A previous blog discussed why every business needs a Shiva. In the exponential era, companies are relentlessly confronted by the disruptive business models of unicorn entrepreneurs – entrepreneurs building a business from startup to over $1 billion in valuation. In fact, length of stay in the Fortune 500 index has fallen from 61 years (1958) to 18 years (2011), and 52% of Fortune 500 companies have not been on the index since 2000. The pace only gets faster.
How can companies fight back? How can companies channel Shiva and build new unicorns while destroying their old multi-billion dollar companies?
Currently, companies are acquiring companies that they believe will add growth and value to the business. But about 70-80% of acquisitions fail. Another approach used by companies is acquiring promising companies to recruit the management team, but few have succeeded. Business venture capital funds have been useful in the life sciences, but few companies have built unicorns that way.
Companies have also tried to use in-house developed technologies and ideas. Few of these have led to unicorns, as internal development tends to promote evolutionary, rather than revolutionary, businesses.
Silicon Valley offers a blueprint to encourage disruptive ventures, but incumbents have failed to truly embrace Silicon Valley’s strategies because destroying the old business is unnatural to business operations and often against the best interests from top managers. Some CEOs do well, but they are a rarity. Another issue is the high failure rate in a typical venture capital portfolio and the risk of these failures to corporate careers.
A better solution could be the Corporate Silicon Valley strategy – the Corporate Shiva. The strategy would combine the financially savvy secrets of unicorn entrepreneurs with a corporate structure to disrupt itself from within before anyone else does from the outside. One way to do this is by using the Chief Venturing Officer (CVO) in a way that is inherently different from a typical managerial position. The CVO would combine the best of unicorn entrepreneurs like Bezos and Musk with corporate strengths, but it would require major changes in the way the upper echelons function.
The CVO strategy is based on an analysis of how 82 unicorn entrepreneurs and 40 mini unicorn entrepreneurs built their businesses. The central role of the CVO would be to seek opportunities in emerging trends, technologies and industries that could disrupt the company’s existing operations and render existing business models obsolete. This role contrasts with that of others in the company whose goal is to protect and grow the existing businesses. The CVO and the other parts of the company will therefore have a contentious relationship. It is crucial to get the right structure and incentives. Evolutionary innovations are best handled by corporate R&D and business departments, but they are not enough to propel revolutionary or disruptive innovations.
The CVO should not report to the CEO whose primary role is to protect and build the existing businesses. Destroying the company from within stands in stark contrast to this mission. That is why the CVO reports to a management committee. Such a structure is exactly the kind of hybrid executive role that can combine the best of company functioning and entrepreneurial entrepreneurship. It retains the freedom to pursue the Silicon Valley approach by seeking out companies that can dominate emerging industries without worrying about existing sacred cows and corporate politics.
Funding for the CVO office mimics the Silicon Valley angel model that funds pre-VC firms in emerging trends. Silicon Valley dominates many emerging industries by launching multiple ventures with the potential to lead any industry. While it’s difficult to predict the specific winners, launching multiple ventures increases the likelihood that the winners will be in Silicon Valley. It also fosters the ability to partner with parallel firms seeking dominance in the same space without trying to pick a winner before there is some visibility into an emerging trend.
The CVO would be compensated on the basis of a salary plus performance-related payment like partners in a VC firm. The company’s directors are given options in the companies to support the core tasks of the CVO: building unicorns by attracting, developing and financing entrepreneurs, including by raising venture capital for late ventures. The layout of the office of the CVO approaches the external market conditions of fast-growing entrepreneurs. Entrepreneurs can be employees or recruited individuals.
MY RECORD: Companies have tried many approaches to tackle the increasing pace of innovative disruption, but the results speak for themselves – not much has worked. The solution may lie in re-creating Silicon Valley in the company through the CVO position. In the exponential age, every company should have one.
This blog was written in collaboration with Dr. Stav Fainshmidt, Associate Professor of International Business at Ivey Business School, University of Western Ontario.
 Unicorn entrepreneurs have built their businesses from startup to over $1 billion in valuation and sales (to make sure the companies aren’t just the result of inflated valuations), and mini unicorn entrepreneurs are the ones who have built up to over $1 billion in valuations and sales. $100 million in sales, but valuations were not available for these privately held companies.