April 23, 2025
[Full Podcast transcript at end of page]
To build a successful corporate venture studio, it starts with setting clear "winning conditions" and an investment thesis that is strategically aligned—but not shackled—to the core business. Marcus emphasized the importance of avoiding overlap with existing corporate venture capital or innovation labs and instead, focusing on small, elite teams that are empowered and autonomous. He recommends starting lean and avoiding the pressure of early KPIs so teams can first validate the thesis and install a proper operating model.
Ben added that it's essential to treat the studio as a portfolio game. You’re not building one venture—you’re building a system. He also pointed out there are over 60 variables to consider when designing a studio (e.g., structure, branding, investment model), and cautioned against over-designing before building. His advice: build while you design.
Marcus emphasized that structure matters—a lot. You have to start by determining whether you're partnering or spinning out, and then think through everything from IP ownership to governance and compliance. He uses a people-assets-kill switch framework: Who owns what? How do we protect IP? What happens when something fails?
Ben echoed that sentiment and offered tactical examples. Should the studio be a business unit, wholly owned subsidiary, or an external entity? Each comes with different legal implications. He noted that some companies aim for at least 51% ownership in external ventures, often with acquisition rights built in. These early structural decisions affect board responsibilities, fiduciary duty, and how risk is managed.
"You can’t just foster it—you have to fight for it," Marcus said. Leadership sets the tone, and the leader must be willing to take risks and reward others who do the same. Safe zones, kill switches, reduced approval layers—these are all ways to encourage experimentation.
Ben took a bottom-up view. While top-down support is critical, real change happens when a small group of internal rebels is empowered to experiment. These early adopters go back to their departments and influence others. The key isn't training—it’s doing. The most successful programs we've seen give people enough time and safety to build something new and meaningful.
Marcus’s advice: decide if you really want to compete. If you do, speed and boldness matter—but not at the cost of rigor. He believes in the power of elite, cross-functional teams and recommends accelerators, collision days, and pilot programs as tools to quickly vet opportunities.
Ben highlighted a structural issue—most corporate innovation teams operate in silos. CVC writes checks. Internal teams build. Studios create. Partnership teams partner. What’s missing? A unifying validation layer. Instead of picking a tool first, identify the problem, validate it, and then select whether to build, buy, or partner. That’s how some of the best studios operate, including ZX Ventures and RBC Ventures.
"You don’t," Marcus said bluntly. Cutting growth innovation during market stress is weak leadership. The question isn't how to balance—it’s how to protect innovation as a strategic asset. If you're not willing to do that, then at least be honest and call it what it is: defense.
Ben acknowledged that pressure but argued for balance. You don’t need massive investment in H2/H3 ventures to make progress—you just need the right amount, shielded and governed appropriately. These bets can be small but meaningful, and they must be made alongside core business operations.
Marcus took the contrarian view: start by focusing on what not to track. Workshops, patents, idea logs—those are activity metrics, not outcomes. What matters is venture-level traction, portfolio value creation, and tangible strategic outcomes that align with long-term corporate goals.
Ben layered on two levels of measurement: venture-specific and portfolio-wide. For individual ventures, early traction matters—even if the numbers are small. For the studio, investor-style metrics like cost per venture, stage progression, and third-party validation of value are more telling than anything else. Most importantly, he emphasized the need to ship. Many studios take years to launch a single company. Just shipping one venture can create momentum, learning loops, and credibility.
Thanks to everyone who submitted questions. If you want to talk about venture studios, innovation strategy, or just jam on what winning looks like, we’re always around:
Ben Yoskovitz 00:00
What are the key metrics to measure the success of innovation efforts, especially with venture studios and venturing
Marcus Daniels 00:06
activities? Maybe I'll flip it then, what are the things you should not track right? Let's stop tracking the number of innovation workshops and people have participated in the year. Let's stop tracking the number of patents we filed. Let's stop tracking the number of innovation ideas that we've generated and are capturing in some innovation software platform, right? The only thing that matters is outcomes. Outcomes over activities. I feel like that's where most folks fail, because they want the magic answer, what the metrics, the specific metrics, and it is outcomes. Again, venture studios, even with the, you know, corporate venture capital investing, it is going to take time. And I think a lot of groups get stuck trying to, you know, measure activities to show that they're making progress. How do we have that orientation of taking risks? But really think about what winning is, and that's outcomes in the big picture.
