We all know the world is growing fast, and most of that growth is not in the major western markets – it is in the rest of the world. But when it comes to innovation we seem to be trapped in a paradigm that says innovation will come from the major market-places – particularly the US and Europe. It is not reasonable to think this. To participate in a gold-rush you have to go to where the gold is.
Innovation is about inventive people finding solutions to unmet needs. Sure, it helps if they have a good technical education, but they also need to see, and intimately understand, the unmet needs. There are increasingly big parts of the world with excellent education levels that are as capable as Americans or Europeans at innovating and which will bring different thinking paradigms to bear on the problem.
The Nokia story is already in the text-books, about telephone innovation coming from an unexpected place – Finland– that took the world by storm. Examples like that are increasing and will continue to increase as the global ideas marketplace is broken wide open by entrepreneurs who are born global and have unlimited access to information. If they arrive at the problem with a different world view – for instance if they come from outside the US and Europe – they are more likely than most of us to come up with something original.
At one level we all know this. The bottom line of every corporate venturing programme is to find the best innovations the world has to offer, preferably before anyone else. So we spend our efforts on setting up global systems – sophisticated web-based portals, extensive scouting teams, shiny new regional innovation centres.
But none of these prevent an all-too-human failing, which is that when confronted with an excess of good ideas, we do what all overloaded humans tend to do and follow the most efficient-looking paths. In an overload situation a very seductive bias creeps in – to prefer those ideas that are written in your own language, that arise from a social context you understand, and preferably that come from somewhere in the world you know or can visit relatively easily if the need arises – basically to take the easy path.
This is dangerous.
My own home region illustrates this perfectly. Australia and New Zealand might be on everyone’s bucket list for a visit, but we are largely ignored by corporate venturing. Together these two countries account for 0.3% of the world’s population, which is where the conversation ends in many a corporate venturing unit.
But did you know that Australia and New Zealand:
- Have 7% of the world’s top-ranking universities in life sciences.
- Produce 5% of the world’s top-cited publications in the natural sciences.
- Have the highest patents per capita in the world.
- Are both in the world’s top five for entrepreneurship.
- Are both in the world’s top 10 for biotechnology in Scientific American’s Worldview Scorecard.
- Invented contact lenses – not quite the mobile phone, but still pretty cool.
Yet we locals notice that the corporate venturing scouts fly in and fly out, sandwiching in an intense but random set of one-on-one visits. They may even come back six months later, although the follow-ups may not have all been done by then. And after the third trip, the idea of 20-plus hours of travel just gets too hard. Even if the scouts are exceptional people, who build their personal networks over time, the day inevitably comes when they and their burnt-out families move on to another job, and the multinational is left with a need to replace and start the whole network-building thing all over again. The locals also get jaded with having to start again, and before long the whole exercise fizzles out – a self-fulfilling prophecy that moves inevitably from “it is hard to find deals down-under” to “ there are no deals down-under”.
Let me tell you what we are doing to overcome this gap.
We have invented a new way of accessing regional innovation. We start with a deep, strong team of seriously successful local people with senior multinational company experience. These are the go-to guys for local entrepreneurs or innovators and they act as a lightning rod to collect the best of local innovations. We attach a team of highly competent analysts, typically with venture capital experience. Between them we generate a near-perfect set of everything that is emerging in this region.
Then we partner multinational corporations – the ones who want to do a better job in our region and know it. They share with us what they are looking for and – hey presto – we have highly successful engagements.
It does not stop at match-making either. We help avoid the plague of long-haul travel that afflicts all corporate venture groups – we can act not only as their local eyes and ears, but also their arms and legs. We make their visits down-under totally focused by arranging customised itineraries in-company with our seriously successful entrepreneurs. We avoid the late night teleconferences because we are on the same time zone as the innovators. And we avoid the inevitable communication glitches that occur because you are not eyeballing the locals, or you do not understand what “maybe” means in the local (English) language.
It is early days, but so far our model is successful – we are signing on multinational partners at a steady rate and a track record of successful deals is following. We next aim to raise a local co-investment fund to invest alongside the corporate venturers. Coming as we do from a background in venture capital, we know that this can spread the risk being taken by our multinational partners and turbocharge the progress of good opportunities.
What generic lessons can be taken from this – just because it works down-under, would it work elsewhere? I firmly believe it would. Having senior local people with multinational experience as the interpreters provides a brilliant first screen. These are people embedded in the local innovation community– they have trust and prestige within our community and they are not going anywhere. And having those same people involved in negotiation or execution greatly increases the conversion rate from opportunities to secured deals.
The problem of ideas being prejudiced against when they come from a different world view is also overcome if you have an experienced local team. They are more likely to get it than your corporate team at headquarters.
If all that is not enough – it is a damn sight cheaper to source innovation in this way. Our corporate partners effectively share the costs of our work between themselves and we end up delivering way more than a scout can do for less than half the cost.
I am sure this model will translate to different geographies. We are setting about proving that now by expanding into south-east Asia, but that is a work in progress. The real excitement will come when we tackle South America, northern non-China Asia or Africa.
By using local teams with local world views, you really can scout the world for new innovations. You can cast off the blinkers brought about by overload. And you can find those nuggets of game-changing innovation wherever they arise.