At first glance, a five-year-old insurtech startup and a 160-year-old bank don’t have much in common.
But as a recent Mach49 fireside chat highlighted, by embracing entrepreneurship and cultivating a culture of customer-driven innovation, every organization, whether a large Global 1000 or a brand new startup can become a disruptive force for change in their industries and beyond.
Our founder and CEO, Linda Yates, joined Joe Emison, co-founder and CTO of Unicorn Branch Insurance, and Ryan Kohler, head of investment banking ventures for Standard Bank, to discuss how Mach49’s approach to driving growth through venture building and venture investing has shaped their work. UC Berkeley and Princeton Professor John Danner moderated their discussion.
Customer Pain Matters in Every Context
Joe Emison and Ryan Kohler work in significantly different contexts, with divergent backgrounds—Joe is a startup veteran and technologist in the US, while Ryan built his career in the traditional world of investment banking across Africa.
Joe worked with Mach49 in a previous role serving as the CEO of an internal venture for a Global 1000 company. He later jumped out and co-founded a new startup leveraging Mach49’s approach—building Branch Insurance into a unicorn valued at $1.05B. Ryan and the Standard Bank team partnered with us to build a venture to make it easy to do business in Africa. According to Ryan, that goal and what they learned from customers during that project has since become the north star for the entire company. At the request of the visionary Investment Banking leadership, Ryan has gone on to launch and lead Standard Bank’s Investment Banking Ventures activity, which is now entering its fifth year of operation. Despite their differing realities as a startup and Africa’s largest bank, both Ryan and Joe point to one core element of the Mach49 process as a game-changer: listening for and solving customer pain.
“The number one thing you have to do is understand customer pain,” Linda explained. “You actually have to interview customers because while surveys are statistically significant, they are strategically irrelevant because unless you talk to customers directly, you won’t have a visceral understanding or empathy for their pain.”
As Joe noted, that customer-centricity is often at odds with the typical Silicon Valley ethos—and with how he used to operate.
“Unless you spend a lot of time understanding who has pain and what the pain is, you will build too early, and what you will build will be poor. I’ve always been a technical entrepreneur. Before working with Mach49, I had that ethos of ‘build as early as possible to get the product out.’ Having the opportunity to incubate a venture with Mach49 helped me understand that all the time I was spending building was useless relative to the time I was spending talking to people and understanding their pain.”
The power of listening is turbocharged for corporations like Standard Bank, who have thousands of existing customers at their fingertips.
“What we liked about Mach49 was this notion that big corporations have what it takes to compete with smaller, more agile businesses,” Ryan commented.
“I’m still amazed at what we're learning about our customers and the challenges that they experience when they go through a certain client journey with our bank. I’ve got so many examples of cases where we assumed what the issue might be, and the situation actually turned out to be different.”
Those findings weren’t just applicable to Ryan’s venture efforts. The customer insights his team gleaned through extensive listening sessions have since informed Standard Bank’s overall strategy—proving the symbiotic nature of corporate venture engines.
Give New Ideas Time to Breathe
According to John Danner, “a lot of people think the term corporate entrepreneurship is something of an oxymoron.” To overcome the risk of what he called “ideacide,” the Mach49 process marries entrepreneurial spirit with what Linda has termed “the mothership advantage.”
“It’s a double helix,” Linda said. “One strand of the DNA is venture building and investing. The other is seizing the mothership advantage, including ideas, talent, brand, channels, customers, etc.”
To successfully combine the two, companies need to control the friction and inertia inherent to large organizations while building a repeatable, scalable process.
For many corporations, unlocking senior executive buy-in is the key to success in this balancing act. Getting that support often requires significant realignment.
“They need to think in terms of a portfolio, not just one venture,” Linda explained. “They need to focus on option value, not net present value, and they must use a separate set of metrics for their new ventures vs. those used for the core and legacy business.”
The financial markets need realignment too, Yates went on to note.”One of the challenges large companies, like Standard Bank, face that Branch doesn’t, is that the financial markets do not do them justice when they look at their internal ventures. Think about it, our startups in Silicon Valley go public and get a hall pass for years before they are expected to turn a profit. Yet they get incredible valuations solely on the financial markets using the metrics of customer acquisition and revenue growth. Our big companies deserve those valuations as well. Financial markets need to value the unicorns within and reward them with the same or better multiples than pure startups who have none of the advantages the large companies possess!”
For Joe, even as a startup, setting appropriate expectations has proven crucial—especially when driving ventures from the bottom up.
“If you’re inexperienced but highly skilled, the thing you tend to mess up is setting proper expectations. If you have high experience and high skill, generally you’re able to talk to someone and set expectations,” he explained.
Ryan has found that starting small as a large company helps develop a venture mindset among executives.
“You don’t need to get political, but you need to be working on a few things that can be considered incremental innovation. Landing those in the near term develops the buy-in, and also the motivation to potentially follow on with bigger, bolder venture opportunities.”
Embrace Eruptive Innovation
As John noted, every company talks about growth and innovation. But talk is cheap, and follow-through matters.
“Too many companies have gone to the graveyard selling more of what they’ve always sold,” he said. “They don’t get innovation.”
For Ryan, avoiding that trap all comes back to the customer.
“I don't think that people should sit around and wait for this aha moment to come up with something brilliant that's going to totally disrupt everything,” he said. “You've got to go through the process of working with customers continually to drive incremental innovation. Over time, people are going to see you as a trusted growth partner.”
Joe agrees. “The larger the scope of your project, the larger the likelihood that it doesn’t accomplish what you wanted it to do.” Developing internal support for a series of small changes, running experiments, placing “small bets,” as Mach49 calls them, with an appropriate time scale, is instead what moves the needle.
“None of us are smart enough to pick out the winners early enough,” added John. “It's more about creating a culture of eruptive innovation, where innovation can be effervescent, and growth can become not just the objective but the reality.”
Ready to learn more? View the entire discussion here, and purchase Mach49 CEO Linda Yates’ book, The Unicorn Within: How Companies Can Create Game-Changing Ventures at Startup Speed.