Ben Yoskovitz 01:09
Welcome back to the next episode of beyond the core. Really excited to have everybody join us today. Today, it's just going to be me and Marcus chatting, but of course, we're gonna be chatting about venture studios. And you know, the industry of venture Studios is changing a lot. There's tons going on all the time. We're working with lots of corporate partners about venture studios and learning from them what their biggest challenges and concerns and questions are. We write lots of content about venture studios. We talk to other venture studios and other folks in the industry to understand what's going on. What are the big topics of the day? And today, we thought we would cover six of them. So we've turned them into questions, big, big topics. We're not going to go into each one of them in enormous amounts of depth, but we hope that we can just touch on some key things that we know are top of mind for everybody that's thinking about venture studios. So I'll jump right in with the first topic question, what are the best practices for managing a corporate venture studio, including setting it up and ensuring alignment with corporate goals? I
Marcus Daniels 02:14
think, you know, really setting the winning conditions is where I would start. And I think having a clear investment thesis beyond the core. And I'm emphasizing beyond the core for a few reasons, because it has to have some connection, strategic connection, to the core business, but it also needs a mandate, so you're not tripping over other corporate venture capital group or even other innovation labs. And so I think that's a good starting point, and that then moves into building and funding an elite venture Studio team. And I think this is where a lot of folks miss. They make the teams too big too early. You know, we like to see small teams. Maybe start with three people, one person on the internal side who has institutional knowledge, maybe somebody you bring in from the outside, and then some leader who has accountability for kind of the mandate. And then let's actually think about, how do we not assign any KPIs too early that drive outcomes? And I think that's really important in the first six to nine months, so that team can install some sort of operating model, you know, really refine and validate the investment thesis without that pressure of having to drive quarterly metrics, give them enough time, and, you know, room, really, to basically get comfortable with this new process of building ventures. What are your thoughts? Ben, anything to add to that?
Ben Yoskovitz 03:32
Yeah, no, I'm glad you brought up the investment portfolio sort of lens on it, because I do think you have to look at it in that way. You have to look at the fact that you're building a portfolio of businesses, not one business every couple of years, or even one business a year. You might start with small numbers, but at the end of the day, it's a portfolio game. Some are going to win, some are going to lose. This is it's an interesting topic, because it runs the gamut from how do we design this thing and set it up, and then how do we keep it aligned? And when we were evaluating this at Highline beta, I actually identified about 60, I'll call them variables or questions that you would want to ask yourself as you're designing a venture studio. So you've touched on a couple of them. Marcus investment thesis is a huge one. Like, what are we actually going to focus on? How close to the core. Are we going to make it? How are we structuring it? You know, our recommendation would be as a, you know, at least a subsidiary type of unit, if not completely on the outside to shield it from some of the corporate stuff that goes on. The brand is a component of it. What should the brand be? How close to the core should that be so? Again, I'm not going to list all 60 variables, but team is a big one, methodology, investment, model and thesis. So you do have to design these things thoughtfully in order to give yourself the best chance of building businesses, all the while trying not to be so heavy handed with the design. That you spend five years designing the quote, unquote perfect venture studio, forgetting that the job was actually to build and fund businesses. So we take a top down, bottom up approach. Think about some of these key strategic design decisions while actually building that small team and building actual businesses. It's a sets and reps game. So if you don't get into it and start testing ideas, shipping things, learning from the market, you're going to be wasting a lot of time. I
Marcus Daniels 05:26
totally agree. I think one of the questions I always love that you ask is, What does winning look like? You know, really taking a step back macro and really for a studio, is, are you building ventures? Is there enough strategic value over the right kind of time horizon as well? And that's why I made the comment specifically. Do we have enough comfort level of not trying to measure all these KPIs at the inception, and can we really link it to winning in the big picture to really create that value for the studio?
Ben Yoskovitz 05:51
Yeah, and I asked that question, what does winning look like? Because to me, you should be able to describe that and have a very clear answer for it, and you should be able to then work backwards from there in order to accomplish winning, to actually try to win. And it's interesting, because, again, we work with a lot of different folks in this arena, and the answer to that is not always super clear. Sometimes it's, you know, we're scared of startups coming and eating our lunch could be revenue generation, so they have some idea of what they want to achieve. And then they're, in some cases, shoehorning the venture studio model into that where it may not even be the right tool in the toolbox to accomplish what winning looks like. So I like to start with, what problem are you trying to solve? What does winning look like? And then if a venture studio venture studio is the right tool to accomplish that, or at least take a swing at it, then you can figure out how to design the venture studio properly to try to achieve the goal. Absolutely Cool. Okay. Next question topic, this is always a fun one. What legal and regulatory considerations should we be aware of in corporate venturing, particularly with partnerships and equity stakes, these are not small topics. So Marcus, you can, you can start us off.
