Welcome!

Symbian Authors: Kevin Benedict, Matthew Lobas, Shelly Palmer, RealWire News Distribution

News Feed Item

Racing to Innovate, Corporations Embrace Venture Capital

With Traditional R&D Yielding Diminishing Returns, a Growing Number of Companies Are Turning to Venturing for Game-Changing Ideas as Well as Financial Gains, According to a New Report by The Boston Consulting Group

BOSTON, MA -- (Marketwire) -- 10/31/12 -- Corporate venture capital (CVC) investing is back in style, and this time it's here to stay. A host of new industries are rushing to join the game, and CVC veterans and newcomers alike are forming cross-industry networks to fund promising start-ups, according to a new report by The Boston Consulting Group (BCG). The report, "Corporate Venture Capital: Avoid the Risk, Miss the Rewards," is being released today.

Corporate venture activity has accelerated in recent years, the report says. Once almost exclusively the stronghold of innovation-intensive industries such as technology, pharmaceutical, telecommunications, and media and publishing, CVC is being embraced by industries that once shunned the activity. Senior executives in several industries have told BCG that they regard venturing as an indispensable tool for innovation and development -- an assertion borne out by comparing their internal R&D spending with their venture investing. Across the board, corporate R&D spending as a percentage of sales is declining even as companies intensify their venture activities.

"Venture investing is, of course, an inherently risky activity," said Alexander Roos, a BCG partner and coauthor of the report. "But considering the disruptive potential of the innovations emerging from start-ups, the greater risk is not to invest at all."

Since the 1960s, CVC has cycled through three distinct boom-and-bust periods, with the bust coming each time as a result of financial-market or macroeconomic downturns. Now a fourth growth phase is under way, leading some observers to suggest that history is repeating itself. BCG argues otherwise, citing compelling evidence that CVC, once an experiment, has entered a new, more mature phase. Not only are new industries entering the arena, but the life spans of corporate venture units have increased steadily in the past ten years. For example, the length of time that CVC units in the pharmaceutical industry have been in continuous existence increased by 50 percent from 2002 to 2012, while the average lifetime of consumer industry CVC units has lengthened to 4.9 years in 2012 from 1.5 in 2002.

What's more, corporate venture investing has spread geographically beyond the U.S. and Europe to vibrant, fast-growing emerging markets. In the first half of 2012, for example, the dollar value of consumer industry venture investments in China rose 18 percentage points, to 63 percent, from the second half of 2010, while U.S.-focused investments shrank by 14 percentage points, to 20 percent.

The report takes a comprehensive view of the CVC landscape, analyzing the industries and companies engaging in venture investing as well as the industries and regions where they are focusing their capital.

New Players Are Joining the Game

Today, more than 750 corporations around the world have CVC units in operation, according to the report, citing the definitive database of Global Corporate Venturing, a leading industry publication. Between July 2010 and June 2012, these corporations engaged in more than 1,300 transactions. Analysis of the data reveals that corporations and industries with a long history of venturing are stepping up their presence in the field, while sectors that went largely unrepresented in earlier decades are also entering the arena. To gain a sense of the evolution of corporate venturing, BCG compared the venturing activities of four of the traditional industries (technology, pharmaceutical, telecommunications, and media and publishing) with those of four relative newcomers (machinery, power and gas production, consumer, and construction).

The Pressure to Innovate Is Fueling the Surge

The comparison shows that venture investing is taking root across a broad range of industries. Within the traditional sectors, the percentage of the 30 largest companies with dedicated CVC units has been climbing steadily since at least 2007. In three of four sectors (pharmaceutical, telecommunications, and technology) more than half of the 30 largest companies have such units in place -- a sign of the growing recognition of CVC's value as a tool for innovation, corporate development, and competitive advantage.

The same pattern holds, on a smaller scale, in those industries that have traditionally been less reliant on pure innovation to drive growth. "In recent years, these industries have come under growing pressure to innovate in response to demands for cleaner technology, more sustainable operations, and an improved user experience," said Dinesh Khanna, a BCG partner and coauthor of the report. "As a result, they are looking past internal R&D toward other innovation channels." Starting from a very low level, CVC concentration in all four newcomer industries in the comparison increased markedly from 2007 to 2012.

The Search for Disruptive Technologies Is On

As CVC expands beyond its traditional strongholds, the investment focus is widening as well. Corporate investors are looking beyond their core businesses toward sectors such as clean technology, which has the potential to disrupt industries ranging from power generation to building materials to transportation. Industrial companies, for example, are spreading their investments widely but maintaining a focus on related sectors; they invested in clean technology (the target of more than half of industrial CVC investment), information technology, health care, and transportation. CVC units in the chemical sector, meanwhile, diversified away from the core toward targets in the clean technology, health care, and industrial sectors, where they are seeking, for example, to exploit the potential for biochemical processes to supplant petrochemical ones. Overall, the most popular investment targets, measured by total number of transactions, were in IT, health care, media and publishing, and clean technology.

