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Written by Ben Yoskovitz, Founding Partner at Highline Beta
Author and speaker, Simon Sinek is quoted as saying, “The hardest part is starting. Once you get that out of the way, you’ll find the rest of the journey much easier.”
Let’s be honest: the entire journey in corporate innovation is hard, but Simon’s not wrong, starting is tough. And if you don’t start, you have zero chance of succeeding.
Figuring out the starting point for an innovation challenge–the initial prompt–is critical to understanding how to go about executing the work, figuring out what needs to be researched and validated, and how to prioritize. This is particularly true when focused on H2/H3 innovation, growth beyond the core, where there are more unknowns.
In our work at Highline Beta, we’ve categorized four starting points for kicking off a growth innovation project, each of which needs to focus on different things, while eventually converging on the same type of work. We call this our Discovery process.
From the narrowest to the broadest starting points, they are:
These are not necessarily mutually exclusive, but ideally one of these is the key goal for your innovation efforts. Knowing where you’re starting allows you (and us) to define the right scope of work that has to get done, and dig into the things that really matter as quickly as possible.
This is a fairly specific starting point, where you already have something in-house that you want to use, and expand upon. The asset or capability could be almost anything:
Large companies often have quite a few under-utilized assets, and valuable resources that they’re not fully taking advantage of. A great example is AB InBev and saved grain.
In 2017, we had the opportunity to work with AB InBev through their growth innovation group, ZX Ventures, to launch a new incubator program. The program ran for 11 weeks, with the goal of validating very early stage venture ideas for potential future investment.
One of the first projects in the program was focused on upcycling saved grain. Saved grain is the barley that comes out of the beer making process. Historically this grain is sold for animal feed, but AB InBev believed there could be a higher value use for the asset.
We worked with teams inside the incubator program to explore consumer and business interest in saved grain.
Fast-forward a number of years, and AB InBev launched Evergrain Ingredients, a B2B ingredients company that upcycles saved grain into food-ready protein and fiber. This was an incredible example of a company leveraging an under-utilized asset to create an entirely new business with a new business model.
Since first working with AB InBev and ZX Ventures on exploring new value propositions for saved grain, we see the opportunity in under-utilized assets everywhere. Our clients often have incredible infrastructure & IP that could be a “gold mine” of potential.
When we kick off a client engagement with an asset in-hand, our goal is to expand the possibilities of the asset’s use. We don’t want to be beholden to how the asset is being currently used. Instead, we want to diverge as much as possible to find new value.
We do so by:
Our goal is to come up with a wide set of problem statements that we believe are worth pursuing. We’ll talk about next steps in a moment.
More companies are recognizing the potential of building new ventures that are adjacent to their core business, with the strategic intent of driving more value back to the core. Companies are building “arm’s length” venture teams, whose mission is to launch new growth initiatives, typically with a focus on H2/H3 innovation. These teams are meant to move more quickly than the core, and have less restrictions.
We’re big believers in this approach, but it’s definitely not easy. There are entire new structures that need to be put in place around governance, hiring, metrics, budgets, etc. That’s a topic for another blog post!
When thinking of building new ventures that support the core business, these are three key criteria:
To learn more about how this all comes together, download a full PDF here.
In 2018 we had an opportunity to work with RBC Ventures (now RBC X), which was a new business unit at Royal Bank of Canada dedicated to building new ventures “beyond banking.”
We worked closely with the team to build the foundation for RBC Ventures, including thesis development, developing a validation framework, supporting the governance structure, training employees and more.
One of the ventures that emerged from RBC Ventures was Ownr.
Ownr started by streamlining the process of setting up a new business. It has since expanded to provide more capabilities for small business owners. And Ownr has done an excellent job of accomplishing two things:
This is a great example of the strategic benefit in building new ventures. Ownr is significantly different in terms of value proposition and how to execute its growth than what RBC does in its core business, which means Ownr requires a different structure, methodology and team. But Ownr also drives significant value back to the bank–thus justifying the bank’s continued investment in it.
Ownr connects with users before they need to engage with a bank, and so it’s a perfect value add service for RBC to offer. As Ownr scales and wins (independently from RBC), RBC also wins through driving new customer acquisition.
When a client comes to us with a starting point of building new ventures to support the core, we need to identify strategic goals and relevant adjacencies. There’s a risk with this starting point that you go too broad, and so it’s important to set guardrails.
If you’re starting with an asset or capability, you likely have a strong strategic fit, and an answer to “why” you’re pursuing specific opportunities. That’s not necessarily the case when the starting point is focused on creating new ventures. We don’t want to pursue areas where our corporate client doesn’t have a right to win or unfair advantage.
At a high-level, the work starts as follows:
Our goal is the same as when the starting point is an asset or opportunity, but we come at it from a slightly different angle, with an exploration of different problems or spaces where we believe you, as a corporate partner, have a right to play (and win.)