Marcus Daniels 07:13
Yeah, I'm happy to, I the way that was phrased. You know, I always go back to, like, the critical, strategic, structural decision to start with. And so kind of two frames would be, kind of startup partnerships, or CO building of new ventures, versus creating new ventures, maybe on the outside where there's equity. That's kind of how I kind of understood that question. I would say, you know, having a useful framework where you're comparing both, so you're not tripping up. Compliance issues, regulatory elements. I always like to think of it from the people lens, then maybe the IP assets, and I love kill switches. You know, what happens? Do we need? Like a prenup? So what happens if you shut down the venture or the partnership fails? And so I think, you know, going through those elements, I think, really creates enough rigor in putting in the right kind of winning conditions that, if you know, where do we capture from the people lens shared resources? Because that's one that becomes something that usually triggers a lot of regulatory challenges. If it's on the outside, maybe it's the IP, you know, ownership structure, and then also, with respect to this, you know, the when you're killing a project, what happens to it? Is it ready a company on the outside, or is it something, you know, how are we accounting for the for this IP that could actually create regulatory burdens? And obviously, this really depends on a lot of industries, but certainly those are kind of the the areas, or at least a useful framework that, you know, we like to kind of apply, and then get into the minutiae of just how do we actually support so there's entrip these regulatory concerns. Yeah,
Ben Yoskovitz 08:49
absolutely. And I'll give some maybe very specific examples of discussions we've had with partners around regulatory and legal. So one of them is very clearly, should it be a business unit or wholly owned subsidiary, but owned by the corporate, or should it live on the outside where the corporate has an equity stake in it has some form of governance, but it is, in fact, an independent entity, and there are very significant differences between those two things, and your company has to decide which approach that they want to take, at minimum, for me, if you want to shield the venture studio from the corporate and some of its responsibilities, legal, compliance, regulatory, a wholly owned subsidiary. By the way, I should have probably prefaced this with not a lawyer and not an accountant. But we've seen this not legal advice, it's not legal advice. So we'll put, like a real disclaimer on it, but wholly owned subsidiary. We've seen that model work, where it can be somewhat shielded by regulatory and compliance stuff, certainly if it's on the outside even more. But if you put. Put it on the outside, you have other things you have to think about, like the board who sits on the board of this new CO? So can you have a employee of the corporate sitting on the board of what is effectively a startup or a new CO, and what are the potentials for conflict of interest and so forth? So keeping it on the inside, the governance is relatively straightforward, a little bit shielded. Put it on the outside, much more shielded from because it's an independent entity. But if the corporate sits on the board, there's a governance component to that that you really have to think through and understand. You know, like you sit on a board, you have a fiduciary responsibility to that venture studio. How does that work when you're doing a budget and the money is coming from the corporate to fund that venture studio? So you start to get into these little specific details that you really have to think through.
Marcus Daniels 10:51
Yeah, and I think also just playing a bit on the chessboard. That's why I mentioned the comment of what happens having maybe a prenup, if, when you decide the studio mandate is coming to an end, if it's after five years, or a partnership deal of that is kind of being unwinded or just not moving forward. What happens in those cases. And obviously you can't predict everything, but I think just asking the right questions early and being transparent about it, I think, gets you a long way, just again creating those winning conditions and how you can best maximize success.
Ben Yoskovitz 11:21
Yeah. And another tactical thing we've seen is companies creating venture studios and then looking at how to own 51% again, not legal advice, not an accountant. But there's an interesting threshold there where you say, look, I want to create new startups. I want them to live on the outside, but perhaps I build in Marcus to your point, whether it's a kill switch or an acquisition switch, which is I want right of first refusal to acquire this business when it hits certain targets for a certain value, or I want to acquire 51% of it. So the revenue now goes on my books, and I can recognize that, but I'm also accountable for the cost, but I don't own all of it, so there's a lot of details in there. And again, I would work backwards from what does winning look like? Are you thinking you'll ever acquire these businesses? Yes or no. Are you thinking they have to be strategically very close to the core? Are you thinking these businesses could sell to your competitors, which will change how you would govern them. So all of those variables play into what's the right structure and the right model for the studio, and then the implications from a regulatory and compliance perspective. Great answer. Too much legal advice. We'll move on. No more. No more. Why the disclaimers? No more legal advice. Okay, so the next big topic is a culture. Is culture, basically. So here's the here's how we've structured. The question, how do we foster a culture of innovation within our organization, especially given the slow pace of cultural change? This
Marcus Daniels 12:52