In addition to seeking opportunities outside their industry, corporate investors are deploying their capital outside the U.S. The data reveal that while the geographical investment focus varies widely by industry, corporate investors in most sectors are, in one fashion or another, directing much of their capital toward emerging markets. CVC investors are also increasingly willing to co-invest with other companies.

One of the most active networkers is General Electric. In clean technology, for example, GE is partnering with 13 corporate investors, 7 of them representing other industrial sectors. It is connected with Google through the two companies' investments in CoolPlanetBioFuels, for instance, and with Asahi Glass through common investments in Envia Systems.

The Old Rules Still Apply

The most successful CVC units are guided by distinct ground rules that dictate how those units define both their operating principles and their strategy, how knowledge is captured and transferred, how corporate assets are leveraged, and how venturing teams are staffed:

  • Operating Principles. Leading CVC units have clearly defined investing parameters. Corporate leadership has committed to venturing for the long term, with the understanding that venture investors, by definition, take risks and that the occasional failure is the cost of doing business.

  • Strategy. Befitting their key role in the innovation management effort, successful CVC units are tightly aligned with their corporate parents' overall business and innovation strategies.

  • Knowledge Transfer. Companies with high-performing venture units often designate specific business units to serve as "guardians" of individual investment targets. "The guardians are responsible for ensuring that the knowledge gathered from target investments feeds directly and reliably into the larger corporation-wide innovation pipeline," said Michael Brigl, a BCG principal and coauthor of the report.

  • Leverage of Existing Assets. Successful CVC units also make the most of their corporate resources. Some corporations, for example, give researchers from target companies access to their laboratories, while others contribute manufacturing expertise, offer broader distribution of the target company's products, or provide administrative support for patent applications.

  • Staffing. Finally, proven venturing performers pay close attention to staffing issues, choosing team leaders who combine broad familiarity with the VC landscape with deep understanding of the corporation's strategy and processes.

A copy of the report can be downloaded at www.bcgperspectives.com.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or [email protected].

About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 77 offices in 42 countries. For more information, please visit www.bcg.com.

About bcgperspectives.com

Bcgperspectives.com is a new website -- available on PC, mobile phone, and iPad -- that features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back almost 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed via PC, mobile, iPad, Facebook, Twitter, and LinkedIn.

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

@ThingsExpo Stories
The major cloud platforms defy a simple, side-by-side analysis. Each of the major IaaS public-cloud platforms offers their own unique strengths and functionality. Options for on-site private cloud are diverse as well, and must be designed and deployed while taking existing legacy architecture and infrastructure into account. Then the reality is that most enterprises are embarking on a hybrid cloud strategy and programs. In this Power Panel at 15th Cloud Expo (http://www.CloudComputingExpo.com), moderated by Ashar Baig, Research Director, Cloud, at Gigaom Research, Nate Gordon, Director of T...
The definition of IoT is not new, in fact it’s been around for over a decade. What has changed is the public's awareness that the technology we use on a daily basis has caught up on the vision of an always on, always connected world. If you look into the details of what comprises the IoT, you’ll see that it includes everything from cloud computing, Big Data analytics, “Things,” Web communication, applications, network, storage, etc. It is essentially including everything connected online from hardware to software, or as we like to say, it’s an Internet of many different things. The difference ...

ARMONK, N.Y., Nov. 20, 2014 /PRNewswire/ --  IBM (NYSE: IBM) today announced that it is bringing a greater level of control, security and flexibility to cloud-based application development and delivery with a single-tenant version of Bluemix, IBM's platform-as-a-service. The new platform enables developers to build ap...

