Establishing a Corporate Venture Building Unit – A Practical Example
A case study by Bitrock Digital Partners and REHAU New Ventures.
In a globalized economy, companies must constantly evolve in order to remain relevant and secure competitive advantages. One way to do this is through corporate venture building, which involves using existing resources to establish a new business unit outside the existing organization, as the REHAU Group has successfully done with Bitrock Digital Partners.
In today’s globalized economy, innovation is one of the basic building blocks that contribute to a company’s success. In all industries, established companies are challenged by new start-ups, which is why constant further development is essential to remain relevant. Therefore, to secure competitive advantage, companies must constantly reinvent themselves and innovate. One way to do this is through corporate venture building, where existing resources of an existing company are used to build a new business unit outside the existing organization. How this can be done successfully is shown in the following case study using the REHAU Group as an example. In cooperation with Bitrock Digital Partners, the company from the plastics sector founded the venture building unit REHAU New Ventures to promote innovation and digitalization and to open up new business areas.
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How does a company adapt to market changes and growing competition?
The REHAU Group offers various solutions for the construction industry, the furniture sector and the automotive sector. In 2017, the company began to establish an organizational unit within the company with a small team and external support to address innovations and new business areas that build on the core business of the REHAU Group. The goal was to develop new business areas beyond the core business. The team launched various projects in the construction industry, including building business models in civil engineering, road construction and pipe, as well as windows. Innovations such as smart alarm systems and digital displays were tested. Meanwhile, it became clear within the group that other departments, such as the product management department and the business department, were also increasingly involved in innovative projects. As a result, it made more and more sense for the company to establish a corporate venture builder, which would operate separately from the company. Although the internal innovation unit had been involved in numerous projects, it became clear that this was the only way to maximize the added value. By separating out from the corporate structure, REHAU New Ventures had greater flexibility and freedom to develop new ideas and take risks. Separation from the corporate structure allowed the company to act more independently and create an innovative and creative corporate culture.
What is the process for establishing an outsourced innovation unit?
In 2020, the existing teams, including the Innovation Unit and the Innovation Lab, were merged and REHAU New Ventures was founded. To ensure a smooth transition here, Bitrock Digital Partners was consulted with its expertise. In workshops, management received strategic advice and coaching to improve existing operational concepts. Together with REHAU New Ventures, a clean set-up was made for the new venture unit. It was ensured that the new unit had enough freedom to be successful and to motivate founding teams. A manual was also created for the structured set-up of future projects. The new unit combined software and hardware development teams, as well as electronics specialists, and was spun off as a separate Ventures GmbH on the market. REHAU New Ventures GmbH has a broad base and brings with it competencies that were taken from the parent company. These included competencies in the areas of innovation management, innovation architecture, software development, electronics expertise, marketing, business development, e-commerce, financing and venture capital. By bringing these same competencies and resources from the parent company, the innovation unit was able to build on a solid foundation from the outset, enabling it to develop and implement innovations faster and more effectively than newly founded start-ups. This enabled the decisive competitive advantage to be gained and innovations to be established on the market more quickly. By founding REHAU New Ventures, the REHAU Group has thus created the opportunity to maximize its innovation capability and increase its growth potential.
What is the function of the innovation unit in the company and how is it structured?
REHAU New Ventures GmbH is a wholly owned subsidiary of the REHAU Group that aims to build up a portfolio of companies in the long term. In doing so, the ventures are to be run and managed as independent companies. The goal is to build a portfolio of value and to establish two to three new start-ups or ventures each year. The focus is on creating long-term value for the portfolio. To achieve this goal, two teams have been established with different topics. The first team is focused on digital processes and tools to make home building and renovation more efficient. The second team is active in the Better Living area and focuses on electronic products and digital services to make life in the building more pleasant. Both teams are made up of interdisciplinary teams consisting of various disciplines such as innovation management, customer service, technical understanding and UI design. The development of new ventures and start-ups within REHAU New Ventures focuses on the rapid and iterative validation of ideas. Here, customer problems are taken as a starting point and solutions are prototypically tested as early as possible. As soon as a Minimal Viable Product (MVP) or an advanced mock-up is available and customers are ready to use the product, a business plan is drawn up and presented to the Supervisory Board and investors.
In order to successfully launch the new venture on the market, a dedicated team is formed to deal exclusively with its implementation. At the same time, synergies between the individual ventures are exploited and joint structures are created in order to achieve efficiency advantages over competitors in the market. This also includes a special team that takes care of the support of the individual ventures, e.g. in the areas of accounting or ERP system. These joint structures and services can create repeatable processes that increase efficiency and thus drive the value development of the entire portfolio.
What are the stages of spin-off and what challenges do companies face in setting up ventures?
REHAU New Ventures divides the spin-off process into four phases: Ideation phase, Build phase, Scaling, Transfer and Exit. In the “ideation phase”, a major challenge is to always keep the customer in focus and to quickly test and then confirm or disprove hypotheses. Developing appropriate solutions can also be a challenge, as some problems may not have a solution. In the “build phase”, the main challenge is to assemble the right team that complements each other and shares the same culture, but also allows for different views. In addition, especially in this phase, it is important to have a broad portfolio of competencies and to involve external competencies at an early stage. This can be achieved either by selecting the right people or through partnerships such as with Bitrock Digital Partners, including industry and methodological knowledge from years of project experience.
What are the biggest learnings from REHAU New Ventures in setting up ventures?
It is particularly crucial to understand which phase the project is in and what requirements are involved. In the early phase, it is important that teams have different impressions and generate ideas from different sources. However, once a concept has been validated, experts need to be recruited to develop and bring a validated concept to market. This is where strong focus is critical. In addition, it is important to generate domain expertise for building future ventures so that existing resources can be drawn upon again for later projects. In venture building, portfolio management is also crucial to spread risks and compensate for failures. It makes sense to build up a comparatively large portfolio or to join forces with other companies in order to spread the risk over several firms. Lastly, it has been shown that successful collaboration is often based on good interpersonal relationships. This means that the best skills alone are not always sufficient to find the best candidate for a job. Factors such as motivation, corporate culture and personality can be just as decisive.
Author: Clara Thümecke
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