76 REAL-LEADERS.COM / SUMMER 2022 LEADING LEADERS Money Growing Your Company in the 21st Century Requires Looking Outward, Not Upward Established companies are spending more to grow less. In 2018, for example, investments in research and development, capital expenditures, and mergers and acquisitions by S&P 500 companies totaled more than $1.3 trillion. During that same year, the U.S. venture capital industry deployed $100 billion. S&P 500 companies invested 13 times more than the venture capital industry, which means they should be doing at least twice as well, right? In fact, each dollar invested in corporate growth today returns 15% less revenue than it did 10 years ago. This is not a trend I see changing. Over the past 20 years of building successful start-ups and designing incubation programs for some of the world’s leading corporations, I’ve learned two insights that can be hard for corporate leaders to hear: 1. It’s more important than ever for big companies to (re)learn how to build from scratch. 2. It’s harder to build a successful venture from within an established organization than it is to build from scratch as an individual. It shouldn’t be this way. Corporations should be fertile grounds for new ventures to grow, but the opposite is true. In this new landscape, companies must change their growth strategies if they hope to survive. Hunters vs. Farmers In my experience, organizations are stocked with people who are very good at harvesting, optimizing, and systematizing products that were planted years ago. Let’s call them “farmers.” The flip side of the farmer is the “hunter.” These individuals can not only spot opportunities but start something from scratch. Hunters tend to have these qualities: • Possesses an intuitive sense of problems as the customer sees them. • Pushes projects forward without being told. • Tries everything first to understand how to solve longer term. • Draws people in to support your mission. • Solves problems in a way that moves things forward. The hunter is the type of person you would invest in no matter their idea. If you want to create new ventures within your organization, you must have these people in place and let them operate autonomously. Where Can Your Company Play? A successful growth strategy also hinges on identifying the right opportunity for your new growth business. For most large organizations, the approach seems to be: “Let’s expand by trying a different flavor of the same thing.” However, true growth comes when you branch out from your core offerings and try something new. To do this, start with a problem. What problem can you solve for your customers? By using the problem as the starting point, you can think more abstractly, which can lead you toward a deeper purpose. The Royal Bank of Scotland’s customers had a problem: They couldn’t understand the terms of the loans they were receiving. So, the bank worked with AI experts to develop software that walked customers through the details of their loan point by point. From that solution came a new software service, Safe to Sign, which spun off as Nift to provide related solutions to other companies in banking services. Sometimes, a company already has expertise in a function which it can leverage into a wider, saleable service for its entire industry. Solve a problem for your customers, and you might find all sorts of new opportunities. n Henrik Werdelin is a founding partner of Prehype, an international organization that helps entrepreneurs and companies build new ventures. How your money and spending can change the world for the better 76 MONEY 77 CLIMATE ACTION 78 SOCIAL IMPACT 74 INNOVATION & TECHNOLOGY 79 INVESTING
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