Reinventing traditional R&D and exploring open-ended ideas.
Corporate incubators work with intrapreneurs and entrepreneurs who are proposing disruptive solutions to existing problems, or solutions which the company cannot otherwise pursue. They provide lean innovation training, idea prototyping, mentorship, partner networks and facilities. Typically, incubators will recruit and accept teams before training them, helping them ideate and prototype, and develop their prototyped ideas over a period of 4-18 months.
The most successful teams are often given the opportunity to continue developing their innovations through various key pathways. Teams may be invited to 'spin in' and join the corporation, or in some cases, they may be fenced off for an extended period while the corporation contributes further investment to keep them going. Other startups may be offered investment from the corporate's VC arm or other business units and asked to continue working outside the corporation. Remaining teams will be left on their own to rais money from other funding sources such as institutional VCs. However, The ideation, mentorship, and prototyping assistance that teams received during the incubator is a crucial launchpad for the next phase of their journey.
Strategy behind the play
The core idea of the incubator is to encourage employees to come up with ideas, and give them the opportunity to pitch their ideas. By providing employees with experimental capital, and the time to test and prototype these ideas, the company can discover new, novel ideas and replicate successful ones.
Incubators are most effective when it comes to exploring ill-defined or open-ended ideas and areas, particularly those which are typically associated with long-term ROI timelines (greater than seven years). This focus on long-term ROI timelines is an important component in a corporation's innovation pipeline, and using incubators as a tool can help uncover many of these long term, high impact, disruptive innovations.
Reinvent traditional R&D
Keep ideas fresh
May act as a strategic investment strategy for potential acquisition targets down the line
Keep employees on their feet and engaged
Limitations & Risks
Corporations often lack the context to explore, understand and capitalise on such disruptive inventions. This is getting worse as corporations continue to shrink the time horizons during which they seek ROI.
Initiating the Play
Launching this play requires a moderate initial capital outlay.
Key steps to initiate:
Select the operating model for the incubator.
Obtain and maintain executive sponsorship and funding, preferably from the CEO.
Select the right founder teams to incubate. These teams should be passionate and full of the ambition to solve big problems. It is also important that teams are both willing to learn and to take risks.
Set up dedicated funding for the incubator which is not be connected to the annual budgeting cycle.
Create a network of mentors with startup experience from internal (corporate employees, executives) and external sources.
Running the Play
Incubators are a moderately resource-intensive play.
Train the teams on Lean Methods and Agile Startup Models, Minimum Viable Product, Customer Development and Design Thinking.
Mentor the incubator teams through the process of ideation and prototyping. Provide guidance and assistance to teams as problems arise and guide them through the process of rapid iteration and prototyping to find product/market fit.
Help to nurture the right culture across teams in the incubator program and assist each team to forge their own culture internally of the company they are creating.
Identify and remove startups from the incubator program who cannot translate the idea into a product, have team issues, or cannot find a validated product-market fit.
Typical variations of this play include:
Corporate accelerator (where startups are invested in, and cohorts are formed)
Open Innovation Programs
It can take time to foster intrapreneurship qualities amongst members of incubator teams and patience may be required.
At the conclusion of each team's time in the accelerator, carefully consider the best next steps. Some new products will have the best chance of success within existing corporate infrastructure, whereas others should consider spinning off as an entirely new entity or division.
There should be a focus not only on nurturing new ideas, but also future business leaders and intrapreneurs.
Location is an important factor, and incubator participants should be embedded in their local, physical entrepreneurial ecosystem as well as the global virtual entrepreneurial community.
Play in Action
LinkedIn recognised the importance of allowing employees to have the time and space to work on independent projects. By creating a structured incubator system, they are supporting approved projects for up to three months through the process of ideation, validation and prototyping.
The LinkedIn [in]cubator gives employees an opportunity to pitch projects which they think are worth developing to LinkedIn executives. Approved project teams are given three months to work on it. According to project sponsor Kevin Scott, “…incubator was inspired by hackday, a Friday each month when employees are encouraged to work on just about anything they want...”. The aim of their incubator was to create more support for internal opportunities and employee ideas.