Venture Capital Allows Companies to Be Curious

Recently I was talking with a client about strategic planning as they are beginning their journey to define their path forward to 2030. They’ve set a goal, identified values, have a vision of their purpose, and currently have a strong business. The executive management team is being brought together to share insights and build the “framework” of the plan. After that, others will become involved to add another level of depth.

One topic we discussed, which is a challenge for many electrical distributors, is getting key members of their team to be strategic for their areas of responsibility, let alone the intersection of those areas with other elements of the business.

And knowing what is outside the “four walls of their company and their ecosystem / local market.”

Curious

Curious George

Some of you may remember Curious George.

We talked about the need for people to be curious. The need to explore and seek ideas that may make them, and the company, uncomfortable and then evaluate these areas to see who they could fit the business or how the business would respond if a competitor adopted those strategies, tools, or initiatives.

As part of being curious, we also discussed the concept of investing into initiatives as pilots or learning experiences.

Few companies do this as they are focused on “today”, or the quarter, or utilizing profits for ownership.

But, as companies grow and cash is spun off from the business, there is the opportunity to invest, to explore, to be curious.

Consider companies such as Ferguson, Schneider Electric, and Siemens. All have something in common (and I’m sure others in the industry do.)

“Captive” Venture Capital

The commonality is … they all have investment arms, or “divisions / subsidiaries” that are venture capital firms.

Ferguson has Ferguson Ventures. Schneider has SEVentures which has two companies that interact with electrical distributors in its portfolio. Siemens has Siemens Energy Ventures.

These companies are investing in companies that have services for their customers, markets that their customers could service, technologies, and perhaps complementary companies … sometimes potential future acquisitions. They are learning.

Others may have similar, but to personalize this for distributors …

• Could distributors allocate a percentage of net profit to an investment fund?
• Recognizing that rebates are about 30% of distributor net profit, perhaps rebate income could be redirect to this fund and the core business’ net profit objective be set accordingly, therefore encouraging price discipline, sales skills, operational efficiency, SG&A cost management, performance-based compensation, inventory management, and acquisition cost negotiation?

The ”fund” could be used for internal initiatives (defined as pilots) or perhaps there are “skunks works projects”. And the larger your company, perhaps investments, and hence utilization preference, could occur in some software start-ups? Or contractor product innovation? Or local market activities? Or a minority ownership in a distributor in a complementary industry? Or maybe …

Sometimes you just want some many to “play with” and wantonly invest (I know, that sounds bad and yes you should do due diligence but, sometimes it’s about taking strategic risks, knowing that there is no short-term payoff.)

And what if one hits and differentiates your company or you learn something?

Is curiosity a core trait of your business? Is it in your management team? Are some of your staff empowered to be curious?

Does your team feel that it can explore? Or are you  (the leader) the sole explorer?) Or is exploration verboten, but unspoken, in your company?