Cloud Expo 2014 TV commercials will feature @ThingsExpo, which was launched in June, 2014 at New York City's Javits Center as the largest 'Internet of Things' event in the world.
An entirely new security model is needed for the Internet of Things, or is it? Can we save some old and tested controls for this new and different environment? In his session at @ThingsExpo, New York's at the Javits Center, Davi Ottenheimer, EMC Senior Director of Trust, reviewed hands-on lessons with IoT devices and reveal a new risk balance you might not expect. Davi Ottenheimer, EMC Senior Director of Trust, has more than nineteen years' experience managing global security operations and assessments, including a decade of leading incident response and digital forensics. He is co-author of t...
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In his session at Internet of @ThingsExpo, James Kirkland, Chief Architect for the Internet of Things and Intelligent Systems at Red Hat, described how to revolutioniz...
Technology is enabling a new approach to collecting and using data. This approach, commonly referred to as the "Internet of Things" (IoT), enables businesses to use real-time data from all sorts of things including machines, devices and sensors to make better decisions, improve customer service, and lower the risk in the creation of new revenue opportunities. In his General Session at Internet of @ThingsExpo, Dave Wagstaff, Vice President and Chief Architect at BSQUARE Corporation, discuss the real benefits to focus on, how to understand the requirements of a successful solution, the flow of ...
The security devil is always in the details of the attack: the ones you've endured, the ones you prepare yourself to fend off, and the ones that, you fear, will catch you completely unaware and defenseless. The Internet of Things (IoT) is nothing if not an endless proliferation of details. It's the vision of a world in which continuous Internet connectivity and addressability is embedded into a growing range of human artifacts, into the natural world, and even into our smartphones, appliances, and physical persons. In the IoT vision, every new "thing" - sensor, actuator, data source, data con...
"BSQUARE is in the business of selling software solutions for smart connected devices. It's obvious that IoT has moved from being a technology to being a fundamental part of business, and in the last 18 months people have said let's figure out how to do it and let's put some focus on it, " explained Dave Wagstaff, VP & Chief Architect, at BSQUARE Corporation, in this SYS-CON.tv interview at @ThingsExpo, held Nov 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
Focused on this fast-growing market’s needs, Vitesse Semiconductor Corporation (Nasdaq: VTSS), a leading provider of IC solutions to advance "Ethernet Everywhere" in Carrier, Enterprise and Internet of Things (IoT) networks, introduced its IStaX™ software (VSC6815SDK), a robust protocol stack to simplify deployment and management of Industrial-IoT network applications such as Industrial Ethernet switching, surveillance, video distribution, LCD signage, intelligent sensors, and metering equipment. Leveraging technologies proven in the Carrier and Enterprise markets, IStaX is designed to work ac...
"There is a natural synchronization between the business models, the IoT is there to support ,” explained Brendan O'Brien, Co-founder and Chief Architect of Aria Systems, in this SYS-CON.tv interview at the 15th International Cloud Expo®, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
C-Labs LLC, a leading provider of remote and mobile access for the Internet of Things (IoT), announced the appointment of John Traynor to the position of chief operating officer. Previously a strategic advisor to the firm, Mr. Traynor will now oversee sales, marketing, finance, and operations. Mr. Traynor is based out of the C-Labs office in Redmond, Washington. He reports to Chris Muench, Chief Executive Officer. Mr. Traynor brings valuable business leadership and technology industry expertise to C-Labs. With over 30 years' experience in the high-tech sector, John Traynor has held numerous...
Bit6 today issued a challenge to the technology community implementing Web Real Time Communication (WebRTC). To leap beyond WebRTC’s significant limitations and fully leverage its underlying value to accelerate innovation, application developers need to consider the entire communications ecosystem.
The 3rd International @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that it is now accepting Keynote Proposals. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devices - computers, smartphones, tablets, and sensors - connected to the Internet by 2020. This number will continue to grow at a rapid pace for the next several decades.
The Internet of Things is not new. Historically, smart businesses have used its basic concept of leveraging data to drive better decision making and have capitalized on those insights to realize additional revenue opportunities. So, what has changed to make the Internet of Things one of the hottest topics in tech? In his session at @ThingsExpo, Chris Gray, Director, Embedded and Internet of Things, discussed the underlying factors that are driving the economics of intelligent systems. Discover how hardware commoditization, the ubiquitous nature of connectivity, and the emergence of Big Data a...
Almost everyone sees the potential of Internet of Things but how can businesses truly unlock that potential. The key will be in the ability to discover business insight in the midst of an ocean of Big Data generated from billions of embedded devices via Systems of Discover. Businesses will also need to ensure that they can sustain that insight by leveraging the cloud for global reach, scale and elasticity.
SYS-CON Events announced today that Windstream, a leading provider of advanced network and cloud communications, has been named “Silver Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9–11, 2015, at the Javits Center in New York, NY. Windstream (Nasdaq: WIN), a FORTUNE 500 and S&P 500 company, is a leading provider of advanced network communications, including cloud computing and managed services, to businesses nationwide. The company also offers broadband, phone and digital TV services to consumers primarily in rural areas.
SYS-CON Events announced today that IDenticard will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. IDenticard™ is the security division of Brady Corp (NYSE: BRC), a $1.5 billion manufacturer of identification products. We have small-company values with the strength and stability of a major corporation. IDenticard offers local sales, support and service to our customers across the United States and Canada. Our partner network encompasses some 300 of the world's leading systems integrators and security s...
IoT is still a vague buzzword for many people. In his session at @ThingsExpo, Mike Kavis, Vice President & Principal Cloud Architect at Cloud Technology Partners, discussed the business value of IoT that goes far beyond the general public's perception that IoT is all about wearables and home consumer services. He also discussed how IoT is perceived by investors and how venture capitalist access this space. Other topics discussed were barriers to success, what is new, what is old, and what the future may hold. Mike Kavis is Vice President & Principal Cloud Architect at Cloud Technology Pa...
Cloud Expo 2014 TV commercials will feature @ThingsExpo, which was launched in June, 2014 at New York City's Javits Center as the largest 'Internet of Things' event in the world. The next @ThingsExpo will take place November 4-6, 2014, at the Santa Clara Convention Center, in Santa Clara, California. Since its launch in 2008, Cloud Expo TV commercials have been aired and CNBC, Fox News Network, and Bloomberg TV. Please enjoy our 2014 commercial.