I attended the recent EMC World, which is one of the best events for press and analysts because it tailors its program for us and our specific needs. There was a nice balance of group sessions and one-on-ones. One of the sessions I found fascinating was given by Scott Darling from EMC Ventures about EMC's venture funding efforts.
Not long ago I attended an event in San Jose where Intel's investment group leader gave a similar talk, so it was interesting to contrast the two groups. Intel is focused on investing in young companies that consume Intel's products, EMC is interested in investing in young companies that could grow up to replace all or part of them. These are two very different strategies.
EMC's Darling spoke to the '5 stages of venture capital denial' that he regularly deals with because of his group's approach and focus.
Why innovation dies in large companies
Most folks in my business have long realized that innovation doesn't come from large companies, but from small companies that haven't been told they can't do something. We believe that large companies are where creative ideas go to die. The reasons behind this could be a book in and of itself, but in short form, the larger the firm the bigger the focus on policies that assure compliance and the more organizations exist who have carved out areas they think of as their own. In other words, the larger the firm the less tolerance there is for disruption or someone outside of a group doing something creative that affects it.
Innovation is a disruptive event and often crosses organizations so the very processes that allow the company to work at scale by being highly consistent with sharp command and control hierarchies work against innovation from inside a company.
This is why Skunk Works groups are formed, these are groups that are separate from the firm and work with little oversight, to solve problems that seem unsolvable. The intention is to have a group not involved with company policies that might kill innovation and also to prevent an executive, who feels his turf has been violated, from prematurely killing the effort.
Now you'd think Skunk Works programs would be common, but they aren't. They aren't always successful, often because they are staffed with people who bring the corrupting influence of the firm's policies with them. That can be massively disruptive, which makes it hard to get the funding needed to properly resource them.
A funding program like the one EMC has created fulfills a similar purpose. EMC's Venture Group looks for small firms that address existing and coming problems potentially better than EMC does and they help fund them largely so EMC not only isn't blindsided by any success that might result, but might instead benefit from it. A group like this inside of Sony would likely have funded Apple, and one inside of Microsoft would likely have tried to fund Google. (It should be noted that Yahoo did fund Google but instead of partnering with the company they tried to compete with it, showcasing why breaking the following process is dangerous).
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