Ventures Should Solve Problems, Not Chase Hypes
Introduction
In an era punctuated by rapid technological advancements, the corporate venture ecosystem is increasingly seduced by the allure of the next big thing. Buzzwords such as Blockchain, AI, Metaverse, and NFTs dominate the discourse, promising to revolutionize industries overnight. Yet, amidst this cacophony of technological enthusiasm, a critical insight often goes unnoticed: not all innovations address genuine market needs or solve real problems.
Take, for instance, the meteoric rise and subsequent challenges of numerous blockchain projects. Launched with fanfare, many such initiatives struggled to find practical applications beyond the speculative frenzy of cryptocurrencies, underscoring a disconnect between technological capability and market necessity. This example epitomizes a broader trend in the corporate venture landscape — a tendency to chase after hypes, seduced by the potential of emerging technologies, yet failing to anchor these innovations in solving tangible problems.
This article posits a fundamental reorientation of priorities in the corporate venture space. It argues for a disciplined approach that places problem-solving at the forefront of venture building, relegating technology to a supporting role. By prioritizing the identification and understanding of real-world problems, ventures can develop solutions that not only captivate but also deliver meaningful value to their target audiences. The ensuing sections will explore the pitfalls of the hype trap, advocate for a return to basics, outline a framework for problem-solving ventures, and ultimately, call for a renewed focus on creating impactful solutions over merely leveraging the latest technologies.
As we delve into this discussion, let us guide our exploration with a core thesis: the success of corporate ventures hinges not on their technological prowess but on their ability to solve real problems in a meaningful way. In doing so, we will chart a course toward more sustainable, impactful, and customer-centric innovation in the corporate venture landscape.
The Hype Trap: A Common Misdirection in Corporate Venturing
The corporate venturing landscape is often captivated by the latest technological innovations, a phenomenon that can mislead even the most strategic minds in the industry. This fixation on emerging technologies can lead ventures down a precarious path. The allure of these technologies, while grounded in their potential to disrupt and transform, often overshadows the foundational goal of venture building: to solve real, tangible problems that customers face. This misalignment between technology adoption and problem-solving is what we term “the hype trap.”
The hype trap ensnares ventures in a cycle of innovation for innovation’s sake, where the primary objective becomes the deployment of cutting-edge technologies rather than the delivery of meaningful solutions to market needs. A poignant example is the rush towards developing and integrating AI capabilities without a concrete understanding of the specific problems these capabilities were meant to solve. While AI holds immense potential for transforming business operations, customer service, and decision-making processes, its indiscriminate application has led to ventures that, though technologically advanced, lack a clear value proposition for their intended users. This disconnect highlights the critical flaw in the hype-driven approach to venture building: the assumption that technological sophistication alone is sufficient to guarantee success.
The consequences of falling into the hype trap are significant. Ventures that prioritize technology over problem-solving not only risk misallocating resources but also alienate potential customers by failing to address their actual needs and pain points. Moreover, the focus on technology can obscure simpler, more effective solutions that may not carry the same aura of innovation but are far better suited to solving the problem at hand.
To navigate away from the hype trap, corporate ventures must adopt a disciplined approach that places problem identification and understanding at the forefront of their innovation efforts. By doing so, they can ensure that technology serves as a means to an end — the end being the creation of value through the resolution of real problems. This shift in focus from technology to problem-solving is not just a strategic imperative but a necessary evolution in the mindset of corporate venturing, one that promises to yield more sustainable, impactful, and customer-centric outcomes.
Back to Basics: Understanding the Problem and Context
The essence of true innovation in corporate venturing doesn’t stem from an infatuation with the latest technologies but from a profound understanding of the problems and contexts within which these challenges exist. This fundamental shift back to basics requires venturing teams to immerse themselves in the lives of their customers, thoroughly grasp the intricacies of the problems at hand, and discern the nuanced dynamics that define the market landscape.
The starting point is a meticulous dissection of the problem. This involves not just identifying the symptoms of the issue but understanding its root causes, how it affects potential users, and the context in which it exists. This deep-dive approach ensures that solutions are not just superficial bandaids but are designed to address the core of the problem effectively.
Example: Financial Inclusion Ventures
Consider the case of ventures aimed at improving financial inclusion in emerging markets. These ventures didn’t start by deploying the most advanced fintech solutions. Instead, they began with a ground-level understanding of why certain populations were underserved by traditional banking systems. By recognizing barriers such as lack of access to physical banks, distrust in financial institutions, or the absence of necessary documentation, solutions like mobile money platforms were developed. M-Pesa, a mobile phone-based money transfer service in Kenya, is a prime example. By understanding that many Kenyans lacked easy access to banking infrastructure but had widespread use of mobile phones, M-Pesa was able to provide a simple, secure, and accessible financial service, revolutionizing the way money is saved and transferred in the region.
