Victor Guixer Martin, Managing Partner, Guixer and Partners
Today, we see most board of directors and C-levels around the corporate world embracing change into new digital paradigms with mixed enthusiasm and fear. From the most technology-driven corporates, to the less digital-savvy ones, innovation and technology investments are starting to become critical discussion topics with direct impact on the day-to-day operations of the business.
The truth is that innovation is not a tradable asset, nor something you grow in a small corporate capsule. Innovation dynamics are complex and require a profound cultural conversion and the necessary cooperation from friends, enemies, and a diverse plethora of stakeholders. Understanding innovation dynamics is not an easy task for any organization. It requires a strong willingness to turn the whole industry ecosystem around the client, and most of the times, a strategic cooperation with small technological companies, backed by smart venture capitalists.
“When I started Guixer and Partners, I found in nearly every sector, unpredictable results from interactions of mutually disconnected stakeholders along new incumbent technologies challenging their established business models. Corporates needed to design lean operation models while protecting their current status quo. Startups needed smarter funding sources and proper guidance, while private investors were interested in getting access to cross-innovation for new investment ideas while complying with their own risk policies. I needed to start closing the investor-corporate-start up virtuous circle to allow for innovation to nurture profound digital transformation programs”
There was a time when the “spray and pray” modus operandi embraced by angel investors and venture capitalists was acceptable, as technological jewels would shine brightly above all. It is a consensual view that today, the angel investment/venture capital model no longer guarantees innovation in a given industry, as capital constraints lead to concentrate investments in only a few consensual bets. Accelerators are not necessarily creating quality deal flow either, as they tend to concentrate in quick problem solving, plus digital talent selection for traditional corporates. Venture capital vehicles are moving away from their traditional earlier stage funding role as risk aversion grows following a time where liquidity (and valuations) was high.
We do not believe that governments or similar institutions are solving complex, multifaceted innovation industry issues with hackathons and grants, leaving aside the benefits derived from delivering an excellent PR exercise. Unlocking value has more to do with initiatives like Elon Musk’s horizontal-to-deep focus in different, sometime unrelated, knowledge areas.
Understanding innovation dynamics requires willingness to turn the industry ecosystem around the client, and a strategic cooperation with small technological companies, backed by smart venture capitalists
If a global innovation market ever exists, innovation merchants would be needed to ensure the right incentivisation of stakeholders.
Innovation merchants are tomorrow’s investment bankers, driving digital and corporate turnarounds with the confluence of external capital and talent. Back in the XIX century, commercial traders began negotiating commodities. Merchant banks later institutionalized their practices and started a pure financial model.
In the advent of the XXI century we need a frictionless “Agile Investment Banking” model to discern and align high quality ideas with global impact, smart capital and ambitious corporations to deliver the execution of complex changes.
“When I imagine how an innovation merchant would look-like, I see a senior professional on his last stage of his career -Greypreneurs – with a wide experience in various fields, from finance to technology, with an open mind to challenge the impossible and established models”
The lack of motivation from top corporate managements to achieve established long-term vision in the name of short-term value creation objectives, the continuous search for purpose and inertia are strong drivers for innovation merchants, a growing professional class independent from corporates and established advisory firms, but still willing to inspire and bring fresh air from the outside. We applaud every initiative to develop the «greypreneur» talent; the perfect fit to new startups and young talent with the common goal of solving real world problems and transform established business models.
Embracing technologies like Blockchain, artificial intelligence, big data, cyber security or IoT is no longer a technological or product choice, but an obligation to survive in a fast-changing world. But this is no longer an individual effort, nor a one-shoot investment, and most of the times this long-term thinking is at odds with professional investors’ short-termism, still valuing the corporate world with just profitability multiples, in a quarterly basis.
The old days when R&D internal labs would provide the needed competitive advantages in a given industry are reaching their end or are already gone. Boards and directors have to decide if they are driven by the crowd or follow strong convictions, as when Kennedy said “We choose to go to the Moon”.
«This is a long journey where you will find internal resistance, but it is the only trip that will eventually save you tomorrow from incumbent digital competition», says Victor Guixer, and adds: «Believe me; it is much better to change direction than ending up being the next Kodak, or the next Nokia. By the way, just remember the mobile phone you had 10 years ago, 5 years ago; even the apps you use every day, and now think about a near-future where touch-screens will no longer be the main human-to-human communication interface».
This last point precisely highlights that innovation and change cycles are shorter every year and this is something you should turn into opportunity. Mitigate such risks and trying to advance market changes is the best remedy to start. Then you can move forward bringing external innovation, M&As and digital transformation around a business plan. But you better get ready and you better get a plan first. Many of those that are the bewildered by the current paradigm are the types that come to us saying, “We want to become a blockchain company”. The question actually is… for what? Do you know what your problems are? Do you know where you are placed in the innovation value chain? Or are you just trusting your favourite advisor power point that you bought last year?
In summary, the innovation merchant drives value by enabling digital transformation in a given industry by enabling cooperation between previously disconnected stakeholders. Opportunity and risks are huge. But there is no paradise without risk. Be advised that it is an awesome journey. It isn’t easy, but it will be worth it when you look back and see, like some banks did, begin to understand the challenge only after the new fintech companies began challenging their existing market. Are you ready to start your journey?