Corporate incubators have reinvigorated large-scale enterprises like Telefónica and Nokia with the innovative drive of lean startups. Peter Borchers at Deutsche Telekom’s technology incubator explains, “We act as an early warning system for new trends. We also make the whole company a little more entrepreneurial.”
Collaboration With Startups
Without that entrepreneurial mindset, corporations can’t spend their way into this mindset. Research by Accenture showed that corporations that have tried to innovate without structural changes have not been able to introduce marketable innovations. As a result, the decline of large corporations has been accelerated by the rapid growth of smaller technology firms. The research concluded that corporations that collaborate with startups are better able to achieve market victories. In another study, corporations that have been the most dedicated to adopting the entrepreneurial mindset are pulling out far ahead of their competition. Harvard Business Review summed up this trend: “Since the mid-1990s, a new competitive dynamic has emerged — greater gaps between the leaders and laggards in an industry, more concentrated and winner-take-all markets, and more churn among rivals in a sector.” Achieving market leadership is much easier when you learn from the mistakes of corporations that went down the entrepreneurship path in the wrong way.
Here are our four recommendations for any corporation that wants to foster intrapreneurial thinking:
1. Redirect Fear to Where It Belongs
Many people come to work at corporations for the stability. If they were comfortable with risky ventures, they would probably work at a startup already. When stability settles down into complacency, disruption from the outside becomes far more likely. That’s what happened with the transportation and media industries. Corporate leaders shouldn’t fear risky innovations. They should fear what results from not doing enough for their customers. That fear can be used fuel innovation. Some ways to channel that fear include sending managers to innovation training, arranging visits to disruptive startups or collecting stories from former customers who have moved on to something new.
2. Prepare for the Hard Left
Understand that it’s common for innovations to make no sense at all initially. If the idea was obvious and predictable, it would have been done already. Prepare for projects to not work out as planned — or for project teams to discover original applications of projects that failed in the past. The classic case is Post-It notes at 3M. Dr. Spencer Silver was looking for stronger adhesives, and he found one so weak that it didn’t even leave any residue. Most researchers would toss that away. He threw out his assumptions and found a cultural icon that has contributed to billions for 3M.
3. Commit to the Long Haul
Some corporations treat innovation like a variation on a marketing campaign. Starting with a hackathon or innovation event puts the solution before the problem. This is approaching innovation from the wrong direction. Events like these tend to produce minor innovations that fizzle out because there’s not enough market demand for a solution or because the company doesn’t have the right resources to mount a full solution. True innovation emerges from structural changes in corporate priorities. What lean startups do is start by identifying a problem that is driving significant pain for a potential customer base. The next step is arranging the right resources in terms of skills and leadership. The solution is then built around answering that problem in the most direct way with the resources available. Only where there is a viable product does the business go in search of financing.
4. Bring Customers on Board Early
Lean practices make customers part of the design process instead of presenting them with a finished product or service that they may or may not accept. The early customers/testers add a vast amount of market value with their feedback, model validation and approval in the form of hard cash. Gaining access to customers is often harder for a corporation because the sales department doesn’t want to give up live leads for an untested project. For sales representatives striving to achieve or exceed quota, giving away customers is self-defeating. The corporate leadership has to emphasize the value of collaboration to reach company goals over individual or departmental achievement. Internal competition is good as long as it doesn’t impede the corporate incubator from bringing new ideas to the market.
Free-Form vs. Hierarchy
It’s not easy to insert a free-form startup incubator into the rigid hierarchy of a corporate structure. It can be done successfully, though, when corporate leaders commit to a long-term project that involves hands-off intrapreneurship, adherence to lean practices and greater risk tolerance. Corporations that attempt to do this on their own have had limited success. A collaboration between far-sighted corporate innovation leaders and incubation experts trained in the startup mindset has proven to be the best arrangement to produce a true corporate incubator.