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Passive Investments
Investments not connected to its own strategy and loosely linked with capabilities Cannot advance business through Passive Investments
Enabling Passive
Complements Provides financial strategy of current returns only business
Driving Investments
Driving Investments
Strategic investments with tight link between operations
strategic financial
Driving Emergent tight Link to operational capability loose
Advances strategy Allows exploration of current business of potential new business
Emergent Investments
Financial investments that have tight links to its operating capabilities Potential for adding strategic value. Both current and future Future growth and exploration of new markets Immediate financial benefits, potential longlong-term strategic benefits
Four Ways to Invest
Driving Investments Enabling Investments Emergent Investments Passive Investments
Mapping Your Corporate VC Investments
Corporate investment ilent investing in wireless radio-frequency devices which gives radioAgilent valuable information whether it wins or loses
Driving Investments sustain the current strategy
Investments for all seasons
Emergent investments better in booming economies. Likelihood of returns offset risk Enabling and driving investments have more staying power Low financial returns have little impact on driving investments. All 3 can foster growth of current business, only emergent can lead to future growth.
Corporation as a Money Manager
Passive investments diversify opportunities and smooth out profits Shareholders can diversify their own portfolios Passive investments are not in line with its strategy or its operating capabilities Hard to justify these investments
Corporate VC
The investment of corporate funds directly in external start-up companies startThe framework explains VC investments
Classifies two different reasons for corporate VC
Dual Dimensions of Corporate VC
StartStart-ups with strong links could use the companies manufacturing, distribution, technology or brand StartStart-ups can be an opportunity to build new and different capabilities without threat of internal efforts to undermine them
• Strategic • Financial
Dual Dimensions of Corporate VC
There are two main Objectives for investing
Strategic Investments made primarily to increase the sales and profits of the corporation’s own business Financial Investments made primarily looking for attractive returns
Company needs to know its strategy and operating capabilities Build its investment within these parameters Manage investments to receive the strategic benefits, not only the financial returns If done correctly, investments will survive economic downturns and provide growth for shareholders
Making Sense of Corporate Venture Capital
By Henry W. Chesbrough
Corporate Venture Capital
Dual Dimensions of Corporate VC Four Ways to Invest Paths to Growth
Merck has invested in companies that could decrease the time that clinical trials take so that they could sell their product for longer before the patent expires
Growing Current Business
Driving Microsoft Enabling Intel Emergent Lucent Technologies Emergent Cisco and Communications Passive Dell Computers
Recommendations
Enabling Investments
Enabling Investments are primarily for strategic reasons but not tightly coupled with operations The idea is that the desire for one product will drive the desire for the another product Example