#38: Harnessing HR's Potential in Corporate Venturing
Hi, I'm Jeppe, and welcome to my weekly newsletter on Corporate Venturing. My goal is to provide a comprehensive view of the latest developments in the field, drawing insights from top management, venture capitalists, founders, LPs, and family offices. This newsletter aims to offer valuable information and thought-provoking content to understand the importance of Corporate Venturing in business strategy.
In this week's edition, we delve into a critical, yet often overlooked aspect of Corporate Venturing: the role of Human Resources (HR). In the realm of incubating accelerators, incubators, and Corporate Venture Capital (CVC), HR's contribution is pivotal.
The "Organ Transplantation" Analogy in Corporate Venturing
Imagine Corporate Venturing as an organ transplantation within a company. The executive leadership (the head) acknowledges the need for this new 'organ' to ensure the company's survival and growth. However, the existing corporate structure (the body) may resist, unconsciously working against the integration of this new venture unit. This resistance can be likened to a body's immune response, trying to reject a new organ. The challenge is to harmonize this integration, ensuring the new venture thrives and contributes to the overall health of the organization.
HR's Crucial Role in Facilitating Integration
Before diving into the specifics, let's acknowledge the fundamental role of HR in any organization. Often perceived merely as the facilitators of recruitment and policy, HR departments hold the potential to be much more, especially in the context of Corporate Venturing. By actively engaging in the CVC process, HR can extend its influence beyond traditional boundaries, becoming a cornerstone for innovative growth. As strategic partners, HR professionals can guide the organization through the complexities of integrating new ventures, ensuring that these initiatives are not just supported but effectively assimilated into the company’s DNA. This proactive involvement of HR can be the differentiator between a successful venture and one that fails to align with the company's ethos and objectives.
Identifying and Nurturing Internal Talent: HR can play a crucial role in identifying employees who exhibit a natural inclination towards innovation and venturing. By recognizing and nurturing these talents, HR can help staff these new venture units with individuals who are not only skilled but also passionate about this new direction. However, HR's role extends beyond internal talent management. It is equally important for HR to understand the need for external talent and experts. The success of the CVC lies in the combined knowledge from internal and external talent as well as seniority. This balance ensures that the venture unit benefits from the deep-rooted understanding of the company’s culture and processes, brought by internal talent, while also gaining fresh perspectives and specialized knowledge from external experts. This synergy is crucial for fostering an environment of innovation and adaptability within the CVC, ensuring it is well-equipped to navigate the challenges and opportunities of corporate venturing.
Creating Collaborative Opportunities: For a Corporate Venture Capital (CVC) to engage effectively with the parent corporation, there needs to be a seamless exchange of ideas and resources. HR can facilitate this by creating platforms where employees can interact with the CVC while fulfilling their regular roles. This approach not only fosters a culture of innovation but also helps in aligning the CVC's objectives with the company's broader goals.Often, the process of integrating these platforms is handled by IT due to the technical challenges and resource allocation requirements involved. The understanding of how to build this efficiently is crucial, as CVCs need to operate with speed to meet the dynamic expectations of the startup ecosystem. If this process is not managed effectively, there's a risk of the CVC becoming entangled in standard, slower corporate processes, leading to delayed timeframes which can be detrimental to the venture's success.Therefore, HR must play an integral role in this integration. Their involvement ensures that the collaboration between CVC and the rest of the company is not just technically feasible but also aligns with organizational culture and employee engagement strategies. By working closely with IT and other departments, HR can help create a conducive environment for the CVC to thrive, balancing the need for speed and innovation with the realities of corporate structure and processes.
Training and Development: HR departments have a pivotal role in developing specialized training programs to prepare employees for roles in corporate venturing. These programs can encompass a variety of learning modules focused on entrepreneurial thinking, innovation management, and strategic investment. Emphasizing the importance of such training, a study by Bruce Rudy, featured in Harvard Business Review, illustrates how integrating learning into employees' workflow can significantly foster innovation within organizations. The article, titled "Build Learning into Your Employees’ Workflow," underscores the value of continuous learning and adapting to new business challenges.In addition to these insights, HR professionals can also draw inspiration from organizations like Global Corporate Venturing, which offers a suite of courses specifically tailored for corporate venturing. These courses cover a broad spectrum of relevant topics, from the basics of venture capital to advanced strategies in corporate innovation. By incorporating these diverse learning resources, HR can ensure that their training programs are comprehensive, up-to-date, and in line with the latest trends and best practices in the field.Such training initiatives not only equip employees with the necessary skills and knowledge for effective venture capital engagement but also reinforce a culture of continuous learning and adaptability – qualities essential for thriving in the ever-evolving landscape of corporate venturing.