is one of my favorite questions. It comes up all the time. I'll take a bolder approach. Is that you just can't foster a culture of innovation. You have to fight for it. And I think that again, it goes back to leadership. The energy the leader brings to the table sets the tone right. And so if the team, the group, sees the leaders willing to take risks, then that'll help indirectly foster risk taking behavior. Like, can we actually have enough comfort to put ourselves out there to try to drive innovation forward without worrying about our careers, worrying about different elements. Of course, those worries and concerns exist, but I think it really starts, are you willing to fight for it? You know, if you think of an entrepreneur on the outside, a founder is battling every single day to try to win with all these odds stacked against them. And so similarly, in a corporate environment, you have all this other pressure, and if you're not willing to fight for it, there's no way you'll be able to create that level of culture. I mean, can you find a way? Can the leader, you know, lead by example? Can you protect the rebels? Like to think, is there enough safe zones that people can experiment, you know, celebrate failure. Can you promote risk takers? Is a really bold kind of approach. If people know there's somebody in the group who's showing each day, executing, taking risks, you know this, that person getting a promotion or more responsibility or rewarded with more innovation budget to take more risks. It obviously is something I think could really help foster that risk taking driving growth innovation. Another like, I think hack, one of my favorite ones too, is just, how do you implement this? How do you remove approval layers, like, just as a really simple step that it kind of empowers people to take more risks or move faster, and those small little details, I think, really build up to support creating, call it a culture of growth, innovation, fight forward is the most important piece in my my perspective,
Ben Yoskovitz 14:51
yeah, I think, I think that's a great way of looking at it. And I think you, you're, you've taken a bit of a top down lens on it, which I like, you know, so there's a. Air cover component to this from an executive level support perspective, and if people at the top aren't fighting for this stuff, it's never gonna happen. And like, my answer to this question is, it's freaking hard. I suppose that's the answer to every one of the questions is, like, every one of these it's hard to pull off. The things I've seen not work super well are an attempt to train everybody in the organization on methodology. Some of the I know there are examples of that that have worked. I've personally never seen that work super super well. It's the flavor du jour of innovation methodologies. Somebody goes in tries to train everybody on a certain methodology, jobs to be done. And I'm not saying jobs to be done is bad. It's just somebody picks up on that says, Oh, that's cool. I want to train everybody. I've never seen that work super, super well. What I have seen work well is what I describe as the bottom up infecting of the org. And so that's like, sounds gross, but it's not gross. It's you run small programs with small groups of people who are the rebels, who are the innovators, who are put in a safe space to do things differently, and when they go back to their day jobs, they have a tendency to infect the rest of the people around them, because they've their mind and their has been opened up to a new way of working, and they've got a Little bit of the skill set to actually do it, and as long as they go back to their day jobs in areas where people are receptive to hearing those new ways of working, it's not a top down everybody's going to use jobs to be done. It's a bottom up infiltration of the org. And we've seen that work a few times, actually, quite successfully. And so to me, that's the approach I would take if I was trying to affect change. It takes time, probably not, probably it takes years to do that inside of a large org, but we've seen that work a few times, and I like that approach,
Marcus Daniels 16:58
and I love the fact that you talked about not everybody again, because then it becomes this kind of training capabilities exercise when you really have to focus on a small group, the bottom up approach and infecting it really is the thing that kind of catalyzes the risk taking behavior to be able to ship and execute and really drive innovation, or just driving outcomes one way or the other, if it's successful or not moving to the next kind of, you know, opportunity,
Ben Yoskovitz 17:23
yeah, and I'll give you a good example, you know, when, when Alistair Kroll and I wrote lean analytics, we had no real plan of what we were going to do after that, but we in, we got a lot of workshop gigs out of it. This is back in, you know, 2013 a lot of workshop gigs, right? Small companies, big companies would would fly us to places that were cool, and we would go and we would spend a couple of days or a week training people on lean and lean analytics. And everybody had a good time because it was fun. Oh, it's the best part of my job is learning new stuff and doing this crazy stuff with with these, these two characters, me and Alistair, and then everybody would go back to their day jobs, and you know that that glow of excitement would wane and there was no vehicle for them to practice the skills that they had learned or continue to develop leveraging the inspiration that hopefully we gave them. And I've talked to a lot of folks that do that type of consulting, and that's the experience, right? They go in for a one day workshop, everybody has an awesome time. They're ideating, the sticky notes are flying, and then nothing comes out of it. And so I think that's the challenge that big companies have with culture change, as opposed to other programs we've seen where they'll run like a real program to build new businesses. So again, that's growth, innovation, venture building. People will sit in that for a while and spend weeks doing something new, and then go back to their day jobs, if you will. And now they're actually transformed and committed to the methodology and committed to trying to change culture that way. So again, I think it's not a training exercise. It's a doing exercise and then convincing other people to try doing things a different way.
Marcus Daniels 19:12
Yeah, I think you summed it up perfectly. It is exactly that it's the doing, the executing the building, getting the reps and sets and building that muscles becomes infectious. Cool.
Ben Yoskovitz 19:22
Okay, next topic. So this is an interesting one, because it's, it's a couple of ideas combined here. So how do we identify and support promising internal ideas and external partnerships, especially in a competitive landscape?
