#19: Corporate Venturing in the eyes of a Chairman with Jukka Pertola
Hi, I'm Jeppe and welcome to my weekly newsletter on Corporate Venturing, released every Tuesday. My aim is to provide a comprehensive perspective on the latest developments in the field and its related topics, drawing from the insights of top management, venture capitalists, founders, LPs, and family offices. I aim to offer valuable information and thought-provoking content that will aid in understanding the importance of Corporate Venturing in business strategy.
In this edition of my newsletter, I had the privilege of interviewing Jukka Pertola, a highly reputable senior professional who serves as the Chairman of several esteemed companies, including Tryg, Siemens Gamesa Renewable Energy A/S, GN Store Nord A/S, COWI and GomSpace. With a distinguished career spanning over 30 years, Jukka began as an electrical engineer (Telecom and IT) and made significant contributions during his tenure at Siemens. He concluded his operational journey as the CEO of Siemens Denmark in 2017.
Jukka embarked on a professional board career in 2018 when he assumed the role of Chairman at Tryg. Recognizing that the demands of serving on multiple boards were not aligned with the responsibilities of a CEO, Jukka made the decision to transition into a chairman position. This shift allowed him to focus on his extensive board commitments and the very important role he plays in the companies he's involved in. One of the valuable insights Jukka has gained in his professional journey is the experience of working as an individual without the direct support typically provided by an organization.
To excel as a professional board member, one must embrace the need to perform daily tasks independently and find comfort in working autonomously
Can you provide an overview of your experience and involvement in corporate venturing as a Chairman?
Jukka brings a wealth of experience and insights to the realm of corporate venturing, as evidenced by his remarkable journey. During his time at Siemens, Jukka had the opportunity to work closely with the company's corporate venture arm, Mustang Ventures, which was among the pioneering corporate venture capital (CVC) initiatives globally. With over 400,000 employees spread across 190 countries, Siemens' CVC played and still plays a significant role in fostering innovation. Jukka recalls that while he didn't perceive it as particularly unique back then, having a CVC allowed for the exploration of intriguing ideas and the creation of new ventures. Additionally, investments were made in external companies that aligned with Siemens' business models and units, while those that didn't fit were discontinued.
Jukka's involvement with corporate venturing continued during his tenure at LEO Pharma, where he was part of establishing LEO iLab. The decision to created this company builder marked a disruptive force within the industry, setting the stage for innovative breakthroughs through the combination of digital innovation with LEO Pharma's focus on dermatology.
In his current role as Chairman at Tryg, Jukka is associated with a unique initiative called The Camp.io, which is a co-working space and community for entrepreneurs, nurturing insurtech and fintech companies. Among the notable successes to emerge from this program is Undo, a promising startup that has garnered attention in the industry. Undo partnered up with Tryg insurance that reinsure all the Undo customers.
What do you believe are the key advantages of corporate venturing?
Corporate venturing offers several key advantages that Jukka believes contribute to its significance and impact. Firstly, it allows corporations to maintain close proximity to start-ups, fostering an environment of collaboration and knowledge-sharing. By keeping start-ups within their sphere of influence, corporations can tap into fresh ideas, emerging technologies, and entrepreneurial talent.
Another advantage lies in granting start-ups the autonomy to make their own decisions. Corporate venturing provides an environment where start-ups have the freedom to explore and innovate without being bound by excessive corporate bureaucracy. This independence enables them to operate with agility, adapt to market dynamics, and pursue opportunities that align with their vision.
By embracing these advantages, corporate venturing creates a symbiotic relationship between established corporations and innovative start-ups. It encourages a dynamic ecosystem where the strengths of both entities can be leveraged to drive growth, foster innovation, and bring transformative solutions to the market.
As the Chairman of multiple companies, what factors do you consider when evaluating whether a corporate venturing initiative is a good strategic fit for the organization?
Jukka takes various factors into account when evaluating the suitability of a corporate venturing initiative for an organization. These considerations stem from his extensive experience and understanding of the dynamics involved. Here are the key factors Jukka considers:
Firstly, the size of the corporation plays a crucial role. Smaller companies may lack the necessary resources and capacity to effectively engage in corporate venturing. On the other hand, larger corporations have the advantage of being able to explore new and innovative ideas. Corporate venturing serves as a valuable avenue for them to be exposed to fresh perspectives and unconventional concepts. The agility and speed of start-ups contrast with the more structured and slower processes typically found in larger companies, allowing for greater flexibility and adaptability.
