Enterprise ventures into new business areas are often managed by in-house teams guided by external management consultants. For a greater chance of success, enterprise teams should be augmented with experienced and creative entrepreneurs.
Helsinki-based Coventures believes it’s cracked the code to this corporate growth challenge of utilizing tested entrepreneurial talent to build ventures and boost corporate entrepreneurship. The company positions itself as a venture-building outfit, catering to corporations seeking growth or requiring assistance in anything between innovation management and product leadership.
“We’ve constructed our business offering around this obvious glitch in the corporate matrix,” says Coventures CEO and co-founder, Marko Oksanen. “While companies and big-name consultancies are jam-packed with top talent, they often miss the skill sets and experience of actual entrepreneurs.”
Growth is the single-word mantra of the market economy. Even major companies with established business models and steady revenue streams look for new avenues for growth. In addition to increasing the company’s top-line, growth capabilities also play a significant role in signaling an ability for renewal and innovation, subsequently having a major impact on the multipliers used to calculate enterprise valuation.
MO: “Growth is of tremendous importance for all profit-seeking entities as the growth of today is the profitability of tomorrow. But who exactly are the people in these big companies tasked to build new ventures?
There are essentially two models that enterprise-size companies follow: using an in-house ‘growth team’, or working with an external consultancy. Often companies combine the two, with the in-house team employing the services of consultants – think Big Four – who may or may not have experience in actually implementing their own plan.
There are many reasons the consulting model is still popular, but it’s not without flaws.
Growth demands a certain mindset, namely that of the entrepreneur. Entrepreneurs are comfortable with risk and ambiguity, and capable of thinking outside the traditional business school frameworks and know to ask tough questions – both of themselves and others. These are the not traits typically associated with most salaried employees and consultants.”
Employees tasked with venture building operations within the enterprise may well be among the most suitable from the pool of internal candidates – at least on paper. But even in the rare case that they’re given free rein to take risks on initiatives with a strong chance of failure, they still need to think about their standing within the company. Indeed, competing priorities between politics-driven decision-making and lack of appetite for risk can come at a great price.
MO: “While success may be rewarded with promotion or financial incentives, there is a strong chance for failure to be associated with reputational damage. Few in-house staff members, patiently climbing the corporate ladder, are willing to take such a risk.
Outsourcing growth strategies to traditional management consultancies is not optimal either. You don’t necessarily want to be paying consultants who work notoriously long hours within a cut-throat ‘up or out’ pyramid model. Heavy lifting is often done by business-school graduates with little or no previous work experience. There may be a senior member on the team, but most of the grunt work is carried out by junior consultants. They learn on the job, yet charge astronomical hourly rates as part of flashy packages pitched as a prerequisite for growth.”
Consultants, of course, have some obvious strengths. They are great at producing plans, which create trust within the corporate leadership. However, as the famous entrepreneurial guru Steve Blank put it, no plan survives the first touch with the customer. Failure often happens when the aforementioned plans are executed and the ones responsible for creating the plans might take a step back to protect their careers.”
What then are the personality types that go into consulting? Those who go into consulting are rarely of the entrepreneurial mindset. A typical consultant goes from business school to consultancy whereas a typical entrepreneur goes from business school to work for a startup until building his or her own startup.
MO: “Companies should therefore ask themselves, which professional profile – entrepreneur vs. business school grad – they would wish to hire to build new ventures. Entrepreneurs have the real-world experience of executing ambitious ideas, and are therefore ideally suited to collaborating with enterprises to build ventures. These battle-tested entrepreneurs are a natural resource in the business world and one that big companies should utilize more. They are agile thinkers who greatly complement the organization’s own talent pool.”
Whereas traditional consultancies always try to serve the client in the best way possible, their business model works the best when they are able to ‘rinse and repeat’. This is the reality of the consulting industry. For the model to work, it requires a strong, ironclad offering, as junior consultants need scaffolding and plenty of handholding.
But what happens when the tried and tested model doesn’t work? Or when it works well enough, but an alternative model would have been even more successful for the client company.
MO: “Sure, occasionally senior partners in a consultancy can find a novel approach, but as humans, we tend to be biased to do what we are incentivized to do. In other words, consulting companies are often prisoners of their own business model and thus like to re-use old formats as much as possible, as it allows them to a) use more junior resources and b) it ensures scalability of their business model.
Entrepreneurs, on the other hand, have proven experience in experimenting with different business models – they’re not as tied to a single approach. This takes time and requires patience, as well as the fortitude to face and overcome failures.“
As such, large companies should perhaps consider utilizing the tremendous talent of entrepreneurs to build scalable business models across a range of industries. Instead of employing the services of a large and costly consultancy team with a set way of working, companies can contract entrepreneurs who systematically evaluate different revenue models, identify dead ends early, and apply tried-and-tested tools designed to increase success rates. Entrepreneurs are proactive generalists and as such one entrepreneur with the right talent set can accomplish as much as a team of experts. For enterprises to couple their top talent with the dexterity of entrepreneurs is not only a dynamic approach to building ventures, but also incredibly cost-effective.
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