Marcus Daniels 19:38
Yeah, I would start with that word competitive? Do you really want to compete? I think that sets the stage right. And so regardless of what methodology you use, if you're doing it all yourself, or working with a partner on the outside, you know, it goes back to, do you want to compete and validate things? Well, at a certain speed. I think the balance between. Mean the rigor and also the speed really matters. Because, you know, we've we've joked sometimes where we just, we've talked to people we've supported over the years. They've left a large organization to go to a different industry, and then they come back and their group, they're rejoining, they're still validating, kind of the same stuff over a long period of time. It's been silly so many years. And so I think there's a piece there where, and that's why I kind of just skewed in the word competitive, like, if you're going to compete in the marketplace, I think there's a level of boldness and risk taking and speed that matters without compromising the rigor. Now we're biased towards, again, our venture studio process, you know, we really do believe in the rigor of what it is we've, you know, invested heavily into AI and refining the process from all the work we've done with corporate partners over the years, and working with startups and launching vertical venture studios. And I feel like that is also the next stage. You know, not just the balance of speed and rigor, can you also start building these capabilities with external partners, internal groups, and lastly, the last thing I would add is, can you really empower I'll call it an intrapreneur, to own it. What we've seen often is you have maybe a business leader that's quite senior, or a project manager who's kind of managing the process, versus somebody who is really going to move fast be a bit bolder in taking decisions, but will also own it, and that's really from the internal side. On the external side, I mean, like, we've always looked at different types of programs, if it is, like fast track collision day, to get a quick kind of, you know, snapshot, like over 48 hours or a week, of just what that landscape is like, if you really want to be a bit more bolder and compete in the marketplace externally, is it like a pilot program accelerator we've seen, you know, cases that we've helped with, you know, the introvert prosperity accelerator as an example. And then if you really want to be, you know, I think supercharge the boldness to compete. I mean, something, you were really close with Ben from the inception the 100 plus accelerator, and you're bringing in a lot of other corporates, and you're competing at that global level, not just in a specific Geo. You're moving into other areas and growing off a platform. So like, I think the the theme, again, for myself, and I'm a very competitive guys, you know, is, is, how do you compete and move to win? And you can't win if you're not going to move fast and be
Ben Yoskovitz 22:26
bold? Yeah, that I totally agree with. You know, it's funny, this question, I think, triggered something inside of me, a frustration that I have with with the way corporates are structured. So, you know, there are out of necessity departments, and, you know, groups within, within big companies, yeah, a marketing team, a sales team, whatever, whatever it is, what I find frustrating when we when we think about innovation teams, is they're actually quite often very siloed. So let's say you have a CVC corporate venture capital group, and they're doing investments. I'm not suggesting they're not talking to business units and trying to find strategic things that make sense, but they have one tool in their toolbox, which is, I write checks into startups. You might even have a separate partnerships team, and their whole job is to find partnerships with other companies. Let's say startups you might have, well, you certainly have some form of internal innovation, right business units, and they have a tool in their toolbox, which is, we build things on top of the existing products. We have, typically close to the core h1, type stuff. Maybe you also have a venture studio, and their job is to build beyond the core h2, h3, stuff. But they have one tool in their toolbox, which is building stuff, and I've never understood why. Well, I do understand why things are structured that way. I just don't think it's the optimal way to structure things, because, in my mind, the way that should work, and you touched on the process it should be, go find a problem, validate the problem, build up conviction around that, and then decide which tool in the toolbox to use. Maybe you should build something in house, maybe you should buy something, maybe you should partner. Maybe you should spin something out, maybe you should do nothing. But unfortunately, because of the way corporates are structured, there is no balance between these different things. It's just each group using the one tool in the toolbox that they have chasing it. Now, there are some venture studios that, and we've talked to some folks like Pedro when he was running ZX ventures, where he was building but also investing. We talked to other folks like Mike Dobbins, you know, when he was at RBC ventures, they started with a mandate to go build new ventures, but then they started partnering and acquiring and investing. That's when I think you have the best chance of balancing an internal idea versus an external opportunity. It's stop getting caught in the silo of I have one tool in my toolbox, but think about all the tools, but validate the same way every time. Don't just write a check randomly do. Just buy a company, randomly validate properly, then use the right tool in the toolbox, and then execute the plan.
Marcus Daniels 25:06
Yeah, and the frustration point you made, it's kind of mirroring some of how, you know, large organizations have won with these different departments and how they're scaling. I think goes back to the point I made earlier about having small, elite teams and, you know, having cross functional teams, you know, specifically in the capability, in the competency, trying to build specifically in that zero to one phase of venture building. And then you can kind of add in the other components as you grow in scaling, as you're starting to win in building momentum. I think the example you gave with the corporate venture capital side is interesting, because we know, for, you know, some have different motives, right? Some are really there for kind of that strategic value. Others have just purely investors on on return. Some are in in between. And, you know, we do see more progressive groups as they're starting to win. You know, integrate partnerships as kind of another element into that group so it's not siloed away, right, when you're looking at those elements, because, again, usually partnerships are a great way to do diligence. If you're going to make an investment, you know you're cutting down the speed to be competitive in the market to win that deal. And so I think the again, the this, the tighter these teams can be, and the more cross functional they can be over time, I think you also create that stronger culture of growth innovation.
