Underestimated Influencing Factors of a Successful Corporate Development
April 24, 2019
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Corporate Development and External Innovation Through M&A and Corporate Venturing – Part 2: Critical Success Factors
June 13, 2019

Corporate Development and External Innovation Through M&A and Corporate Venturing – Part 1: Challenges

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Strategic corporate development is steadily gaining importance as a result of the increasingly dynamic economic environment, characterized by volatility, uncertainty and complexity, as well as by the increasing number of operational possibilities. In practice, corporate development is implemented differently. This ranges from an executive-level administration department, to an opportunity-oriented approach in form of a central task force, to decentralized corporate development units, aligned with certain business divisions.
The organizational form, however, will not be further elaborated on in the next sections. More important are the tasks that have to be performed by the corporate development. These focus on the continuous development of business models, processes, offerings and on the development of the organization itself, with the help of internal and external innovations.

Generating Innovations: Typical Activities of Corporate Development in the Area of M&A and Corporate Venturing

Corporates need to evolve to keep up with the changes caused by digitization and the transforming demands of markets and stakeholders. Among other things, the search and the subsequent integration of new technologies, ideas and startups into the corporation and corporate processes can make all the difference and help companies to be innovative.

Most of the companies combine one or more of the following activities to find and generate innovations:
As a result of these activities, the collaboration between different stakeholders is becoming increasingly important for the success of corporate development. Workflows are also influenced by these activities and the employees are motivated to participate.

Challenges for Corporate Development Through Today's M&A and Corporate Venturing Activities

Based on these activities, new challenges for companies evolve. The described activities provide a huge amount of different information regarding topics such as trends, technologies, customer behavior and other companies. The collected information must be managed promptly and distributed to the relevant recipients.
Additionally, the stakeholders from different business units and the external cooperation partners also claim time slots that must be granted to secure a successful communication and collaboration.
Besides these, challenges also emerge through the administration, search and generation of new ideas and innovations.

As a consequence, the following three main challenges can be summarized:

The added value from the innovations is too small

Due to the fragmentation of the individual activities across different business units, there is often no holistic transparency and success measurement in the planned and implemented measures. Due to one-sided communication, lack of participation and appreciation, the potential of the employees is often not fully utilized and the internal resistances towards changes is not reduced.
This might also lead to innovations never reaching the market or the customers.

Creating added value from innovations is too slow

Internal problems slow down the adaptation of innovations. These include classic examples like a huge amount of manual work on data maintenance and reporting issues, uncoordinated and different internal and external activities as well as duplication of work, because of the fact that the different business units do not know each other’s work.
The overcoming of one's own lethargy is insofar a critical success issue if competitors are faster and thus more interesting for potential innovation partners.

No scalable innovation implementation

Frequently, M&A and Corporate Venture Capital activities are not scalable in terms of implementing innovation. This means that the necessary interplay of generating innovation, employee involvement and the introduction of the latest innovation to the customers often does not work. Because of that, resistances due to late or small employee involvement, information islands, but also a narrow focus on possible alternatives, lead to an unnecessary limitation of the capacity to innovate.
Often, corporate development lacks a database that allows a suitable sustainable implementation and continuous analysis of the various M&A and corporate venturing projects or other already mentioned measures.
An extrapolation of possible scenarios and their probability of success based on the company-specific internal and external circumstances would thus also be easier.
We will examine in more detail the critical success factors for a thriving implementation of innovation measures through M&A and corporate venturing in the next blog post.
Please find the whole article, which was published by the M&A Review here.
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The Author

Harald Ostler
CEO aumentoo GmbH
Author, Business Angel and Growth Enthusiast

Harald Ostler is an entrepreneur, investor and author of various publications. After positions as Director R&D and Chief Pricing Officer, he has been very active as an IT Business Angel since 2013.
His motivation and main reason for his intensive engagement as CEO at aumentoo is based on the following sentence: We believe in evolutionary change through digitized corporate development for strategic competitive advantages.

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