Entrepreneurship, Strategy series

Written on 24 September 2017
By Dr Clare Gately
Professor of Entrepreneurship, EDHEC Business School.
This article is based on her academic research, executive education and teaching and from the practitioners and authors in this field.
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Think about this. The Global Entrepreneurship Monitor Report (2016) indicates that twenty two percent (22%) of people across sixty four economies intend to start a business within the next three years. That includes everyone in your organization.  Instead of them leaving and setting up independently, this milieu of entrepreneurial talent can be given space to flourish through corporate incubation.

Corporate IncubatorsThe term incubator conjures up images of a cosy, safe and secure environment for young to flourish.  As they grow, they leave this protective environment and step out into the world. We apply this concept to start-ups too.  Since their introduction in the late 1950s, incubators have become synonymous with the innovation system; providing a supportive milieu for fledgling start-ups. In exploring new ways to innovate, organisations have adopted the concept, originally devised as a municipal stimulus measure, for internal gain. Now corporate incubators enable organisations to mirror the start-up community by sharing a dedicated innovative space for the commercialisation of ideas.  This sits well with todays workforce who favour work environments focused on creating something they value, in building connections and a strong community.

An Internal Innovation Hub

The corporate incubator works as a dynamic, internal entrepreneurial ecosytem, supporting entrepreneurial talent through funding, mentoring and a dedicated space to work. Through marrying the agility of a start-up with the resource and knowledge base of a larger organisation, innovative ideas are captured and transformed into commercial value. It is a win-win situation. Employees find a ready outlet for their entrepreneurial talent, whilst organisations tap into new sources of innovation and new product development. Through stimulating an agile, customer-focused environment, organisations gain quicker return on investment and quicker time to market.

A key to the success of this model is visible buy-in from senior management.  This includes setting in place a means to celebrate and show case incubated projects through regular exhibitions and organisation-wide communications.  From the organisation’s perspective it is important to consider the value derived from investing in a corporate incubator; but the odds are in their favour.  A UK Nesta Report (2011) indicates that the survival rate of incubator firms is eighty five percent (85%) ; a rate way above that for stand-alone start-ups.  In determining the types of projects supported, senior management need to be clear on the strategic mission of the corporate incubator. Advocates consider them a strategic investment that will guarantee the future sustainability of the company.

Further, senior management need to consider the strategic fit between projects and the company’s core competencies. Whilst a radically unaligned idea may spread risk, a project that fits the core competences of the organisation will be less costly to implement and will provide a new means to exploit the firm’s existing resources and skills.

From an incubatee’s perspective, failure to thrive needs to be tolerated as a normal part of the start-up process.  Many of the ventures will not pay off or will fail.  Incubatees need autonomy from traditional organisational structures, politics and culture and the authority to call on resources and talent as and when needed. This includes access to an internal funding mechanism to resource the project’s proof of concept and commercialization.

Corporate Venturing or Corporate Incubation?

There are two broad types of corporate incubators, those that leverage internal innovation (inside-out) and those focused on accessing external innovation (outside -in).

The outside-in model integrates external knowledge and innovation from customers, researchers and scientists. Notably the Gamechanger Programme of Shell searches for start-ups with innovatory and disruptive ideas in the energy space. IBM’s First of a Kind (FOAK) Programme enables IBM scientists to collaborate with early adopter clients to test new ideas and new technologies for key strategic markets.

The inside-out model brings internal talent together, leveraging their knowledge and expertise in new ways. Key actors include the idea creators and project champions themselves, internal mentors, technical and business experts. Making use of organizational talent provides a fresh reallocation of resources during down time or periods of slack in the business.  Through an internal mentoring programme for instance, talent from expert fields such as marketing and sales are at hand to advise, and provide quick access to the organisation’s sophisticated marketing and communications system. Bosch provides a good example of this.  Their web site asserts « We empower people to transform entrepreneurial spirit, freedom and ability into new Bosch business. Our start-ups and entrepreneurs are focused on radical ideas in order to develop new, sustainable and profitable business in new markets for Bosch, based on Bosch technological innovation”. In recent years their Robert Bosch Start-up Gmbh Programme has spawned start-ups such as Deepfield Robotics an innovative technology company to monitor and control agricultural production. Through their Grow Platform team, corporate entrepreneurs are supported with business know-how from finance, marketing, communication and business development. 