Ben Yoskovitz 26:25
Yeah, honestly, I think I mentioned Pedro ERP, who ran CX ventures. And we did do an interview with him. And I think if you haven't listened to that, you should listen to it, because he says something in that interview that surprised me, and is which was, you know, they were building ventures outside of AB InBev, and then when ventures, some of them, started to get traction, the core business would copy it. And my first reaction to that was like, Oh, we now have multiple groups of people building the same thing. That's a form of waste. That's not good. He actually said We celebrated that because it demonstrated that we figured something out that the core cared about, and we were very comfortable with the idea of the core, copying, sharing, partnering on that. And I think he used the word, we have a value at AB InBev, that's really about partnership. And so to me, I was like, that's an interesting approach. And you think about the culture required to say, I went and built this thing, it's a new venture, and then the core copied me with all the scale they have, and maybe the core, quote, unquote, won, scaled faster. And some people might look at that and say, that's a disaster, like I failed in my venture studio for not being able to do it. Pedro looked at it differently and said, No, that was actually winning for us, which I thought was fascinating,
Marcus Daniels 27:40
yeah, because it's winning as a team, right? You're playing on the same team. And I think that also is where sometimes it fails, because different groups, different labs, are actually competing against each other. They don't have that level of orientation. I think his lens at what he had, kind of what he accomplished, and where he was sitting, also kind of fostered that from a top down perspective, that we're this collective and this is fantastic to learn from this and then apply it at scale like you just described. Yeah,
Ben Yoskovitz 28:05
yeah, absolutely. Okay. Next topic, how do we balance short term financial goals with long term innovation objectives, particularly in a volatile economic climate, you want to go for it.
Marcus Daniels 28:19
You go first, it's easy. Yeah, look, I'm a transparent, direct guy. You just don't right? I think weak leadership cuts growth. Innovation, it's a signal that effectively says you're not playing offense, you're playing defense, right. Like, that's That's it. Like, that's it. You can't balance short term and long term effectively if you're trying to do anything related to growth innovation, it needs more than time just to marinate. It needs a long kind of mandate. And so if you're optimizing for short term, you're looking at quarterly kind of metrics, or we back to the kind of the conversation earlier, I just don't think you have a chance to win. It's that simple. And so I think the thing you need to do, or the question you need to ask yourself is, how do you protect that growth innovation budget as a strategic asset? And it's, don't view it as like a cost center. And so if you, if you're going to the place of, well, we need to cut we need to cut this now. Then the question is, okay, that's fine. Then you just, you're playing defense. Just call it what it is. So I feel like that's the orientation that a lot of people are muddling, you know, people we've had conversations with, so even some folks we've worked with over the years is you can't be caught in the middle. You have to take an edge in one, one side or the other. And to me, it's as simple as saying, Do you want to play offense? And do you have Are you patient enough to play offense? It's fine to play defense for a bit and say, You know what? Next year we're going to play offense. We're going to play offense. So this is what we're taking that decision, we're focused on short term. And I think the one way to work that out, too, is really setting and measuring different growth innovation KPIs. So which ties, again, to the outcome, strategic outcomes at a at a longer. Term horizon, which then might get enough kind of board strategic support that you know you don't you play in the right the right category for the moment in time of where you want to win.
Ben Yoskovitz 30:11
Okay, so let me ask you this. You've probably heard the phrase defense wins championships. So, yeah, absolutely. I think, I think Dikembe Mutombo, rest in peace said that, and others have said that as well. So if defense wins championships, is that an argument against growth, innovation and playing offense?
Marcus Daniels 30:32
Not at all, because you already wanted the core business. By playing defense, you have a strong foundation. And so now what you're you're competing at a different level. You know, you're not competing to make the playoffs. You're competing to actually try to win the championship, and so to be in the game, to get past the first round. I know he was a great shot blocker, and that's important. But at the same time, it's like, well, you need somebody who's going to take that risky three pointer at the buzzer and not just, you know, try to pound it inside and try to get a short layup you need. Steph Curry is what you're saying, more or less. I mean, he's taking lots of shots and, you know, he's perfected the ability to, we'll call it growth, innovation beyond the arc, really changing, changing the whole entire game of how the game's being played. Like Mutombo, you know, ultimately, now is a bit of a relic. That's why the game of basketball has dramatically transformed to what does it take to win now an NBA championship?
Ben Yoskovitz 31:25
Yeah, it's interesting. I mean, you touched on it, and we've seen a number of companies in the past that we have worked with, have relationships with, go through this up and down. We're going to innovate. No, we're not going to innovate. We're not going to innovate. We're going to innovate. No, we're not going to innovate. We're going to over and over and over again this cycle and and I understand why they do it, but in another way I don't understand. Because to me, if the question is, how do I balance short term financial goals with long term innovation objectives, my my answer to that is, how do you not, how do you not invest in both simultaneously and figure out how to do that? Because while you're playing defense and using your analogy, other people are playing offense. It's that's always true, and then you're spending all your time playing defense, keeping things alive. And I get it, you have short term goals, if you're a public company of a stock price that you have to hit but, but that short term thinking eventually will kill you. Now, you can't take all your eggs and put them into the long term basket, because then you'll literally run out of time as well. But to me, finding the right balance, and it's usually a relatively small amount of investment in h2 h3 growth innovation using different vehicles, like venture Studios, where the bulk of the budget remains focused on the core and hitting those quarterly numbers that you need to hit. I just don't understand how you ever make the decision not to do both at the same time and find the right again tools in the toolbox and the balance to accomplish that,
Marcus Daniels 33:03
yeah? I mean, I'll just push back a little bit on that, because I totally understand what you're saying. I just think again, it's you're not optimizing for the right strategic role, right? If your role is to do both at the same time, you have to think, oh, wait a second, like, that's a different skill set. Who is that?
