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a16z Podcast | On Corporate Venturing & Setting Up 'Innovation Outposts'
22 segments available
Every big technological shift (per Carlota Perez) brings with a structural shift too — an “institutional adjustment” in how companies innovated and build new products, according to Steve Blank and Evangelos Simoudis. Large organizations used to (and continue to) set up remote R&D labs in places like Silicon Valley. But now, those companies are also investing more energy and resources in setting up corporate venturing arms and/or “innovation outposts” in such startup ecosystems — especially as they believe that startup-driven innovation is one of the best ways to keep up with and address disruption in their industries. But… it’s not enough to simply establish a presence in these places; how do you also “sense” and respond to the right opportunities? Are they in the right places? Does beginning with corporate venturing really work for such outposts? And finally, how can these orgs avoid just acting out “innovation theater”? Simoudis — who has also written about whether “the elephant can dance again” using the case of IBM and Watson/ AI — offers his views on how big companies can and should use the Valley (and other innovation clusters) in this episode of the a16z Podcast.
Segments Timeline
The Evolution of Corporate Innovation
Evangelos Simoudis discusses his background in machine learning and the importance of corporate innovation in today's startup-driven landscape. He highlights the shift in how large organizations are approaching innovation, emphasizing a more serious and introspective attitude compared to previous attempts in the late 90s.
"hi everyone welcome to the a six in Z podcast I'm sonal and today Michael and I are speaking to evangelist amou DS who is currently a VC but started his career at Cal Tech where he was one of the orig..."
Innovation Outposts: A New Trend
Simoudis explains the recent trend of companies establishing 'innovation outposts' in Silicon Valley and other startup ecosystems. He cautions against 'innovation theater,' where companies may appear engaged without truly embedding themselves in the local ecosystem, which is crucial for meaningful innovation.
"he's recently co-authored a series of posts that focus on the topic of corporate innovation which we think is really interesting given that so much innovation especially lately is somewhat startup led..."
The Challenge of Real Engagement
The conversation delves into the challenges corporations face in genuinely engaging with startup ecosystems. Simoudis emphasizes that merely having a presence or a venture fund does not guarantee access to valuable deal flow or partnerships, highlighting the need for trust and continuous engagement.
"lot more more serious intentions right well one of the trends that you and Steve Blank point out is that there's been a recent wave of companies setting up quote innovation outposts in Silicon Valley ..."
Understanding Ecosystem Dynamics
Simoudis discusses the importance of understanding the dynamics of startup ecosystems and how corporations can effectively respond to opportunities. He likens the need for sensing capabilities to earthquake detection, stressing that corporations must actively monitor and engage with multiple ecosystems to remain relevant.
"and by extension other ecosystems around startup ecosystems around the world so what we try to caution is just because you're sending some executives here as a corporation it doesn't mean that you're ..."
Five Ways to Respond to Innovation
In this segment, Simoudis outlines five strategic responses corporations can take when engaging with startup ecosystems: invest, invent, acquire, partner, and incubate. He emphasizes the importance of choosing the right approach based on the specific ecosystem and the problems the corporation aims to solve.
"to that why can't they well first of all in our business there is the there is the aspect of trust you need to develop but more importantly I think you need to as a corporation you need to demonstrate..."
Lessons from Past Corporate Ventures
Simoudis reflects on the lessons learned from the corporate venture boom of the late 90s, where many companies failed to sustain their venture arms. He discusses the current landscape, noting that while more corporations are engaging in venture activities, they must avoid repeating past mistakes to ensure long-term success.
"slowed down I thought that was fascinating because one of the observations that you guys have shared is that sometimes the speed of response is even more important than the response itself and I won't..."
Understanding the Digital Landscape
This segment discusses how corporations today are recognizing the multifaceted impact of digital technologies beyond just information technology. The speaker shares insights from working with a large materials corporation that sought to understand software and big data, illustrating the necessity for companies to adapt to various technological advancements that are reshaping their industries.
"stay well so lately start with some numbers so back in in the late 90s roughly between 1998 and 2000 there were roughly 500 corporations that had established venture groups in our area and of those 50..."
The Shift to Software and New Business Models
The discussion highlights the shift in corporate mindsets towards software and new business models, such as software-as-a-service. The speaker notes that companies must respond to customer demands for these models rather than merely observing startups, emphasizing the urgency for corporations to innovate or risk falling behind.
"by extension software as a service models is it because they wanted to become a software company I mean there are material science company or because they feel like software might really start to get ..."
Navigating the Technological Revolution
In this segment, the speaker compares the current technological revolution to historical shifts like the steam age, emphasizing the unprecedented complexity corporations face today. The interaction of multiple technologies and business models creates challenges for corporate executives, who must make informed decisions in a rapidly evolving landscape.
"versus you know leading your customers what you want them to go I've been I've been in this I've been in the space and this industry long enough to have seen all of these ups and downs and what is fas..."
The Role of Innovation Outposts
The conversation explores how innovation outposts can serve as change agents within corporate structures. The speaker discusses the importance of adapting organizational practices without losing core values, and the challenges corporations face in maintaining longevity in a fast-paced environment.
"difficult for a non software-as-a-service company to actually become a software as a surface company because it requires completely reaaargh attacking everything from the ground up from your sales org..."
