Thank you for joining the Ross Republic podcast. In our forty-sixth episode, your host Adrian Klee is joined by Eleonor Hedström, Director at the Wärtsilä Next Business Lab, to discuss the opportunities of venture clienting for large industrial companies.

RR Podcast #46

In the recent podcast episode, I had the pleasure of speaking with Eleonor Hedström, Director of Wärtsilä Next Business Lab, to explore the critical role of innovation in the energy sector and how industrial companies can best leverage new business labs to achieve their strategic objectives. Wärtsilä, a global leader headquartered in Helsinki, focuses on innovative technologies for the marine and energy sectors, striving for decarbonisation and sustainability. Wärtsilä is known for its engineering expertise and is dedicated to providing efficient, flexible, and environmentally friendly solutions, ranging from power generation systems to advanced marine technology. In our conversation, we discussed the evolving role of the Next Business Lab, how it aligns with Wärtsilä’s broader mission, and the broader challenges and opportunities presented by innovation in today’s industrial landscape.

The next business lab’s mission

Eleonor provided a comprehensive overview of the Next Business Lab’s mission. The lab operates as an internal support function that connects Wärtsilä’s three primary business units—power plants, energy storage and optimisation, and energy services—to innovative solutions. The lab’s goal is to identify, scout, and collaborate with growth companies, research institutions, and external technology providers that can help address specific challenges faced by the business units. Eleonor described her role as akin to wearing three different hats: leading a small scouting team, enhancing the company’s innovation capabilities, and managing the WISE ecosystem initiative.

The WISE ecosystem, or Wide and Intelligent Sustainable Energy initiative, is a significant undertaking funded by Business Finland, with a contribution of €100 million from Wärtsilä. Its purpose is to develop zero-emission balancing power—an ambitious step toward a carbon-neutral future. Through the lab, Wärtsilä aims to explore partnerships in areas like monitoring and analytics, sustainable fuels, and predictive maintenance, thereby pushing the boundaries of efficiency and sustainability in energy markets.

Shaping the innovation strategy

One key topic of our discussion was the recent repositioning of the Next Business Lab. This repositioning was largely a response to broader strategic shifts at Wärtsilä, which Eleonor described as “the Wärtsilä way.” The company’s overarching strategy now focuses more directly on decarbonisation and achieving 5% annual growth while ensuring sustainability across its operations. As part of this reshaping, the Next Business Lab has been framed as a support function, making it more integrated with the business units rather than operating independently.

Eleonor explained that this repositioning provided clarity in terms of governance, budget, and the lab’s specific contributions to the overall innovation process. The lab works closely with business units to support their objectives, particularly in developing new business models and technologies aligned with the company’s sustainability mission. By integrating more closely with core operations, the lab helps ensure that innovation is not isolated from day-to-day business needs but instead serves as a direct enabler of the company’s strategy.

Responding to the macro environment

The repositioning of the Next Business Lab is also a reflection of changes in the broader economic environment. During the “zero interest rate decade”, when capital was relatively inexpensive, many companies invested heavily in explorative innovation and in-house development of new technologies. However, with rising capital costs and increased pressure on efficiency, there has been a shift towards more collaborative innovation approaches, including working with external technology providers and growth companies—an approach often referred to as “venture clienting”, which is a model where established companies act as customers for startups or growth companies, using their solutions directly within their business operations. This approach allows the larger firm to accelerate innovation by leveraging external capabilities, while providing the startups with valuable market feedback, real-world testing, and a significant reference customer. The benefits of venture clienting include faster adoption of cutting-edge technology, lower innovation costs compared to in-house development, and fostering a culture of open innovation that benefits both parties..

Eleonor and I discussed how Wärtsilä has adapted to these shifts by looking outside its walls for solutions and prioritising collaboration with external partners. Instead of building everything in-house, the lab focuses on finding the best technology solutions globally and bringing them into the organisation through well-structured partnerships. This not only speeds up the innovation cycle but also allows Wärtsilä to tap into new capabilities without committing to the large budgets required for in-house development.

Building effective partnerships

One of the core functions of the Next Business Lab is to scout and select suitable partners for collaboration—often growth companies or university spin-offs. Eleonor outlined the structured process they follow, which involves creating long lists and short lists of potential partners before engaging with those who show the highest promise. A recurring theme in our conversation was the importance of alignment, clarity, and trust in making these partnerships work effectively.

Alignment on goals is crucial—both Wärtsilä and its partners must share a clear understanding of what they want to achieve together. Eleonor noted that cross-functional teams are established to work on the initiatives, ensuring that internal resources are allocated appropriately and that the collaboration is as seamless as possible. Trust is built through effective communication, transparency, and by setting well-defined success criteria from the outset. These criteria often include the technology’s scalability, sustainability, manufacturing capabilities, and overall life-cycle impact.

Eleonor also highlighted some of the challenges inherent in partnerships between large industrial companies and smaller, more agile growth firms. Differences in culture and processes can lead to friction, which is why the lab plays such a critical role in bridging the gap between the “big corporate” world and the more dynamic environments of growth companies. The Next Business Lab acts as a facilitator, ensuring that growth companies understand Wärtsilä’s processes and requirements, and helping them navigate the often-complex procurement and compliance landscape of a large industrial firm.

Innovation as a strategic advantage

Throughout our discussion, it became clear that the Next Business Lab plays a pivotal role in Wärtsilä’s broader innovation strategy, acting as both a catalyst for technological adoption and a bridge between internal needs and external solutions. The lab’s activities not only focus on addressing operational challenges but also contribute to potential mergers and acquisitions, providing a valuable pipeline of innovation-led opportunities that might be ripe for acquisition in the future.

Eleonor emphasised the importance of keeping innovation closely tied to core business operations. In the past, many industrial companies set up innovation activities that were too far removed from their core operations, making it difficult to transfer and integrate new solutions back into the business. Wärtsilä has taken a different approach by ensuring that the Next Business Lab is directly aligned with the business units from the outset, ensuring that innovations are relevant and can be seamlessly implemented.

Final reflections

In concluding our conversation, Eleonor offered advice to other companies looking to set up or reform their innovation labs. She stressed the importance of fostering strong internal relationships and building diverse teams that combine various competencies. She also highlighted the need for a clear mandate for the lab’s activities—one that is closely aligned with the company’s overall strategy and culture.

In summary, the Wärtsilä Next Business Lab represents a thoughtful approach to corporate innovation: one that recognises the need for external collaboration, alignment with core business objectives, and a nuanced understanding of how to balance in-house development with external partnership opportunities. As the energy sector continues to evolve towards greater sustainability and efficiency, such labs are likely to play an increasingly important role in helping companies navigate these changes while staying competitive.

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