Robert C. Martens is SVP and Chief Innovation and Design Officer at Allegion, a global security business with about 12,000 employees that owns brands like Schlage, Kryptonite, and Steelcraft. He’s also the president of Allegion Ventures, the company’s corporate VC arm that launched its first fund in 2018. Allegion is headquartered in Dublin, Ireland, and chalked up $3.7 billion in revenue in 2023.
InnoLead spoke with Martens about tying together corporate VC activity, mergers and acquisitions, and organic innovation, as part of our new research initiative, Making Innovation an Enduring Capability.
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You could think of me as the primary strategist for the company. To start with, I manage both the research and industrial design functions for the company, identify the megatrends coming forward, and assess whether our long-range planning is tracking the right trends.
After eight years of running the ventures group, I was asked to take on the mergers and acquisitions (M&A) process, and I have a corporate development and business development team that resides underneath me. I’m also responsible for what’s called the Allegion operating system — the way the executive leadership team does business.
Building a Corporate Venture Fund with No Full-Time Staffers
The consistent thread is engagement. Before we launched our corporate venture fund, I really had hesitation because the average corporate venture fund lasts between two and three years, and then you’re selling off the assets. So, I called every CFO I knew and asked, “Why do you guys kill these things?” The message was pretty consistent. They either said, “We don’t know what they’re doing,” or “We think they’re doing science experiments.” It’s this expensive, elite group away from the business, so it’s easy to cut away. When we launched our fund, it was all about engagement.
Before we launched our corporate venture fund, I really had hesitation because the average corporate venture fund lasts between two and three years, and then you’re selling off the assets.
We created a studio called Pin & Tumbler that allowed us to do experimentation. Innovation is about working until you get to failure. But in the security business, failure means something serious could happen. How do you innovate under these circumstances? The answer was safer environments that allow you to engage with entrepreneurs at a much faster pace. Our typical development cycle is anywhere from 12 to 24 months, and that’s too long for a startup. So we created a studio that can create things in 120 days or less.
That also hugely benefited us on the corporate VC side, because we could work with startups, and if they failed, it wasn’t a complete disaster. Now, there are no full-time people on our venture fund. We created a unique structure that has been very successful. It’s a perk within the company — a way to grow, get skills you haven’t had, meet entrepreneurs. All these entities are staffed by people with day jobs who are experts in other disciplines.
When somebody from the outside, an entrepreneur or anyone else, wants to engage with us, we can connect them with an expert from the first day. So, even though you say no to 99 percent of the people you talk to in VC, it can still have a hugely positive impact on your reputation. Even the people we don’t invest in get something they really appreciate from talking to the expert.
Keeping Internal Engagement Strong
From the other side, we get internal engagement. The business gets ideas from all corners, and people don’t see it as that strange group doing science experiments over there. For example, the CFO’s staff have an opportunity to talk to entrepreneurs, and then word immediately gets back to the CFO that this is really interesting stuff. When it inevitably comes time to make tough decisions, people understand the benefits of the innovation work and entities we’ve created.
Corporate VC, if done properly, is more than self-sustaining. It’ll pay for a lot of things.
In the end, it comes down to, what are we going to place our bets behind? Our corporate venture capital fund has been very successful. Corporate VC, if done properly, is more than self-sustaining. It’ll pay for a lot of things. We don’t always make money on what we do in a studio, but sometimes we do. There are a lot of engines there that are self-propagating and understanding which ones can win over, for example, a skeptical CFO. You demonstrate capability in the fact that you’re going to be able to pay for things.
Why Internal Innovation Keeps the M&A Pipeline Flowing
Especially if you’re a public company, you want to have a balance between organic innovation and growth, and inorganic growth, like M&A. And for inorganic growth, not having a core innovation arm will really hamper your efforts. For potential partners and acquisition targets, it makes us far more attractive, because people look at us and say, “You’re doing all kinds of great stuff. I want my company to join you and I want to stay.” It’s such a powerful thing to be able to demonstrate — we’re not just a big whale coming in to swallow the krill.
Internally, no one person owns innovation. [And] depending on the geography, you may have a different process or tools. For example, we have a large, crazy-smart team in Bangalore with an incredibly robust series of tools and different types of events for innovation, which looks different from some of the North American geography. There’s a very large engineering presence, and there’s a lot more gravitational pull towards standard methodologies [like ISO 56000]. There’s a level of comfort there.
Frameworks Aren’t ‘One Size Fits All’
We will use a whole variety of different frameworks, but those frameworks are completely dictated by the leadership and the local team, because we’ve found if you try and dictate it, it’s not one size fits all. Engineers tend to like one thing, designers tend to like another thing. And we get a lot of innovation done by people not sitting in seats that are traditional innovators. People who work in finance or sales will gravitate to a different form. They may not follow the same frameworks, but they tend to be some of the best at sussing out customer experience capabilities and having the most interesting conversations with entrepreneurs because they understand the market and the end user. Some of our tools almost act as translators between different groups.
Other things — like ventures and some of the studio work — are global and transferable across all of the geographies, and we review those at a board level. The key is to have some foundational components that are unique and highly relatable in each locality and also some overarching programs that excite people and tie it together.
Robert C. Martens is SVP and Chief Innovation and Design Officer, Corporate Development, at Allegion.
Featured image source: Allegion plc