Best Practices from Startup Ecosystems
This segment focuses on the lessons corporations can learn from startup ecosystems, particularly in terms of best practices for creating and managing startups. The speaker emphasizes the need for corporations to experiment rapidly and inexpensively, leveraging the successful strategies developed in innovation hubs like Silicon Valley.
"important and very critical problems for corporations to start thinking about we do not believe that everybody would be able to make that leap and frankly some of the statistics show that the the life..."
Learning from Silicon Valley
Here, the conversation delves into what corporations can learn from Silicon Valley's startup culture. It emphasizes the importance of adopting best practices in startup creation, financing, and portfolio management, and how these practices can help corporations experiment effectively and pivot when necessary.
"quickly start companies to get them financed to allow them to pivot as necessary how to back our winners and let our not so strong players move on and I think the corporation needs needs that type of ..."
Case Studies: Google and BMW's Innovation Strategies
This segment presents examples of how major corporations like Google and BMW are innovating through unique structures. Google’s Alphabet and BMW's i brand are highlighted as models for integrating venture capital with core business operations, focusing on mobility services and AI advancements.
"another example is BMWs I brand an organization that has been set up very differently from the major business units of BMW trying to to look at not only the manufacturing aspect the design and manufac..."
Defining Moonshots in Corporate Innovation
The discussion shifts to the concept of 'moonshots'—major corporate efforts aimed at solving significant problems. The segment outlines IBM's Watson as a prime example, emphasizing the need for substantial investment and the importance of experimenting with business models to foster innovation.
"are some more recent experiments that point in that direction you had an article out with another co-author about evaluating moonshots and Harvard Business Review can you tell us what that framework l..."
The Challenge of Competing with Startups
In this segment, the conversation addresses the competitive landscape between large corporations and startups. It discusses how corporations can adopt startup practices, such as effective partnerships, to enhance their innovation capabilities and remain relevant in a rapidly changing market.
"moonshot is it a quantitative thing or a qualitative thing which is to say that you know what's a moonshot for Google may not be a moonshot for a century-old tire or something like that well I mean fo..."
Harnessing AI in Healthcare
In this segment, the discussion revolves around the integration of AI, specifically IBM's Watson, into the healthcare sector. The speakers emphasize the challenges of enabling doctors to interact seamlessly with AI applications to enhance decision-making. They highlight the importance of proper experimentation, patience, and hiring the right personnel to tackle these complex problems effectively.
"series of api's now can get access to all of that intelligence I mean and and they're one of the major application areas they have is in the healthcare sector so you can imagine what they want to imag..."
Competing with Startups
The conversation shifts to the competitive landscape between established companies like IBM and emerging startups. The speakers explore how large corporations can adopt startup practices to foster innovation, particularly through strategic partnerships. They argue that understanding and leveraging these partnerships is crucial for corporations to remain relevant in a rapidly evolving market.
"there even if it's not available right now a question I have for you though Evangelos is Watson is an interesting example in multiple fronts but I can't help but wonder how can it compete with what a ..."
Overcoming Innovation Barriers
This segment addresses the common challenges corporations face when trying to absorb outside innovation, particularly the 'not invented here' syndrome. The speakers discuss how shifting corporate mindsets and practices can facilitate the integration of new ideas and technologies, emphasizing the need for open innovation principles to enhance collaboration and success.
"because when we talk about start-up driven innovation we we think of it as the corporation adopting many of the practices that make startups successful one of these practices significant partnering an..."
The Startup Advantage
The discussion continues with a focus on the inherent advantages of startups in driving innovation. The speakers reflect on how traditional corporations often struggle to maintain the agility and creativity of startups as they grow. They ponder whether established companies can replicate the youthful energy and innovative spirit that characterize successful startups.
"actually a key point because look the common problem with absorbing and outside innovation whether it's from an outside R&D lab an internal captive R&D lab that's just headquartered somewhere else a s..."
Rethinking Corporate Innovation
In this segment, the speakers argue for a fundamental rethinking of how corporations approach innovation in light of current technological disruptions. They suggest that adopting best practices from startups can help corporations navigate the complexities of modern innovation landscapes, although they acknowledge that not all companies will implement these strategies effectively.
"right so I mean honestly Google struggles with this which is why we see alphabet now but how do you I mean in some ways it makes me think of like discharge but we're desiring use like you know a compa..."
Collaboration Over Competition
The conversation highlights the importance of collaboration between traditional industries and innovative ecosystems, using the automotive industry as a case study. The speakers caution against the fallacy that Silicon Valley can completely overtake established sectors, advocating instead for partnerships that leverage the strengths of both traditional and new players to foster mutual growth.
"significant to consider especially for for corporations that are thinking how to deal with there you know horizon 2 in your eyes on three I think corporations because of their of their scale issue bec..."
Building a Sustainable Innovation Ecosystem
In the closing segment, the speakers emphasize the need for a sustainable innovation ecosystem where established companies and startups can collaborate effectively. They reflect on the potential for creating synergies that benefit both parties, ensuring that innovation thrives without disrupting existing industries. The discussion concludes with a call for continued dialogue and cooperation in the innovation landscape.
"continues many times whether it is us as investors or entrepreneurs or or startup executives we do not give the proper credit to the corporation we are not seeking to have a value exchange is this giv..."