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Corporate venturing in the 1990s was like a day at the beach. The water looked so inviting that even novice swimmers jumped in. When the heavy waves of a faltering economy swept in, it left many sputtering on the shore, reluctant to wade in again. But, if you learn how to ride the waves, corporate venturing offers the way to a stronger, healthier organization. Motorola Inc. (www.motorola.com), for one, made a dedicated commitment to venturing—which means making a carefully targeted series of small investments in start-up companies or building a portfolio of potential businesses internally, from scratch, by drawing on some proprietary asset such as a distribution network. Motorola uses venturing as part of an integrated approach—combining ventures with internal research and development and acquired operations—to help it come up with big ideas and differentiate itself from competitors. Each year, the cellphone maker spends about $4 billion on research and development and earmarks between $50 million and $150 million for ventures. Over the last several years, Motorola has invested in about 45 ventures. The ultimate goal isn’t the money to be reaped from taking an internal venture public or selling a stake in a start-up to the highest bidder, although financial returns are important. The real payoff is in the many ways that venturing helps Motorola enter new markets, cut costs on products, line up licensing agreements, or arrange joint-development projects. Even if an internal venture or investment in a start-up doesn’t produce what Motorola thought it would, the company learns which possibilities to pursue and which to avoid. Lessons learned in one part of the business are applied to others. Two things, in particular, set Motorola’s venturing efforts apart from others. Before making any commitments, Motorola makes sure that there is a strategic fit between an internal venture or a start-up and Motorola’s goals, plans, and capabilities. After the ink has dried on a deal with a start- up, Motorola works like crazy to nurture its relationship with the venture. STRATEGIC FIT. The emphasis on fit—which many companies miss, as they try to get the maximum return on each venture investment—is illustrated by Motorola’s investment in 4thpass Inc. (www.4thpass.com). Motorola was interested in deepening its involvement in what is known as J2ME—for Java 2 Micro Edition, an increasingly important standard for software for wireless and hand-held devices. 4thpass already had developed a way to use J2ME to help wireless operators offer and distribute applications such as videogames to wireless users. By investing in 4thpass, Motorola learned about, and helped develop, the J2ME market, which could lead to a new wave of sales of Motorola wireless devices. More generally, Motorola assisted its wireless-operator customers. Another good example of fit is Motorola’s investment in PacketVideo, a wireless multimedia company (www.packetvideo.com). PacketVideo had made great strides in the hot new field of “streaming video”—video that arrives fast enough to be shown in real time, rather than having to be stored and played later. Its products fit nicely with an array of products under development at Motorola that run the gamut from consumers’ handsets to equipment that network operators use. The alliance with PacketVideo also gives Motorola access to quality content providers—such as Internet and entertainment concern AOL Time Warner (www.aoltimewarner) and Japan’s Sony Corp. (www.sony.co.jp)—that would more easily strike up agreements with a nimble start-up than with a larger company. PacketVideo’s streaming-video capabilities and new content could increase interest in new types of wireless equipment by letting people play games or video clips on their cellphones—something that is, in fact, happening. Motorola invested in Graviton Inc. (www.graviton.com), a start-up in the burgeoning field of machine-to-machine communication, because Graviton’s work on sensors fit well with semiconductor technology Motorola was developing. In addition, the relationship might lead to new types of services for Motorola to offer or, at least, might significantly boost traffic on wireless networks that use Motorola equipment. Graviton sensors can, for example, be used in refrigerators in convenience stores to indicate when the temperature gets too hot or too cold—and can prompt a service call. RELATIONSHIPS. Even with a strong strategic fit, an investment in a start-up needs to connect with the interests of individual business units. Without enough strong internal sponsors, a relationship with a start-up will fail, as might its business. At Motorola, members of a corporate-venturing office sit down regularly with executives from the business units to identify technology gaps that could be filled by investing in outside companies. In many cases, the business units already have begun talking with interesting companies, so the corporate-venturing office simply cements the relationship by making an investment. The relationship is then assigned official champions, whose jobs are to ensure that the start-up’s business continues to correspond with Motorola’s needs. Typically, a senior executive from the sponsoring unit is one of the champions. There also is a technology champion, who monitors the start-up’s progress and keeps tabs on how its technology would work with Motorola’s; often, the technology champion works side by side with the start-up’s engineers. There also is a champion from the corporate-venturing office, who will steep himself in knowledge about the start-up and track whether that business is keeping up with its plan. As quickly as possible, Motorola tries to go beyond an initial investment in a start-up and deepen the relationship by establishing a commercial relationship: having the start-up become a supplier, a distributor of Motorola products, or a partner in a product-development project. Motorola is, for instance, developing a chip for use in Graviton’s wireless networks. Motorola has three commercial agreements with PacketVideo, including one to use PacketVideo software in its next-generation cellphones for third-generation, or 3G, wireless networks. Even with commercial agreements in place, an organization such as Motorola can easily overwhelm a small company through sheer size. To head off that problem, Motorola’s venturing group goes the extra mile to make the start-up prosper: helping recruit employees, assisting with the development of technology, and finding customers. When circumstances change—and they do—Motorola tries to stick with the relationship. For instance, Motorola made an investment in SecureOps Inc. (www.secureops.com), a high-technology security business, because it was a strategic fit for two of Motorola’s business units. But then both units were sold. Rather than ignore the investment, the corporate-venturing group shopped the technology around the company and found two other business units that picked it up. Venturing, and the collaboration that comes with it, is helping Motorola meet the quickly changing needs of its customers. It can help you, too. But you have to get back in the water to do it.
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