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What is BCG Digital Ventures?

A deep dive on BCG's corporate venturing unit

Kenton Kivestu, ex-Google, ex-BCG, Founder at RocketBlocks
Published: November 11, 2019

BCG DV is a wholly-owned subsidiary of BCG that helps large corporations build and launch new businesses.

Given the rapidly changing corporate landscape, this group acts as BCG's primary way to help large corporations deploy the roughly $3 trillion dollars on their balance sheets into corporate innovation and new ventures.

Overview of BCG Digital Ventures unit

In this deep dive, we'll cover the following:

The founding of BCG DV

Oddly enough, BCG DV was started by Jeff Schummacher, a former McKinsey & Co. Partner who also did a stint as the CMO of SportsAuthority, in 2014.

Essentially, Schummacher's founding thesis was that large corporations have lots of money (roughly $3T on their balance sheets in aggregate) but struggle to deploy it effectively on new business creation and innovation. This corporate conundrum created a market opportunity to help corporations invest in innovation at-scale.

And this is what BCG DV is designed to do. By hiring the right mix of talent - from product management to design to engineering - DV can offer corporate partners a way to invest and build relevant new businesses without fully needing to scale up the infrastructure and know-how themselves.

The model appears to be working. Since launch in 2014, BCG DV has built a staff of roughly 1,000 and has grown beyond its Manhattan Beach HQ in LA to nine offices across the globe, including locations in Berlin, Tokyo and Singapore.

The work BCG DV does

Essentially, BCG DV builds, launches and scales new businesses.

All of their projects are split into phases that originate from a mutual agreement between DV and the client. At a high-level, there are three main stages:

  1. Innovation: initial exploration of ideas, market research, insights and light prototyping (roughly 2-3 months)
  2. Incubation: focused development of a single business idea including building the product and gaining initial traction (roughly 8-12 months)
  3. Formation: a functioning business unit is spun-out of DV

The phase model has multiple benefits. First, it derisks the project from the client perspective - if the client doesn't find the initial innovation phase promising they can end the project without paying for later phases. Second, from the DV side, it allows them to quickly re-allocate staff to more promising projects quickly.

Since 2014, DV has helped launch 80 businesses for its clients, from helping UPS launch a new turn-key fulfillment network offering to helping Sartorius, a lab equipment supplier, launch a new digital lab assistant called LabTwin.

Example case project for BCG DV

Let's examine the LabTwin example further to build our understanding.

Sartorius partnered with BCG DV to build a new digital assistant specifically tailored to use cases that lab scientists face doing their day-to-day work. DV staffed a cross-functional team of engineers, designers and product managers to build a new digital assistant from the ground up.

In turn, Sartorius helped define the use cases and connected the DV team to relevant industry experts and early customers. The end result is that a new company, LabTwin, has been created by Sartorious and BCG DV together. While the financial details aren't public, Sartorious likely paid for the development of the new digital assistant and the two entities agreed upon an equity split in the new business. You can find additional LabTwin details here.

Where BCG DV fits in the BCG universe

If you've heard of other BCG technology-focused groups like BCG Gamma or BCG Platinion, you might be wondering how BCG DV fits in with those?

Essentially, the differentiation between the groups comes down to what type of technology they build. BCG Platinion focuses on building technology that enables the client's core business to accelerate - instead of launching new businesses like DV.

BCG Gamma is focused on analytics and data science heavy problems within the client's core business as well. So again, this steers clear of DV's efforts because in most new businesses, there is no data to analyze since there are no customers and activity yet!

A Hertz rental car example

Let's consider Hertz rental cars as an example. Hertz operates in over 150 countries, employs roughly 40K people and earns roughly $10B in revenues annually.

Now imagine that they have three, distinct technology-focused projects they'd like to invest in: 1) use their data to predict future high value customers 2) modernize their internal reservation system and 3) launch a new car-sharing business.

If they wanted to hire BCG to help with all three, which units would make the most sense for which projects? Likely, the sensible breakdown would look like the below, with each BCG technology unit helping out where it fits with their core mission:

Comparison of projects that different BCG groups, like Platinion, DV and Gamma take on

For BCG DV, the project that makes the most sense is helping Hertz spin up a new business focused on car sharing.

What type of roles does BCG DV hire people for?

The hiring funnel for BCG DV looks significantly different than it does for BCG's core strategy consulting group and, given everything above, that should make sense!

To help build, launch and scale new businesses, DV needs cross-functional teams of engineers, designers, product managers and growth marketers that know how to build and launch software. In addition, they hire for a unique role called venture architect, which is responsible defining how a product idea will ultimately evole into a full business (e.g., building financial models, organizational design, go-to-market strategy, etc.).

While the roles offered are different than BCG "classic" roles, the DV interview process still centers around the case interview format. You can see the demand for these positions at DV's official careers page here.

Summary

In summary, BCG helps leading companies launch new business units.

Since many successful companies are “cash-rich” but struggle to create new innovations in-house, BCG DV offers a convenient way to partner with a trusted party, get the expertise they need to launch a new business and retain a significant chunk of the upside while doing so.

However, given the executional nature of this task, almost everything about how DV operates is different from the core BCG strategy consulting operation, and this reality impacts how they work, what type of people they hire and, ultimately, the work they produce.

Still thinking about DV? Check out our Founder's video summary below.

P.S. Are you preparing for PM interviews?

Real interview questions. Sample answers from PM leaders at Google, Amazon and Facebook. Plus study sheets on key concepts.