It’s impossible to ignore big trends that could have a significant impact on the future of our businesses. Most recently, everyone is speaking about Generative AI; a few months ago it was the Metaverse. There are also broad population trends that can materially affect a business, including an aging population, immigration, etc.
The problem with a trend is that it’s very broad and everyone sees it coming (whether they act on it or not is a different story.) Trends are not user or customer problems; they’re too nebulous. And so we need to dig deeper.
At Highline Beta, we like to start by identifying product or user niches so we can narrow the focus and not try to “solve trends.” It’s important to figure out what to ignore or park, as much as it’s important to figure out what to focus on. We identify relevant product or user niches by:
Our initial goal is to narrow down from a big trend into a few user groups or product niches that seem interesting, where we believe there is potential for new venture building.
Once we have a set of relevant user groups or product niches, we know where to dig further. Our next step is to identify a broad problem set within each user group or product niche that we want to pursue. We want to explore as many problem spaces as possible, with the goal of narrowing down at the next stage.
In order to identify meaningful problems worth pursuing, we do the following work:
Our end goal is similar to when we start with an asset/capability or a focus on supporting the core business with new ventures. Everything leads to the identification of a problem (or set of problems; sometimes still quite broad), where we have an identified user/customer group, in a large market, and our client has a strategic advantage. If we have those variables in place, we move to the next stage.
This is the most open ended starting point for any innovation engagement. Often clients at this stage have already decided that they want to build new ventures, but they’ve also got a target in mind — i.e. “We want to generate $100M in 5 years from H2/H3 innovation.”
There’s no reason not to set ambitious growth goals for innovation efforts, otherwise it’s hard to measure macro-level success or failure. But, this starting point provides the fewest guardrails, and so it’s our job to narrow the focus and be able to identify actual opportunities worth pursuing.
Typically when we start an engagement at this level, we begin by exploring disruptive trends (see 3. Capitalizing on a Disruptive Trend above.)
The client may already have an inkling towards which spaces or very broad opportunities they want to pursue. If that’s the case, we’re able to move quickly into exploring trends, and narrowing from there.
Sometimes that’s not the case, and we work with our corporate clients to develop a thesis (or theses) on which areas are worth pursuing.
Colgate-Palmolive (Colgate) was balancing fitting transformative innovation efforts with the everyday delivery of the business. This is a common challenge for big companies as, in addition to time resources, it requires a notable shift in mindset and processes to make those efforts effective and repeatable.
Accordingly, Colgate hired us to help support growth-driving innovation in the H2/H3 space. The objective was to have 4 to 5 new validated ventures, supporting a portfolio-based approach to innovation.
Beyond the initial starting point–what happens next?
As mentioned above, the work we do to kick off an innovation and new venture development project depends on the starting point:
But the goal in every case is the same: Find a broad set of problems, with an identified user/customer group, in a large market, where our corporate client has a right to win.
From there, we work with the corporate client to pick a narrower set of problems to further explore.
Click here to download a PDF.
In the next phase of a Discovery project, our goal is to go very deep into a narrow set of problems and learn as much as we can through iterative experimentation. The specific tools we use vary at this stage (often depending on whether we’re pursuing B2B or B2C opportunities), but generally we will:
Once our Discovery process is complete, we’ve further narrowed down from our initial set of problems, and we bring forth our recommendations on next steps, and which ventures are worth pursuing.
This culminates in making a business case for each venture that we believe has merit. The business case includes these core elements:
Cincinnati recognized they had a challenge many companies face: coming up with and executing truly breakthrough innovation quickly. This is often a challenge because it requires a shift in the way the company thinks about innovation: moving from focusing on problems close to your business to looking instead at problems in the world that you could be well positioned to solve. With this in mind, they knew they needed an external partner who could help them make that shift quickly, and they felt Highline Beta was the right one.
Specifically, Cincinnati wanted to delve into the topic of financial security, and the challenges many people face, going beyond an exclusive focus on insurance. The goal was to identify and validate new venture opportunities that could help Cincinnati deepen their relationships with the agencies they work with and their customers.
In the end, Highline Beta presented two validated new venture opportunities to Cincinnati. We had validated the problems, early adopter customer segments, solutions, go-to-market strategies and business models. In addition, we had identified the key unfair advantages that Cincinnati brought to both ventures. Our work concluded by providing go-forward plans and product roadmaps for both ventures based on a recommendation to build, spin-out or partner with an existing startup.
Our business cases are always rooted in deep research and experimentation. This provides us with the confidence to make recommendations on what to do next. Typically after Discovery, we move into Venture Validation, which is a further exploration of the solution, go-to-market and business model, increasing the level of detail in terms of validation.
We believe that collaboration drives growth, and are always open to having a conversation. To learn more about our innovation services, please connect directly with Ben Yoskovitz, Founding Partner or Paige Halam-Andres, Managing Director, Innovation.
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