Employees find a ready outlet for their entrepreneurial talent, whilst organisations tap into new sources of innovation and new product development

A Competitive Advantage for the Organisation, an Entrepreurial Opportunity for the Incubatee

The benefits to the organisation are manifold.  New sources of competitive advantage can be created, stretching the company’s reach in markets and disrupting industries.

13 good reasons why an organization should create a corporate incubator
  1. Diversify portfolio of products/services
  2. Gain new sources of competitive advantage through innovation
  3. Attract and retain entrepreneurial talent
  4. Create a spirit and corporate culture of entrepreneurship
  5. Use vacant space and facilities
  6. Controlled investment opportunity
  7. Nurture and unleash internal entrepreneurial talent
  8. Leverage internal knowledge in new ways through mentoring, training and networking with corporate incubatees
  9. Internal knowledge and technology transfer
  10. Reduce time-to-market for new product commercialization
  11. Extend strategic vision of the Organisation
  12. Accelerate business growth and development
  13. Spill-over effect across workforce.

From the incubatee’s perspective, the corporate incubator offers a structure and a space to collaborate on new projects of value to the organization. This structure provides interesting benefits to incubatees. They can behave entrepreneurially, without many of the financial or resourcing risks of early start-ups.

9 good reasons why a start-up should be incubated a corporate incubator:
  1. Retention of employment, salary and pension contributions
  2. Engagement with entrepreneurial ecosystem
  3. Access to internal corporate venture funding
  4. Access to support services (e.g. mentoring, business development training, legal and I.P. advise)
  5. Opportunity to network with like-minded people
  6. Comparatively lower personal and financial risk
  7. Alternative career advancement opportunities
  8. Exposure to new things and new ways of looking at things (practices, technology, business models, revenue models)
  9. Peer-to-peer support

Today, more than ever, organisations are challenged to find structures that enable them to remain agile and leverage the full value of their available talent. In mirroring the start-up culture and behavior, corporate incubators provide a means to capture the way people want to work whilst simultaneously providing organisations with a new outlet for innovation.  A corporate incubator structure offers a real opportunity for organisations to reinvigorate their internal talent’s interest and engagement with the entrepreneurial world. By doing so, they create a spirit of enterprise, a zeitgeist of innovation, with plenty of new opportunities for value creation.

 

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Further Resources:

http://www.bosch-startup.com/en/robert-bosch-start-up-gmbh/ [Accessed August 30th, 2017]

Dee, N., Livesey, F.,Gill, D, Minshall, T. (2011) Incubation for Growth: A Review of the Impact of Business Incubation on New Ventures with High Growth Potential. NESTA Research Summary, September 2011.

Global Entrepreneurship Monitor. Global Report, 2016.

Raut, P (2017) https://thehubforstartups.com/2017/07/05/how-corporates-can-find-innovat... [Accessed August 22nd 2017]

What Corporate Incubators and Accelerators Can Mean for your Business https://www.entrepreneur.com/article/287495 [Accessed August 23rd 2017].

Wagner, P. and Wosch, S. Corporate Incubators: Nurturing Innovation Potential. Performance, Volume 7, Issue 4, November 2015. The full journal is available at ey.com/performance.

Weiblen, T. and Chesbrough, H. (2015) Engaging with Startups to Enhance Corporate Innovation. California Management Review, Vol. 57, No. 2 (Winter 2015), pp. 66-90 Published by: University of California Press Article Stable URL:http://www.jstor.org/stable/10.1525/cmr.2015.57.2.66

Shell Gamechanger Programme: http://www.shell.com/energy-and-innovation/innovating-together/shell-gam... [Accessed August 30th 2017].