Posted on Thursday, Sep 11th 2014
Last year, we launched a program called the 1M/1M Incubator-in-a-Box. Part of its goal has been to stimulate corporate innovation and intrapreneurship. It has exposed us to a broad range of technology companies and their innovation goals, strategies, and processes. While most of what we have learned is confidential, I will synthesize some trends we’re seeing in this domain.
- Culture Change: Most major technology companies recognize the fact that they have a certain amount of disadvantage when it comes to innovation. Cultures, as companies become larger, become stodgy and uninspiring. The more innovative talent ends up leaving for smaller companies, or to become entrepreneurs. One of the primary goals of a formal corporate innovation program is to generate excitement and create energy around the concept of innovation such that innovative talent stays.
- Adjacent Revenue Streams: Employees are the closest to the customers. They are the ones hearing about customer issues – whether it be requests for new functionality, complaints about pain-points, or visions of what more they would like to be able to do. New products that can create up-sell opportunities adjacent to existing ones are usually the easiest to identify by empowering employees throughout the organization to present what they are seeing in customer situations. A well-run intrapreneurship program can unlock billions of dollars of adjacent revenue opportunities.
- New, Disruptive Ideas: The organizations at major technology companies are full of excellent, talented people. Some of them are inherently innovation oriented. They assume that the only way they can express their talents for innovation is by leaving the company and starting a new venture. Corporations are starting to realize that if they empower these folks to develop their ideas inside the company without having to leave, it would enable them to harness this talent pool much more effectively. Today, most corporations spend huge amounts of money acquiring startups at gigantic premiums. Intrapreneurship programs are being designed to manage innovation better internally.
- Talent Development: A lot of technology innovation comes from hard core geeks. These types of people, however, generally do not have the training on how to bring a product to market, assess its viability, market size, etc. The question we are asking is what would happen if the technology talent pool at the corporations can be systematically trained with these skills? Some HR organizations are scared. They think people will leave. The more sophisticated folks believe that those who will leave, will leave anyway. But those who choose to stay and use the corporation’s infrastructure and resources to unleash their innovative talents will create a tremendous competitive advantage. Of course, compensation structures need to be designed to incentivize them adequately.
- Intellectual Property: All corporations running corporate incubation programs agree that IP emerging out of these programs belong to the company, not to the employee. They all also realize that the employees coming up with promising innovation need to be retained and compensated with adequate incentives.
- Flexible Time: Google started the 20% flexible time policy, allowing employees to experiment on whatever they liked. This hasn’t really worked. People waste time on nonsense. Even Google has now moved away from this strategy. Instead, the programs that work well take their employees through a process of coming up with an idea, getting both authorization and resources to develop it based on its merit, and working specifically on that project using the flexible time. Not random whatever. In our work, we tend to play a major role in incubating these projects using the 1M/1M framework.
- Channel: Successful corporate innovation programs tend to want to leverage the assets of the company, one of the most significant being its channel. A company with a primarily B-to-B channel would not want to encourage a mobile consumer app project even if that project is Snapchat. There are exceptions to this policy, however. Google’s driverless car project, for instance, has no synergy with its search advertising business. Amazon introduced its cloud hosting service that had no synergy with the e-commerce business. Nonetheless, these are exceptions. You wouldn’t see Apple deviating from its core very easily. We haven’t seen Facebook making outlandish bets yet either.
- Gamification: We’re seeing some degree of gamification at enterprises whereby they are running contests to solicit new ideas, and then deciding which projects and people to nurture further. It’s certainly effective in generating fun and excitement and changing culture. The process, however, needs to be designed as a multi-step game, so that incubation of the ideas is part of it. Otherwise, all fun, no results emerge.
- Corporate Venture Capital: There is a tendency to tie corporate innovation programs to corporate venture capital. Some of it works well. Some of it doesn’t. It depends on the charter and the structure of the VC arm. Does it have to make money the same way the rest of the VC industry does? Is that the main goal? What about exits? Does the corporation automatically acquire the venture based on milestones at a pre-determined price? Or is it a more open, market-oriented approach? Adjacent revenue stream in particular that leverage the channel, often, do not look like very attractive venture-style investments, but tend to be an important component of corporation innovation efforts. Cisco has very successfully taken important areas of disruptive innovation, funded them and staffed them with a very strong team with track-record, and done spin-outs followed by spin-ins. Most corporate venture capital efforts that do not have synergistic tie-ins with the company’s channel tend to be failures, by the way. My take: Corporate VC is not sufficient to achieve all the goals of running a corporate incubation program.
- Internal Champions: High level sponsorship is absolutely essential for a successful program. We tend to work with top executives, mid-level managers, as well HR to get solid participation across the organization. It is, however, important to recognize that large companies are not full of managers and executives who know how to incubate new ideas. Specialized skills have to be introduced.
We are very interested in connecting with innovation leaders at different organizations and learning what you are doing, as well as sharing our findings. Please feel free to send me a connection request, and we can set up a time to talk.