Understanding the context is equally crucial. It encompasses not just the immediate environment in which the problem exists but also broader societal, economic, and technological trends that might influence solution effectiveness. This contextual awareness ensures that ventures are not developed in a vacuum but are deeply integrated into the fabric of the target market, addressing the users’ needs in a holistic manner.
Example: Sustainable Packaging Solutions
Take, for instance, ventures focused on developing sustainable packaging solutions. The problem of plastic pollution is well-documented, but solutions require more than just creating biodegradable alternatives. Understanding the context — including consumer behavior, recycling infrastructure, regulatory environments, and supply chain logistics — is crucial. Loop, a shopping platform offering products in reusable packaging, illustrates this well. By understanding the consumer desire for sustainability, coupled with the inconvenience of traditional recycling, Loop developed a system that offers convenience and aligns with environmental values, thereby addressing the problem within its complex context.
The journey back to basics — understanding the problem and context — is the cornerstone of meaningful innovation in corporate venturing. It ensures that ventures are grounded in reality, designed to meet actual needs, and capable of making a tangible impact. This approach might require more upfront investment in research and engagement, but it paves the way for solutions that are not just technologically sound but are truly transformative and sustainable in the long term. By prioritizing this foundational step, ventures can avoid the pitfalls of technology-driven enthusiasm and create value that resonates deeply with their target audiences.
Examples from our work: solving real problems
As we look to build risk-aligned investable corporate ventures, we are often managing the balance between what venture capital firms want (which is often the next hot thing) and building things of value over time. The good news is that now with “tech winter” the two agendas are fast converging and we are finding much better discussion regarding those ventures that are focused on real problems and are also achieving revenues and are ultimately raising investment.
As you will see below, normally those ventures are not only digitally oriented but also have a clear physical element that solves real problems. The three examples below are ComeBy, Dayatani, and Polar.
ComeBy is the most digital venture on this list. It still aims to solve a real issue of helping more customers buy offline even while online sales are growing. This venture uses information gleaned from shopper interactions within a store or a mall. The KPI here is ultimately how much more sales can be achieved per meter squared. While this is done with the help of applications and geolocation data it ultimately has real KPIs to solve for.
Dayatani focuses on improving farmer yields starting with chili in Indonesia. While it uses the best available current technology — IoT devices for checking weather conditions and soil nutrients and AI to help field officers and farmers better assess pests and diseases, its solutions are grounded (to use the pun). The challenges the venture solves are real, with KPIs measuring yields of the fields, costs of production, and quality of produce. While Dayatani is a venture that has been invested in by leading Indonesia VCs, it focuses on a real problem that is rapidly increasing in importance as climate change impacts growers in Indonesia.
Polar is the latest venture we have built together with Engie and is focusing on creating more efficient cold storage specifically for SEA small and medium enterprises that cannot invest in efficient cold storage. Here the KPI is reduced energy use for maintaining the coldness of the cold storage. The venture in this case also solves a secondary problem of many SMEs not being able to pay for the CAPEX investment for their cold storage or the lack of know-how to manage it once installed. Polar does that as well, offering Cold Storage as a Service.
Conclusion
As we’ve navigated the critical examination of corporate venturing in the modern technological landscape, a clear narrative emerges: the path to meaningful and sustainable innovation is paved with a deep understanding of real-world problems, rather than a fleeting fascination with the current technological hype. This article has underscored the pitfalls of the hype trap, advocated for a rigorous approach to understanding the problem and its context, and outlined a structured framework for developing solutions that genuinely address those problems.
The corporate venture space is at a pivotal juncture. The choice between succumbing to the allure of hype to appeal to decision-makers and investors without clear applications and grounding ventures in the reality of problem-solving will determine the future of innovation. Ventures that emerge victorious are those that recognize technology as a tool, not the end goal. Their success lies in their unwavering focus on solving genuine problems that affect their customers, leveraging technology judiciously to enhance their solutions.
By adhering to the principles outlined in this article, ventures can lead the charge toward a new era of innovation — one characterized by solutions that are not only technologically advanced but also deeply impactful and resonant with the needs of society. This approach not only increases the likelihood of commercial success but also contributes to a legacy of positive change and value creation.
We are also pleased to be an appointed venture studio of EDB’s Corporate Venture Launchpad 2.0. CVL 2.0 is an expanded S$20m programme by EDB New Ventures, designed to enable companies to incubate and launch a new venture from Singapore, supported by venture studios experienced in corporate venture building. You can also find out more on our website.
Interested to learn more about investable ventures? Drop us a line: contact@wright.partners
Sebastian Mueller, Co-founder at MING Labs
Ziv Ragowsky, Founding Partner at Wright Partners
