Continental’s venture into corporate venture capital: how startup investments may help a large automative incumbent to deal with disruptive transformations in the auto space

Abstract

After years of stable growth, Continental AG (Conti), one of the world’s largest automotive tier one suppliers, has released its second profit warning in 2018 and shareholders lost over $20 bn within only ten months. Conti finds itself confronted with significant underperformance in key markets, staggering growth in its core business and increasing competition from new (tech) players aggressively pushing into the auto space. And Conti’s situation is not unique: The automotive industry is on the edge of disruption, as the vehicle’s value proposition shifts away from individual car ownership to consumption of on-demand and shared mobility services strongly impacting traditional sales growth. The vehicle slowly turns into a commodity platform for services, making software the new differentiating factor while commoditizing tier ones’ traditional core businesses around hardware. To manage these challenges and preserve its leading role in the mobility sector, in 2018, Conti has released its so-called Future Mobility strategy, announcing the greatest restructuring in corporate history as well as a large open innovation campaign. One of the key elements is the foundation of a dedicated corporate venture capital unit (CVC) with the aim to effectively tap into innovation and capitalize on new opportunities faster. Starting off with a small CVC team, the company is now faced with the critical question of choosing the adequate organizational setup of the CVC practice. Considering the company’s current financial situation, complex and fragmented organizational structure, competitive landscape and future aspirations, deciding on its setup represents a very delicate task. The unit’s organizational setup and operating model must be chosen carefully in accordance with the company’s overarching strategic ambitions and potential areas of internal conflict.