Underestimated Influencing Factors of a Successful Corporate DevelopmentApril 24, 2019
Corporate Development and External Innovation Through M&A and Corporate Venturing – Part 2: Critical Success FactorsJune 13, 2019
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:
Traditional M&A activities such as supporting corporate acquisitions with the aim of integrating innovative technologies, products, processes and key employees
Implementation of intrapreneurship programs where employees can submit and promote innovative ideas company-wide
Organisation of Accelerator or Incubator programs in collaboration with well-established partners or within the company
Co-operations and partnerships with startups for the realization of projects
Use of own corporate venture capital organizations which invest in startups
Engagement with external scouts or consultants who are well connected in the region
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
Read more about this topic in our white paper.
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.