US-based oil services company Schlumberger has become the first client of services firm Synchrony Venture Management’s system to measure strategic returns from corporate venturing deals.
Synchrony has filed for a patent to its Innovation Capital method, which says it establishes an "empirically-driven, objective, and sustainable system screening, selecting and measuring the strategic value of corporate venture capital investments".
In a presentation at the IBF Corporate Venturing and Innovation Partnering conference this month, Adam Caper, managing director at Synchrony, and Iain Cooper, technology adviser and manager of the early phase technology initiative at Schlumberger, said the method would discover and rank strategic priorities; determine which technology and business areas within the firm have the most potential to contribute to advancing strategic priorities, and identifying the specific gaps and/or opportunities to create value; generate dealflow; show potential strategic gains and screen opportunities relative to those gains; establish specific value-creation thresholds for deals/partnerships and track performance over time; and provide reports to management.
Caper said the method had been developed over five years and its aim was to rebalance corporate venturing units having to rely on financial return metrics, such as annual performance and money multiples, "when in fact the financial return is only a very small part of the value created by a properly targeted portfolio of strategic investments".
He added: "It takes an unstructured, qualitative activity [evaluating strategic returns] and makes it into a one that is rigorous and measurable, just as has been done for corporate functions such as marketing, manufacturing and productivity. The method normalises the articulation of CVC activity, and allows CVC managers to engage with internal stakeholders on familiar terms. This enhances credibility, accelerates uptake and eases decision-making."