A successful corporate incubator or accelerator depends upon three things: people, people, and people. That’s what I learned by speaking with the heads of corporate incubators at 12 blue chip* corporations in the past eight weeks.
The overarching question I asked was: “Based on what you know now, what would you have done differently?”
What’s a Corporate Incubator?
Companies create internal groups, sometimes called “incubators”, which handle innovation opportunities that their existing R&D groups aren’t equipped to, due to the fact that they diverge greatly from the traditional capabilities and activities of the organization (eg. new business models, joint-venturing, etc.). They often explore problems with “unknown unknowns”, which typical analytical tools are ill-equipped to handle. Innovating in this way is uncomfortable for most organizations. Below are 5 hard-won truths from those corporate incubator groups.
Top 5 Corporate Incubator Regrets
- People, not process.
Each of the firms spent a lot of time getting the new process in place. This was worth doing, but it created expectations on the part of the organization, and they typically found they had too few people to operate the incubator/accelerator process, and those people had a learning curve.
In their words: “The [incubator] design and the senior executive support got people excited, but it was realistically three years before we had an experienced team in place to create real business results. We had to go slow early so we could go fast later.”
Recommendation: Get a small core of the right people in place, and don’t overpromise on speed during year one.
- Insiders, not Fresh Thinkers.
The desire to be more entrepreneurial was universal, so most firms went looking for outside talent that had startup and incubator experience. The problem was, these people knew nothing about the corporation and had no networks. So their learning curve was very long. The firms that relied on attracting intrapreneurial insiders had better results.
In their words: One incubator VP told us, “When I hire somebody from the business, I tell them, ‘I’m hiring you for your network. And you have to keep building it while you’re here.’”
Recommendation: Focus on internal hires, and value their networks.
- Customer Problems, not Ideas.
Pivoting is not in the DNA of large organizations. Without a belief in pivots, there was a strong propensity by executive sponsors to judge ideas early, before they had a chance to engage with the market. Over time, these senior executives had to learn to trust the messy, iterative incubation process.
In their words: “We refer to early concepts as solution hypotheses. That’s how we reinforce the notion that these are merely hypotheses and are subject to change.”
Recommendation: Set the right unit of management – customer problems. You can kill an idea, but you can’t kill a customer problem except by iterating until you find a solution.
- Guardrails, not Gates.
Most of the firms we spoke with had strong Stage-gate models for incremental improvement. As a result, the executive sponsors wanted gates for their incubator projects. This caused problems with slow decision-making, and the need for rapid in-market experiments only exacerbated the problem. What emerged in place of gates was guardrails; firms found they could set up pre-approved boundaries and let project teams run experiments without waiting for permission.
In their words: “If you don’t trust your teams, then sure, you need governance meetings. But breakthroughs require a steady pace of test-and-adjust – you’re not going to govern your way to success.”
Recommendation: Set guardrails, then focus the governance process on exceptions.
- Champions, not Portfolio Managers
Executive leadership teams take comfort in the idea that the incubator will benefit from the portfolio principle; they can tolerate some failed projects as long as they have diversity. Unfortunately, many interviewees found that managing the portfolio often took more time than supporting the individual ventures. Every growth board member had ideas for fixing the portfolio mix, whereas few had help to offer the ventures. The emphasis had to be flipped 180-degrees, so executives felt accountable to the business ventures themselves.
In their words: “At [our firm], we can be quick to poke holes and slow to patch them. The mind-set shift by our executives [toward being problem-solvers] was crucial, and it took two full years.”
Recommendation: Require members of the growth board to champion specific ventures for your corporate innovation strategy. This will turn them into hands-on problem-solvers and not merely arms-length stewards of a portfolio. This change in behavior is crucial if you want your team to adapt to new processes.
*About the firms: The 12 people we spoke with are from Fortune 500 firms that have a central innovation incubator or accelerator. The firms represent market leaders from health care, apparel, construction materials, chemicals, high-tech, food and beverage, hospitality, insurance, logistics, and retail.