The current corporate landscape

There’s been a lot of talk about bootstrapping and Germany's "hidden champions," which contrasts sharply with large German corporations shutting down their innovation departments. Many believe that the lack of top executive involvement is holding back successful corporate venture building. But, do top executives really need to be heavily involved in the startup process?

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Why middle managers should lead corporate venture building

Recent studies have highlighted the crucial role that middle managers play in driving innovation within organizations. A study by Harvard Business Review shows that middle managers are involved in 70% business transformation initiatives, highlighting their vital role as change advocates. How so?

1. Proximity to operations: Middle managers have a closer understanding of day-to-day operations and customer needs, which allows them to easily spot new opportunities for corporate innovation and take advantage of these opportunities.
2. Agility and flexibility: Middle managers are more agile and flexible than C-level executives. They can quickly adapt to changes and take calculated risks, which is important for early-stage innovation.
3. Resourcefulness: Middle managers often excel in working within constraints and finding creative solutions, traits that are very valuable for startup success.
4. Hands-on leadership: Middle managers can provide the necessary hands-on guidance and support to innovation teams, encouraging a culture of experimentation and continuous improvement.

This skill set helps managers make faster decisions and quickly adjust to changes and unexpected challenges, which greatly benefits the company’s success.

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What about the C-level management?

Consultants will often emphasize the importance of C-level involvement in driving startup-like innovation within corporations. This made sense when corporate ventures were typically single, high-profile projects that needed executive oversight. But, as corporate venture building has evolved, this approach misses the important aspects and may not be as effective.

Today, corporate venture building is an ongoing and broad effort that often goes beyond the direct oversight of C-level executives. With their many responsibilities, executives can't monitor every project closely. So, digital transformation and innovation require a different approach. By empowering middle managers, who are closer to day-to-day operations, they can enable them to make bold, independent decisions. This decentralized decision-making process allows for quicker responses to challenges and opportunities, leading to more successful and sustainable corporate ventures.

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Solutions and support mechanisms (for middle managers)

While empowering middle managers has many benefits, it also comes with its own set of challenges. Despite controlling budgets, they often lack the skills or confidence to make bold, controversial decisions necessary for effective corporate venture building. It’s also challenging to find middle managers who have founded and successfully exited corporate ventures.

So, what is the way to fully unlock the potential of middle managers in corporate venture building?

To truly empower middle managers, it's important to provide them with the right support and resources. McKinsey reports that capability-building programs (the process of enhancing the skills, knowledge, and abilities of individuals or teams within an organization) can increase core problem-solving competencies among middle managers by 51%.

By offering targeted training in areas like startup methodologies, risk management, and agile project management, companies can equip middle managers with the skills they need to excel in corporate venture building. Some of the key skills they can benefit from is the ability to craft and implement strategic plans that align teams with organizational goals and drive collective action. Complex problem-solving, identifying core issues, organizing relevant factors, and prioritizing areas for analysis are also some of the areas where they should grow. We can’t forget effective communication and coaching, as middle managers should be able to synthesize ideas clearly, tailor messages to their audience, and foster talent development while leading with emotional intelligence.

Encouraging a culture where experimentation is valued and failures are openly discussed can help reduce the fear of taking risks. Mentorship programs with experienced entrepreneurs, possibly through partnerships with innovation hubs, can offer valuable guidance.

Giving middle managers the autonomy to make decisions and control budgets, such as through easily accessible “innovation funds,” empowers them to take bold actions. Forming cross-functional teams with diverse skills can also enhance collaboration and innovation. It's no surprise that McKinsey found “companies with strong middle management are 20% more likely to outperform their competitors.” This highlights the critical role of middle management in steering organizations toward greater innovation and success.

Lastly, recognition programs that offer financial incentives, promotions, and public acknowledgment for innovative efforts can motivate and reward middle managers for their contributions.

By recognizing and addressing these challenges, corporations can get the best of middle management in corporate innovation and corporate venture building.

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Middle managers define culture

Unrealistic innovation goals, coupled with high expectations, can easily dampen employee morale. When employees with fresh, innovative ideas encounter a risk-averse culture, their enthusiasm often wanes. This is where middle managers play a vital role.

Being closely connected to their teams, middle managers have the unique ability to gauge team morale, manage expectations, and gradually steer the corporate culture toward one that embraces innovation. Their influence is key in preventing the negative impact of unrealistic innovation demands and fostering an environment where new ideas can thrive.

To support this shift toward a more innovative culture, companies should focus on the following:

• Promoting a culture that values bold risks and potential gains over playing it safe.
• Encouraging managers to make innovative decisions without fear of backlash.
• Prioritizing actual work effectiveness over mere presentation skills.
• Rewarding those who challenge the status quo to drive meaningful change.

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Is empowering middle managers the key to success?

Insisting on C-Level involvement from the start might show a fundamental misunderstanding of startup dynamics crucial for corporate venture building. To foster true innovation, empowering middle managers to act more like entrepreneurs—or business angels—could be key. This shift promises more creative, agile, and successful enterprises by bypassing the bottlenecks caused by top-level decision-making. Middle managers can be awesome venture builders, so it’s important that venture studios have processes in place to support them - and not just rely on senior leadership.

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