Ben Yoskovitz 33:19
Different people? Different people. Yeah, it's different, it's different people, it's different groups, it's different tools in the toolbox that you're using to do both. But, you know, again, that's why I'm saying, if you have, you know, you have, let's say it's a big company. You already are doing incremental innovation. You're doing a lot of it. You're trying to launch the next version of the product, launch the new, you know, an iteration on the brand, whatever that, whatever it is that you're doing there, and that's to keep the machine going. At the same time, there has to be a separate group of people focused on the future. So to me, it is two separate groups of people optimized with different skill sets, capabilities, resources, governance structures in order to do that, but, but that's where I always wonder when, when companies kill their sort of growth innovation teams and they shut those things down. I'm like, that's you're shooting yourself in the foot, if not directly in the face,
Marcus Daniels 34:13
yeah. And I think the other thing to really kind of highlight, and I think the question said it, if, are you doing this first, right? And so if you're cutting the growth innovation budget first, that also tells you something about where things maybe that's the right answer, because the business is on. The core business is under tremendous threat, and we need to really play, you know, amazing defense every all the resources have to be allocated to this for the next year. Totally fine. But to your point, earlier, if you're not taking any of these bets to go on the offense at any point, it's really hard to see, like, how you're going to be able to turn it around in the future.
Ben Yoskovitz 34:51
Yeah, totally agree. Okay, let's go to the last topic, and you've already touched on this a little bit. Marcus, so what are the key metrics to. Measure the success of innovation efforts, especially with venture studios and venturing activities. Well,
Marcus Daniels 35:05
maybe I'll flip it then, since I touched on some of it already, what are the things you should not track? Right? So let's stop tracking the number of innovation workshops and people have participated in the year. Let's stop tracking the number of patents we filed, let's stop tracking the number of innovation ideas that we've generated and are capturing in some innovation software platform, right? The only thing that matters is outcomes, outcomes over activities, right? And if you're thinking you're taking a real bet to do growth innovation, that's where I would really start the conversation and outcomes. Again, can might be too macro. I know then you're going to maybe drill it down into some real specific things, but, but again, I feel like that's where most folks fail, because they want the magic answer, what the metrics, the specific metrics, and it is outcomes. And outcomes. Again, venture studios, even with it, you know, corporate venture capital investing, it is going to take time. And it's, it's about winning over a different horizon, and it's not something very finite at the beginning. And I think a lot of a lot of groups get stuck trying to, you know, measure activities to show that they're making progress. And I think that's the first, the first place that I think from a culture change we talked about earlier, is, how do we have that orientation of taking risks, but really think about what winning is, and that's outcomes in the big picture.
Ben Yoskovitz 36:34
Yeah, totally agree. You gave me an idea to write a blog post at some point about the vanity metrics of corporate innovation. So we'll do that at another time. And you touched on a few of those vanity metrics that are, you know, we see them all the time. They're very common. Sometimes they're out of necessity, because, you know, an executive level group needs to see how many ideas went through the funnel. You know, everything gets visualized as a funnel. And I've actually worked with a few folks in venture studios who are like, I want to visualize what we're doing and the results we're getting without using a funnel. And I was like, I'm not sure you can. I think we have to have a funnel where ideas go through the at the top of the funnel and they get validated along the way, and businesses come out the other side. I couldn't come up with another way of visualizing, to your point, the activity of stuff going on, but it is a vanity metric, because if no results come out the other end, it's a moot point. When I when I think about the metrics, I look at them at two levels, one is the portfolio level, and one is the venture level. And so at the portfolio level, you know, where are we progressing through whatever operating model or playbook we have? How many ventures are in flight? What stage are they at? How well are they performing? How much money have we spent on them? How much more money do we want to spend on them, if you take an investor lens to it. So that's sort of a portfolio view. And it's, it's different from how big companies look at the portfolio of products they have, for example, or the portfolio of, you know, stuff that they have going on. So it's a it's more of an investor portfolio view of it. And then at the venture level, it's venture specific metrics. And so those can vary venture by venture, but you have to be able to understand, is the venture actually solving a real problem? Is it getting early traction? Those are also different because the level of traction is so small relative to what a corporate would expect. And we've talked to a number of guests about that dichotomy of, you know, the core launches a business, it has to hit $50 million in a week, and the venture studio launches a business, and it gets 10 customers in a week, and everybody's cheering. So I think, I think you have to learn what metrics to track at the portfolio level and the venture level, and they're very different from from corporate and and that takes a lot of effort and a lot of education of the people around the venture studio or around the venture building activities who understand what a venture studio is supposed to do, but really, really don't understand how to track progress or success. They want to understand it, but they really don't, because they've never done something like that before.
