Corporate Innovation/Analysis/ Five steps to keep innovation part of your core business In part ten of #FutureProofonCulture, the head of Maersk’s venture arm shares how structure and discipline keep its innovation engine humming By Thomas Brown 25 January 2022 Shereen Zarkani Shereen Zarkani \Corporate Innovation Purrsonalised health: The startups and VCs betting on pet genetics By Adam Green 15 September 2022 Corporate Innovation/Analysis/ Five steps to keep innovation part of your core business In part ten of #FutureProofonCulture, the head of Maersk’s venture arm shares how structure and discipline keep its innovation engine humming By Thomas Brown 25 January 2022 Detached from the core. A clash of cultures. Not invented here. Gambling with hard-earned capital. Hype and fads. Non-core. A distraction. These are accusations all too easily levelled at innovation endeavours, be it by change-fatigued employees, quarter-focused investors or weary executives. Facing down scepticism takes more than a healthy dose of conviction and resilience. Creating a culture of innovation is about more than just culture, says Shereen Zarkani, head of Maersk Growth, the venture arm of the Danish shipping giant. It requires a sometimes frustrating process of laying the groundwork. Establishing a strategic outlook, embracing failure and as much comfort with discipline and structure as with creativity and risk-taking. Sifted spoke to Zarkani to understand what keeps Maersk’s venture arm on an even keel. These are her five pearls of wisdom for fellow innovators. 1/ It’s all about how you deal with failure Innovation leaders have several tricky balancing acts to manage: bridging the external and the internal; connecting the known world of today with the less certain world of tomorrow; seeking out interesting and exciting ideas and the people behind them, without disenfranchising the existing organisation (and its stakeholders). And managing the tension between short and long-term effort, impact and returns. Part of the answer to these competing priorities lies in how we deal with failure, says Zarkani. “Innovation and mistakes are symbiotic,” she says. “Most of us can talk about psychological safety and accepting the theory of failing fast, but it’s really another thing to experience it in real life, and to own it in front of your colleagues, your peers and your bosses. “We’ve incorporated small steps into our daily routines to help our people to understand that failure is part of the process. Even simple things like a ‘failure of the week’ discussion as a team has helped to normalise this, and to build acceptance.” Most of us can talk about psychological safety and …failing fast, but it’s really another thing to experience it in real life Zarkani also highlights the importance of investing time in helping organisations to understand how venture works, and specifically the risk that it carries. “Seven out of 10 startups fail, and that is how we innovate. So we share with our core businesses the stories of failure, not just the good stories. And we don’t try and brush them under a rug because they didn’t work out. It’s equally important to tell both stories — we have the successes to talk about, but we need to reinforce that you have to have both success and failure for innovation to be successful.” 2/ Answering the why It’s important to remember that innovation isn’t just about culture. As important as culture, mindset and behaviours are, innovation requires a complete system to be effective, spanning process, technology, governance, skills and much more. And that, says Zarkani, requires a strategic approach. “We had to start by answering the why [are we here] and the what [do we want to achieve]. Only then could we go on to talk about the how — which is where culture comes in.” Zarkani involved senior leaders from across Maersk’s core businesses in a series of discussions which, she admits, took quite some time to define and reach agreement on. But an investment in time, she believes, which has proved invaluable in putting subsequent conversations on the right footing. Equally important is the need to define what good looks like. “We ran working sessions with our executive leaders, asking in three years from now, what would good look like? What would we need to achieve to be successful? What’s the difference between three years’ time, and five? And drilling down into really clear definitions.” “Spending the right amount of time on this in the beginning… will ultimately help us to run faster” Zarkani stresses the importance of co-creation in this process, and then linking the agreed definitions of success for its venture arm to the wider strategy. “It just makes the conversation afterwards a lot easier,” she says. “It helps to position innovation as a lever, alongside many others that we work with as part of our strategy and growth plans. “Spending the right amount of time on this in the beginning — even though it can potentially be frustrating — will ultimately help us to run faster.” (Zarkani shared the renewed focus for Maersk Growth in a recent interview with Sifted’s Maija Palmer.) 3/ Showing the structure “There can be a perception among people who don’t work in innovation, that it’s just a load of people sitting in a room coming up with exciting ideas and spending a lot of money in the process,” she says. Transparency, says Zarkani, is central to combating this. As part of the narrative for Maersk Growth, and what’s actually shared with leaders across the core organisation, is an inner look at the structure and discipline which the venture arm’s teams work with. “We show people the very detailed processes, documentation and governance that we work with in our team internally. How we work with stage gates and how we have a very structured and frugal approach, rather than the perception of a chaotic, creative process.” “We want to show that we respect that this is hard-earned money, and that we don’t squander it” This openness and detail has helped to dispel a lot of perceptions, according to Zarkani, especially