Thesis-based Investment or Theme-based Investment

One of the worst mistakes companies make when pursuing innovation-led growth is to sink their money into various investments without knowing why, beyond just ‘it’s a cool technology that can disrupt us’ or ‘it’s the board’s pet project’.

Yes, this sounds like the world’s most obvious mistake to avoid, but in our experience, we’ve seen this happening time and again across all industries.

Venture Capital investors are preventing themselves from making investments at random by investing in accordance with a pre-predefined Investment Thesis. This is a healthy practice that can be adopted by any company. In the award-winning book, The Corporate Startup, we introduced the concept of an Innovation Thesis. In essence, a document that helps companies become deliberate when it comes to their investment decisions.


> Companies need clear direction for their innovation investments that commands deliberate action

> Innovation Thesis might be too rigid and might not work with some innovation engines, in particular open innovation

> Innovation Themes are a great way to create cohesion at scale in a company and help set the overall general direction for innovation

> Innovation Thesis should be updated more often than the Innovation Themes, but both need to be revisited on a constant basis. 

> Theme-based Investment: broad | Innovation Themes are easy to use and develop | great for exploration | great for innovation vehicles where learnings outweigh financial impact | usually more sited for open innovation

> Thesis-based Investment: focused | Innovation Thesis are more complicated to use and develop | great for strategic investment focused on ROI | usually more suited for internal innovation

But investing according to an Innovation Thesis has had its fair share of criticism. If most criticism can be labelled as FOMO (fear of missing out) there are instances where Innovation Thesis investment is too rigid. For example, for open innovation vehicles where profitability takes a secondary position relative to learnings, the company can create a list of Innovation Themes they are willing to explore by investing.

Innovation Themes are a bit broader than a Thesis. They provide companies with the flexibility they might need in some particular cases.

But they are still keeping the company disciplined, with all efforts pointing in the same direction. In other words, Theme investment means identifying big themes relevant to your company and then exploring those through various (investment) methods.


To explain this better, let’s look at an example. Say there’s a bank interested in investing in innovation and in particular in the blockchain. Since ‘blockchain’ is such a broad topic and using it as an investment filter won’t be really that useful, the bank decides that it needs to be a bit more specific than just ‘blockchain’.  

So the bank creates two Innovation Themes called ‘Tokenization of Financial Assets’ and ‘Tokenization of Non-Financial Assets’. As broad as these might sound they are an improvement over ‘blockchain’. Now they can kick-off for example an accelerator program opened to any startups offering services around these themes. Or they can kick off research projects with universities around these themes. 

But since the bank has several innovation vehicles it might be that just mentioning those themes is too wide for the internal Innovation Department, or for the M&A department, or for the CVC arm. Therefore the bank in the example sets to create an Innovation Thesis. In the Innovation Thesis, the two Innovation Themes (‘Tokenization of Financial Assets’ and ‘Tokenization of Non-Financial Assets’) will be listed a bit more focused. Say for example ‘Tokenization of Mortgages’, ‘Tokenization of Wills’, ‘Tokenization of Precious Metals’ etc. So now the Innovation Department will only invest in ideas from employees that touch on the topics mentioned by the Thesis. 

If the accelerator program of the bank will accept any startups that have to do with the tokenization of assets (financial or non-financial) the Innovation Department will only invest in furthering ideas that deal with the ‘Tokenization of Mortgages’, ‘Tokenization of Wills’, ‘Tokenization of Precious Metals’.

Note that in order to maintain their usefulness, both the Thesis and the Themes will have to constantly be updated as new information about the market, trends, technologies or even customer behaviour start rolling in as a result of the investment made.

However one will have to be updated more often than the other. Given that themes, usually take longer to change you should consider looking over your Theme priorities every 2 to 5 years. But at the same time, given the more tactical nature of a Thesis, it should be updated every 6 to 18 months.

As you can see a Thesis is not a substitute for a Theme, nor is it superior. If you want you can say that an Innovation Thesis is a more acute manifestation of an Innovation Theme but both are needed to improve the efficiency and discipline of a company’s innovation investments. They are both facets of the same coin. Leaders will have to decide which ones they use and when relative to the desired outcome from that investment and relative to the innovation vehicle they want the tool to be used in.

Think of the Thesis and the Theme as tools in a toolbox – you can’t say the players are a better tool than a screwdriver, it all depends on what you are trying to get done. What’s important is to have both in your toolbox and know which one to use and when.

This article was originally published on the OUTCOME Blog



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