Jukka also points to his experience with LEO iLab, a significant initiative that had an allocated budget of almost EUR 70 million. The strategy was to give internally created ideas the freedom to pursue their own ideas while aligning them with LEO Pharma's core business of skin-related diseases. If an incubated start-up proved successful but was not directly related to the core business, it would be spun out and financed alongside venture capitalists. This approach aimed to bridge the gap between digital native start-ups and the pharmaceutical industry, seeking ways in which LEO Pharma could benefit from this synergy.
Furthermore, Jukka highlights that venturing is deeply ingrained in the culture of Siemens, a company that generates over a thousand ideas annually. The willingness to take risks has been a vital element in Siemens' survival and success. Jukka exemplifies this by referencing the cable project from Europe to the US in the 1860s and 1870s (Transatlantic Cable - Stories - Global (siemens.com) However, Siemens embraced the challenge and proved the skeptics wrong. This risk appetite is part of the culture and today approximately 20% of Siemens' ideas are evolving into successful businesses.
For Corporate Venturing to thrive, the integration of risk into the corporate culture is imperative
Overall, Jukka's evaluation of corporate venturing initiatives encompasses considerations of corporate size, the potential for strategic alignment, the ability to leverage new ideas, and a willingness to take calculated risks.
Which sectors and CEO profiles are well-suited for corporate venturing?
When it comes to corporate venturing, the suitability of specific sectors and CEO profiles varies based on several factors. Here are some noteworthy considerations:
Risk Appetite and Openness: Individuals who are more willing to embrace risks and step outside their comfort zones tend to be better suited for corporate venturing. This mindset enables them to navigate the uncertainties and challenges associated with venturing initiatives.
Long-Term Perspective: It's important for CEOs and organizations to view corporate venturing as a long-term investment rather than solely focusing on short-term profit. This mindset allows for sustained support and commitment to ventures that may take time to mature and yield returns.
Emerging Technologies: Sectors driven by rapid technological advancements often present fertile ground for corporate venturing. Staying at the forefront of technology is crucial, particularly in hardware (HW) companies where being up-to-date is a competitive advantage. CEOs who possess a natural curiosity about the future, are often well-equipped to lead such ventures.
Sector-Specific Considerations: While there may not be strict limitations on sector suitability, certain industries may exhibit greater potential for corporate venturing. For example, in the case of HW companies, being at the cutting edge of technology is essential.
In summary, corporate venturing requires leaders who are willing to take risks, maintain a long-term perspective, embrace emerging technologies, and possess sector-specific expertise. These qualities, when combined with an openness to innovation and a strategic approach, can significantly enhance the chances of success in corporate venturing endeavors.
What recommendations do you have for implementing a corporate venturing initiative?
Jukka emphasizes several important recommendations:
Clarity and Long-Term Vision: It is essential to have a clear understanding of the level of freedom and autonomy you intend to grant the CVC. Recognize that CVC is a long-term game, and the returns may not be realized in the short term. Be prepared for a significant investment of time and resources.
Prudent Resource Allocation: It is crucial to be able to terminate ideas that are not showing promise. Avoid unnecessary spending and be prepared to make tough decisions if ventures are not aligning with the desired outcomes.
Clear Planning and Management Support: Develop a well-defined plan that outlines the objectives and expectations for the CVC. This plan should include a clear understanding of what the start-ups will be doing and when the expected value will be realized. Strong management support is vital for the success of the initiative.
Support from Core Business: While it is important to provide the CVC with the freedom to operate independently, there should still be support and collaboration with the core business. Balancing the right amount of involvement ensures alignment and minimizes potential negative outcomes for the core company.
Long-Term Incentive Plans: Incentive plans can be effective, but they should be carefully structured to align with the long-term goals of the CVC. A thoughtful approach to incentives ensures that they do not compromise the overall strategy or create misaligned short-term focus.
By considering these recommendations, organizations can lay a solid foundation for their corporate venturing initiatives, enabling them to navigate the challenges, make informed decisions, and maximize the potential for long-term success.
I hope you enjoyed this week's newsletter. If you have any suggestions or contributions that you would like to share with me, please do not hesitate to reach out. I would be delighted to hear from you.
/Jeppe