Marcus Daniels 39:23
Absolutely correct. I mean, I think, you know, that reminds me again, like we've seen the constructs of how we've helped set up venture boards that help kind of remind and get that kind of both strategic and also tactical kind of layer, what winning is at the venture level, but also at the portfolio investor level. Like you described, just thinking what you were saying, There a couple of things I would add to make it a bit more also like outcome driven. What does winning look like? You know, instead of those kind of vanity metrics I described before, maybe it is okay. Ventures launched is interesting. That's like the first step. But really, how many ventures get to whatever we think of as close to? Product Market Fit right post the point where the core could also leverage the strategic asset to maybe scale it and really put points on the board. I mean, like, that's, that's one element on the investor lens perspective, too. Again, how do we create value that sometimes is intangible, like, we've been involved in situations of advisory of, how do you value that was created in this new venture that we created. How do you value this venture studio on the outside? And I've always liked, you know, the concept of, you know, equity value created that's validated by some third party. Call it investment, or, you know, body and so, you know, somebody else pricing, what that value of a startup is, because now we hit product market fit into doing a series a or Series B round, you can say, Oh, wow. We started this thing from zero, and now it's kind of gotten to this particular stage. And again, I think, you know, the venture board construct, I think, is one of the most valuable tools that, you know, we've experienced in helping folks kind of navigate this world, but also the point of what is winning, the strategic value that is really hard to put, like a hard metric against, but also give enough momentum of remembering that if you're going to go in the offense and you're going to harvest the value of this group, this investment, it can't be done in the short term. You have to be able to protect it, nurture it, evolve it over time. But I think that's again, why, you know, again, we exist in helping to support this and building companies on the outside.
Ben Yoskovitz 41:32
Yeah, I think pricing. I think if you're spinning companies out, you know, someone else, pricing it, an investor coming in, is a good measure of, to some extent of equity value created. The other thing I'll say here about metrics, it is, building Ventures is a long term game. But if I were starting a venture studio today inside of a big company, I think I would be, aside from the education and setting up a venture board and the governance, I would be almost exclusively focus on getting one venture built. I'm not going to suggest that most venture studios get zero ventures built. I think they all eventually get something built. But I've seen venture studios take years, literally years before they actually ship a company and whether it's spun out or not spun out. So to me, while we're looking at outcomes 100% if you can't get to first base, we'll use a baseball analogy, you can't get to home, like you won't score a run. So to me, it's just, it's if I was launching a studio right now, I'd be like, what's the fastest path to building a business with the minimal amount of investment. So it's not all our eggs in that one basket just to go through the cycle of doing it and proving we can actually ship something, because shipping things is super, super hard. So, and it's not even winning, by the way, which we know, right? Like we shipped the company. Did we win? No, we haven't won. Now it's going to be five more years plus of trying to scale the thing, so we better get to the shipping part as fast as humanly possible.
Marcus Daniels 43:05
No, I totally agree, and we've lived it. And I think, you know, again, what does it really mean to ship a venture like, when is that public launch? Right? It doesn't have to be a public launch. It could be something that, okay. We've shown the muscle that we can go through it. We know we're taking a portfolio approach so we have enough courage to go through this process fast enough and look, we've done one venture. What do we learn from that? How do we tweak the operating model? How do we then go to the next venture? Even if that venture doesn't work out and you shut it down after two years, it propels to your point like now, that muscle, that capability, that we can do this ourselves and also partner with folks on the outside if we're spinning things out. Yeah. I
Ben Yoskovitz 43:44
mean, the confidence that you bet you get from shipping something, even if it doesn't succeed later on, is significant. And then, like you said, iterating the methodology, the operating model, so that that thing's not like a top down stone tablet kind of strategy. It's like, oh, we learned this takes us a bit longer. We learned we have to run a few more experiments here. We learned we have to recruit the founder earlier. Fantastic. Let's do that for number two and three. And by the time you get to venture 4567, maybe you're starting to figure things out. So so to me, that sets and reps really is is key. Cool. All right. Well, that was a lot of stuff, hopefully valuable for everybody that's listening in thank you for sending in questions. Thank you for demonstrating interest in the venture studio model. We're always around to talk to folks on LinkedIn or on X or elsewhere. Feel free to reach out anytime. Ben@highlinebeta.com or marcus@highlinebeta.com thank you for listening. Thank you.
We always enjoy conversations about innovation and startup building so please get in touch.
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