies we approach align with our core mission statement,” Mathieu says. This is a key insight for corporations that may get distracted by all the incredible technologies developing across different industries. While it is essential to explore developments in lateral industries, it is important to remain a mission-driven organization to sustain current momentum and keep current customers satisfied. In the case of UL, focusing on investing in startups that augment or complement its current mission statement ensures the firm’s competitive advantage remains intact and continues to strengthen.
“If you are building the next Instagram or dog walking app, we are not interested,” says Mathieu. By having this laser-like focus, the firm has been able to go through seventy acquisitions without losing sight of its core mission. For executives considering innovation, it is essential first to define a clear mission statement and then use this as a guiding principle when acquiring or partnering with startups. Doing this will save the firm both money and time while ensuring maximization of opportunity cost through avoidance of timewasting ventures.
Start a Corporate Venture Capital Fund
“Why did UL start a venture capital arm?” we asked Mathieu. “Over time, UL simply could not keep up with all the advances in the technologies it inspects and certifies. Starting a VC arm was the natural progression to the direction we were taking to become a more innovative company,” he explains. But, according to Mathieu, VC is not as simple as just putting together some money and throwing it at startups. The process of investing in and onboarding startups is often fraught with challenges such as culture clashes, poor returns and outright lack of fit as the startup evolves. He notes that while financial returns are important, they should not form the main agenda when investing in startups for innovation purposes.
For the UL fund, he looks for three things in a startup before considering an investment.
- An outright connection or correlation to UL’s core business, which could mean the startup resonates with the company either internally (the organization’s core operations) or externally (to customers.)
- An ability to impact UL’s business over a 3-5-year period either regarding internal productivity, access to new markets or acting as a go-to-market vehicle for a new line of products or services.
- Pedigree of the team and project.
Besides focusing on this set of criteria, Mathieu also advises corporations to have a dedicated innovation team that stewards the entire corporate venture capital process. With such a team in place, it is easier to handle issues like culture clashes, startup onboarding, commercial agreements, IP protection, among other issues that are bound to arise.
Create a Culture of Curiosity
“The first step of innovation is ideation, and for ideation to happen, there must be curiosity,” says Mathieu. Most corporations falter at this step because established cultures and norms do not allow for the presentation of ideas, most of which will inevitably fail. As failure is often frowned upon in traditional corporate settings, employees tend to keep their ideas to themselves lest they are labeled a failure, which can affect their performance rating or promotion prospects. “A culture of innovation must start at the top. Management needs to say it is okay to fail, as long as we fail fast and we are failing in the quest for innovation,” says Mathieu.
“This is, however, just half of the solution,” he adds. For organizations to fully embrace an innovation culture, there must be mechanisms and processes in place to manage this inflow of ideas. Some companies use idea boxes while others utilize hackathons, or the 80/20 rule made famous by Google. All these represent mechanisms by which ideas are solicited from employees, presented to management, filtered and supported or killed off quickly to keep the innovation momentum going. By adopting a fail-fast failure-tolerant innovation culture, organization leaders can inspire employees to think beyond their scope of work to help the company break into new levels of innovation.
Conclusion
“Corporate innovation takes time,” Mathieu reflects. While in a startup the entire company is a sandbox where experiments can be run hot and fast, the situation is different for traditional corporate organizations. “Instead of focusing on why innovation cannot work in your organization, focus instead on how you can create a sandbox environment to test your boldest ideas within a controlled environment. Creating such a sandbox environment allows the organization to test out innovations without going straight to the deep end, allowing for bolder and more frequent innovation experiments,” concludes Mathieu.
Video: Corporate Innovation Interview with Mathieu Guerville
Mathieu Guerville heads up the venture capital arm of UL, one of America’s oldest safety testing companies. After decades of doing things the old-fashioned way, UL decided it was time to launch into the future and did so by launching a corporate venture capital fund that invests in startups working on innovative technologies in the safety testing space. In this interview, Mathieu shares insights learned from helping UL execute upwards of 70 innovation-focused acquisitions and internal initiatives.
