Beyond The Prototype And MVP: How To Scale Corporate Ventures

Corporate venture building emerged as a vehicle for innovation

In today’s ever-changing business world, innovation is no longer a luxury, it has become a necessity. Companies that want to stay ahead of competition need to constantly explore new opportunities and reinvent themselves.

Corporate venture building has emerged as a powerful innovation vehicle, allowing established companies to diversify their revenue streams and explore uncharted territories. It leverages their resources and market presence to launch corporate ventures with the agility and entrepreneurial thinking of startups.

Unlike traditional corporate venture capital, which focuses on investing in external startups, corporate venture building is centered on creating new business from within. This approach is able to generate significant value and growth, securing long-term success of incumbent companies in a dynamic landscape.

Many companies that seek new ways of growth and innovation through corporate venture building are professionalizing in the early phases – such as idea generation, validation or prototyping. Yet, still many venture building units struggle to scale their corporate ventures after product-market fit. This difficulty often stems from internal mechanisms within the corporation and the way the innovation and venture-building processes are structured. These challenges can hinder the transition from a promising idea to a scalable business – preventing ventures from reaching their full potential.
Based on years of client experience, we have identified several key success factors for effectively scaling corporate ventures. Think scaling like building a house: it requires a strong foundation (business model and strategy), but also solid walls (operations and go-to-market), a sturdy roof (capital), clear ownership (governance), and skilled builders (talent). If any of the 5 factors are overlooked, the whole venture can easily crumble. Excelling in all five dimensions ensures a robust framework for innovation, rapid scaling, and sustained growth.

Therefore, we have created a comprehensive scaling playbook that addresses the five critical areas, offering corporates a structured and systematic approach for managing the complexities of scaling.

1. Business Model & Strategy

Clarity in how a business creates, delivers, and captures value is paramount for any organization. This involves knowing what customers want, how to best deliver value, and how to enlist strategic partners to achieve maximum benefit. Understanding these elements is particularly crucial when navigating new business concepts, which inherently come with unpredictability and risk. As you approach the scale phase, the risks increase significantly due to the substantial investments of time, effort, and resources to be made. A robust business model and strategy are essential for successful scaling, as they provide the necessary foundation to support rapid growth and adapt to market demands.

In the early stages of business development, many elements of your business model can be unpredictable, particularly whether your product meets customer needs and if they are willing to pay for it. Therefore, it’s essential to continuously validate your concept and value proposition and make informed decisions along the way.

• Continue your concept if you have conclusive proof of concept that there is demand for your product. 
• Pivot if you see high potential in your concept but need to adjust the value proposition to better meet market needs.
• Kill the concept if data shows it is unviable or does not meet a market pain.

It is nothing new that a strong value proposition is vital for a venture’s success. However, simply having a value proposition that addresses a market need is not enough,  a scalable business model is equally critical. Many of today’s most successful companies find their strength in achieving the “sweet spot” of business model scalability. Scalability, which is about achieving profitable growth, is a fundamental consideration for managers and investors alike. If managers fail to incorporate scalability attributes into their business model design, they risk falling behind. Without a scalable business model, even the most innovative products can struggle to achieve lasting success.

While meeting market needs and ensuring scalability are undeniably important, a venture’s long-term success also heavily depends on its alignment with the parent company’s overarching strategy. Strategic alignment not only safeguards the venture during challenging times but also empowers it to thrive by leveraging the parent company’s strengths. This alignment grants the venture access to valuable corporate assets, resources, support, and decision-making power. Utilizing corporate assets such as networks, talent, expertise, funding, and infrastructure provides a substantial competitive advantage, not only in the early stages. During the launch and scaling phases, the corporate venture can further capitalize on the parent company’s brand, loyal customer base, and extensive reach.

2. Operations & Go-to-Market

While a minimum viable product (MVP) serves as a crucial testing ground, achieving product-market fit marks the beginning of a new chapter. Scaling requires a refined go-to-market strategy focused on customer acquisition and retention. Unlike the early-stage, shotgun approach, scaleup marketing needs a more precise focus on ideal customer profiles.

As the venture evolves from a scrappy underdog to a recognized player, brand positioning and messaging must adapt to resonate with a broader audience. This transition underscores the importance of a well-articulated go-to-market strategy that guides the organization through this critical phase of expansion. By refining the go-to-market strategy, corporate ventures can effectively manage the complexities of scaling, ensuring sustained growth and market presence.

Have a clear growth strategy in place

A growth strategy serves as the roadmap, guiding the corporate venture through the complexities of market expansion. A well-defined strategy outlines specific goals, target markets, and the tactics to achieve them. It is essential to balance aggressive growth with sustainable development, ensuring the corporate venture can handle increased scale without compromising quality or profitability. Continuous monitoring and adaptation are crucial to refine the growth strategy as the market evolves and new opportunities emerge.

Clearly outlining growth goals, such as “achieving a fivefold increase in revenues and a tenfold increase in operating margin,” and evaluating whether the necessary and sufficient conditions to achieve these goals are in place is essential. These goals will be shaped by market and business model realities, as well as the ambition level of the founding team.

By utilizing corporate assets from the parent company, corporate ventures can enhance their market positioning, optimize resource use, and achieve their growth objectives more efficiently. Established distribution channels, for example, can accelerate market entry and expansion, while strong supplier relationships can provide favorable terms and reliable supply chains. Leveraging these assets not only speeds up the growth process but also provides a competitive edge, ensuring the venture is well-equipped to scale successfully in a dynamic market environment.