the further out that people sit within the business. And just as important, if not more so, is working to the same level of discipline when it comes to money. “While we have the security of a VC fund-like structure, with capital allocation upfront over a 7-10 year time horizon, we want to show that we respect that this is hard-earned money, and that we don’t squander it. We’re transparent when it comes to making investments, establishing milestones and reporting on our progress — it’s a core part of our communications, which has helped with our credibility. Maersk Growth assesses every investment with both a VC lens and and strategic fit lens, Zarkani says. “Both must be positive as we firmly believe we can only be successful if we back high potential and performing companies with awesome founders.” The investment rationale is documented and the hypothesis is reviewed on a quarterly basis and shared with senior stakeholders. “This ensures line of sight, continuity and tracking on why we invested, the value creation commitments we made to the startups and what we expect to extract strategically.” “Innovation is a process, just like any other process in the company,” Zarkani says, emphasising that it should be subject to discipline and rigour in the same way. 4/ Two-way strategic planning In 2020, Zarkani created a new team within Maersk Growth — “strategic intelligence”. This team, and how it interacts with the core business, is a key part of an offensive on “not made here syndrome”. And at its heart is a new, two-way strategic download. The first part is what Zarkani calls a problem sourcing mechanism. “Our team spend a lot of time with our core businesses. They share their strategy for the next three-five years. They share the problems they want to solve. They tell us where they have questions about the future. And we challenge them and stretch them on the medium to long-term for their businesses, beyond their immediate, known plans. “This allows us to understand what we’re already building, where we might face headwinds, and where the open spaces and exciting avenues are.” “We see more than 1,000 startups a year” The second part of this two-way download is the provision of so-called strategic insights, provided by the ventures teams — something which has evolved from an informal, ad hoc activity to a structured discipline. “Consider that we see more than 1,000 startups a year,” says Zarkani. “We package up all of our knowledge — such as who’s getting funding, where from, what for, emerging business models and so on — and then translate this in a way that’s meaningful and relevant to each business unit. “This can then help to provide both input and inspiration to their next round of strategic planning.” 5/ Getting the handover right Zarkani’s team also carefully manages the way that startups and business units interact. “Our investment engagement starts high,” she says. “Maersk Growth plays the role of project leader and translator, and hand-holds the whole process.” Even if an investment has a wealth of potential use cases within the wider Maersk organisation, Zarkani’s team keeps a tight handle on how startups are exposed to the organisation. “We’ll typically bring in just two or three critical stakeholders, so as not to overwhelm either party. We run joint value creation sessions between the startup and our business units, then once we’ve got pilots or proof of concepts underway, we can begin to step back. “Corporate venture capital can have a bad reputation for over-promising and not delivering” “The two sides might not be speaking a common language, but they’ll understand each other and have begun to get momentum — far more so than had we made an introduction, rather than facilitated a handover.” In a concluding reflection, Zarkani reiterates the importance of transparency — and the “honest broker” role that its venture arm plays with external investments. “Corporate venture capital can have a bad reputation for over-promising and not delivering,” she says. “It’s important to be super-transparent with the start-up from the off. How we’ll work with them, what they can expect in their interactions, and how we make decisions.” TL;DR? Key takeaways… Accepting the theory of failing fast is one thing, but experiencing it and publicly owning it is another altogether Investing time up-front to define the why and what of your innovation agenda may be frustrating, but will pay dividends Innovation needs to be approached with structure and discipline to earn credibility Ongoing two-way dialogue between innovators and the core business is essential for a connected way of working Hand-holding and translating during the formative weeks and months of investment engagement is a crucial role for innovation teams Let us know where these ideas take you, using the comments below or on LinkedIn or Twitter using the hashtag #FutureProofonCulture. You can also read our round-up of the first half of the series. Thomas Brown is Sifted’s corporate innovation reporter, and a freelance journalist, award-winning author and consultant, specialising in digital transformation, innovation, organisational culture and consumer behaviour. You’ll find him tweeting from @ThinkStuff. Related Articles Big corporates are only interested in “innovation theatre” By Carly Minsky Click here to read more How to build a CVC fund — advice from ABN AMRO Ventures By Maija Palmer Click here to read more Corporate innovation weekly: commercialising fusion, healthtech boom, CVC types By Maija Palmer Click here to read more How do you (really) measure CVC returns? By Alberto Onetti and Maija Palmer Click here to read more Most Read 1 \Healthtech Is Daniel Ek’s new body scanner worth the hype? Sifted tried it out 2 \Venture Capital VC diversity needs to change — and white men need to take responsibility 3 \Venture Capital New €3.75bn European Investment Fund pot to back late-stage VCs 4 \Sustainability Counteract closes £15m fund for carbon removal solutions 5 \Mobility Was the $5bn that VCs plugged into escooters worth it?