Building a Culture of Acceptance: HR can actively work towards fostering an organizational culture that is open and receptive to new ideas and ventures. This crucial role extends beyond just training initiatives; it encompasses the development of a strategic internal communication plan that effectively underscores the value and potential of the CVC to the organization’s future.An essential aspect of this culture shift is the recognition and acceptance of risk, which is inherently linked to the nature of Venture Capital. In the context of a CVC, it is vital to manage and embrace this risk appropriately. Employees should be encouraged and assessed based on their willingness to contribute to the CVC's efforts, focusing not solely on outcomes but also on their engagement and risk-taking initiatives. This approach helps in cultivating a mindset that values experimental efforts and learning from the process, regardless of the immediate results.By creating an environment that values risk-taking and proactive involvement in CVC activities, HR can help build a more dynamic and innovative organization. This cultural shift can lead to greater acceptance and support for the CVC initiatives, driving long-term growth and innovation within the company.
Performance Management: Aligning performance management systems to recognize and reward contributions to corporate venturing activities is crucial. According to a report by McKinsey & Company, performance management tailored to foster innovation can significantly enhance the effectiveness of such ventures McKinsey report on performance management.Performance management is not only vital in the context of operating within a corporate structure but also plays a key role in the long-term survival and success of the CVC. As I have previously emphasized, establishing a robust set of Key Performance Indicators (KPIs) to monitor performance is essential. These KPIs must be distinct from standard corporate metrics, as the objectives and dynamics of a CVC are inherently different.HR should actively participate in this process, ensuring that these specialized KPIs are integrated into the overall performance management framework of the organization. This integration allows for a more nuanced and effective evaluation of employees’ contributions to the CVC's success, fostering a culture that values innovation and aligns with the strategic goals of the venture unit.By adapting performance management to the unique context of corporate venturing, HR can play a pivotal role in ensuring that these innovative endeavors are not just launched, but are also sustained and effectively integrated into the broader organizational ecosystem.
Supporting Cross-Departmental Collaboration: HR can play a pivotal role as the bridge that facilitates collaboration between various departments and the CVC unit, ensuring that the CVC has access to a broad range of internal resources and expertise.The importance of collaboration with IT, as previously mentioned, is significant, but equally crucial is the interaction with other departments. The CVC unit needs to communicate with customers to validate whether the startups they are investing in are addressing real, market-driven problems that customers are willing to pay to solve. Moreover, the CVC can be instrumental in developing internal solutions that could benefit departments such as procurement.To foster this level of collaboration, HR needs to assist the CVC in advocating and promoting its activities and achievements within the broader organization. This role involves more than just facilitating connections; it's about actively promoting the value and potential impact of the CVC's work to ensure organizational buy-in and support.By effectively communicating the CVC's objectives, progress, and successes, HR can help demystify the venture unit's role and foster a culture of cooperation and shared interest. This supportive environment is essential for the CVC to thrive and contribute meaningfully to the organization's overarching goals.
Conclusion
As we've explored in this week’s edition, the role of Human Resources in Corporate Venturing is not just supportive but foundational. HR's involvement in identifying and nurturing internal talent, creating collaborative opportunities, facilitating training and development, building a culture of acceptance, managing performance, and supporting cross-departmental collaboration is pivotal in integrating Corporate Venturing initiatives like accelerators, incubators, and CVCs into the fabric of the organization.
The journey of Corporate Venturing, akin to an organ transplantation, necessitates a harmonious integration into the corporate body. HR's role in this process is to ensure that this new 'organ' is not only accepted but also nurtured and allowed to thrive. By embracing risk, fostering innovation, and aligning strategic objectives with organizational culture, HR can be the key to unlocking the full potential of Corporate Venturing efforts.
In closing, we see that HR's role in Corporate Venturing transcends traditional boundaries. It is about embedding a mindset of innovation and adaptability within the organization, thereby paving the way for a future where corporate ventures are not external implants but integral parts of the corporate anatomy. As we move forward, let us recognize and leverage the strategic role of HR in driving the success of Corporate Venturing initiatives, ensuring they contribute to the long-term vitality and growth of our organizations.
I hope you enjoyed this week's newsletter. In the upcoming edition, I will be exploring the topic of "Impact of CVC on innovation within corporations".
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