Choose your success metrics wisely

Metrics serve as the compass for navigating the scaling journey, providing essential guidance and insights. Carefully selected KPIs offer invaluable information on performance, allowing decision-makers to evaluate the effectiveness of their efforts, strategically allocate resources, and accurately measure progress. By integrating a robust metrics framework with a thorough understanding of fundamental assumptions, ventures can greatly enhance their chances of achieving MVP success and subsequent scaling.

In the context of corporate ventures, it is crucial to recognize that KPIs might differ significantly from those of the core business. Understanding and communicating these differences to key decision-makers in the core organization is essential, as it ensures alignment with the venture’s unique goals and challenges. This alignment helps decision-makers appreciate that the venture operates in a different environment and plays by different rules, which is vital for securing the necessary support and resources.

By fostering this understanding, ventures can ensure they are measured appropriately and supported effectively, thereby improving their chances of long-term success and integration with the parent company’s overall strategy.

Make Your Tech Stack Scalable Too

As the venture grows, so too should its technological capabilities. Investing in a scalable infrastructure from the outset will prevent bottlenecks and ensure adaptability to changing market conditions. While leveraging the existing infrastructure of the parent organization can save time and money, it’s equally important to consider whether these tools truly align with the corporate venture’s specific needs. The goal is to create a tech ecosystem that supports innovation and scalability while avoiding unnecessary complexity.

3. Capital

Determining the optimal funding strategy for a corporate venture is a complex decision. Should the parent company invest its own capital or seek external partnerships? This decision profoundly impacts the venture’s trajectory and requires careful consideration of various factors.

While many corporate parents have the ability to fund their ventures internally, funding alone is not the only factor in deciding on a capitalization strategy. Corporate ventures can benefit significantly from the support of their parent company in early stages, which can help them achieve substantial traction. This is why most corporate ventures start being fully owned by their corporate partner and structured as a business unit under the parent organization.

However, as these ventures grow, attracting strategic investors who align with their goals can open up significant growth opportunities. These investors provide more than just funding — they bring industry expertise, market insights, and valuable networks. Establishing strategic partnerships is often a key reason why corporate ventures look to raise external capital. This approach allows ventures to gain strategic value in areas where the parent company’s capabilities may be limited. By leveraging the strengths of both the corporate parent and external partners, ventures can achieve greater growth and success.

For example, consider the case of rready, a corporate venture of Swisscom. Rready, a innovation management platform, aims to build a global SaaS software business, while Swisscom, the Swiss Telco, operates primarily in Switzerland and lacks experience in SaaS. In such scenarios, when the business model does not fit the parent company or the parent company cannot significantly contribute to its success, external funding should be considered. By attracting strategic investors with expertise in SaaS and global markets, rready was able to access the necessary resources and knowledge to scale effectively. Swisscom alone would have not been able to support in that. This example underscores the importance of aligning funding strategies with the venture’s specific needs and the parent company’s capabilities, ensuring optimal growth and success. For more details, you can read the full case study here.

4. Governance

The aim of venture governance is to create a framework that allows ventures to operate effectively and efficiently, free from the constraints of traditional corporate structures and processes, while also managing risks and uncertainties for the corporate parent.

In the initial stages, setting up a venture as a business unit within the parent organization can be beneficial, especially when the teams depend significantly on the parent company. However, as the venture grows and prepares to scale, this structure can become problematic. Fast iteration and agile methodologies are crucial for the venture’s growth, and corporations need to identify where standard corporate processes might hinder the venture’s ability to make swift decisions.

When transitioning from parent company control to an independent legal entity, assessing the necessary level of autonomy is essential. Corporate partners must design a governance structure tailored to the venture’s needs that mitigates business risks, enables decision-making, and allows the venture to move quickly and scale efficiently. Here are some governance options to consider: 

1. Integration into an Existing Division: Integrate the venture into an existing division of the parent company, leveraging existing resources and infrastructure.
2. Dedicated team or business unit in core business: Maintain the venture within the parent company, ensuring close alignment and control.
3. New legal Entity (Spin-off): Create a separate legal entity for the venture, granting it full autonomy to operate and scale independently.
4. New legal entity with external investment: Spin off the venture with external investment, allowing the parent company to retain a minority share while benefiting from external expertise and capital.

Each option offers different levels of autonomy and control, and the choice should align with the venture’s strategic goals and the parent company’s capabilities.

5. Talent

The skillset required in the early stages of a corporate venture differs substantially from that needed for scaling the venture. During the initial months of building a new venture, the focus is on bringing a new concept to life. This involves generating new ideas, validating them and building a minimum viable products (MVP). A team that is creative, enjoys uncertainty, and knows how to effectively validate new value propositions is essential at this stage.

As the venture grows and reaches the stage where product-market fit is proven, the focus shifts to scaling. This phase requires a different set of skills, including strong management skills and entrepreneurial experience in venture growth. These individuals need to take charge during the launch and scale phases, managing strategy, finances, and growth milestones.

What’s the main take-away?

Scaling a corporate venture is a complex endeavor that demands a strategic, multi-faceted approach. While many organizations excel at early-stage innovation, transitioning corporate ventures to a scalable business often proves challenging. By mastering the five key dimensions: business model and strategy, operations and go-to-market, capital, governance and talent, corporations can significantly enhance the chances of their ventures’ success. 

Each of these dimensions is crucial to a venture’s growth and success. While strengths in individual areas are helpful, the interconnected nature of these elements means that a weakness in even one can jeopardize the entire scaling effort. It is essential to take a holistic approach, ensuring all aspects are considered and aligned with the venture’s long-term goals.

Our experience has shown that a structured, systematic approach is essential for navigating the complexities of scaling. To this end, we have developed a comprehensive scaling playbook covering five key areas that provides corporates with actionable guidance to successfully scale.