Today I’m going to discuss Corporate Business Incubator model. This is the only model of Business Incubation Models series (up to now) that is proposed by consultants and intentended to enhance organization’s capability to innovate. 3 consultants from Booz, Allen & Hamilton have published an article in 2000 where they explicitly described the process of corporate business incubation, it’s pros and cons as well as key success factors that could help corporations to boost innovations.
2000, Booz, Allen & Hamilton model (white-box, process, operations)
Main contribution of the model proposed by Gregor Harter, Klaus Hölbling & Steffen Leistner from Booz, Allen and Hamilton is conceptualization of business incubation and applying it to a corporation’s needs in continuous innovation. The model describes how corporate incubator could reinforce and support innovation practices. Research of the Booz et al shows that only 20-40% of R&D research results are transplanted to corporation’s product or service portfolio. The remaining ones are waste and not utilized as could. Authors distinguish two paths of idea development within the corporate incubation:
- Spinning the business or product into the existing environment. This option means to develop ideas into new products/services which will utilize company assets and will be tied to core business.
- Spinning it out as new venture. The objective of this route is to develop a new venture which will be distinct or separated with external funding.
They explain that there are several key success factors of the application of the model:
- Entrepreneurial leadership (commitment of executives which enables, empowers and follows incubation undertakings).
- Incubation Engine (standard incubation processes and corporate incubator team should be assigned).
- People and entrepreneurial culture (empowerment of intrapreneurs and a culture of “failure is success”).
- Corporate resources (utilizing corporate resources such as marketing, partnerships, clients database, PR, business networks).
- Corporate incubator processes (“Incubation is about decreasing time to market”. Crucially important that incubation process should work with the smallest lead times as possible).
Incubation process is organized through stages and gates in order to reduce uncertainty. First goes strict screening criteria which are established to ensure that only the best ideas are funded. Then detailed planning activities are launched to identify the opportunity and develop a business case. Then a decision about initial seed funding is taking place, and so forth.
Corporate business incubators have the following main challenges:
- To produce and incubate strategically aligned projects.
- To balance between exploration and exploitation without restraining innovative capacity.
- To overcome bureaucracy.
In conclusion, each company in addition to corporate incubator should have innovation portfolio management with investment objective (demand side of corporate innovations), rolling planning of resources, project prioritization.
Summary of the model
Summary of the model is presented below:
|Source (Author, Year):||Booz, Allen & Hamilton, 2000|
|Purpose of a model:||To introduce a model of corporate business incubator|
|Type of a model:||Process model|
|Theoretical background:||No information|
|Resources:||Dedicated BU – corporate incubator with staff and management, corporate assets, corporate seed fund|
|Processes and practices:||Stage-gate model with 7 stages:
Each stage is characterized by core and support functions.
|Efficiency and effectiveness:||No information|
|Linkages “Entrepreneur – Business Incubator – Innovation Ecosystem”:||Direct linkage to the entrepreneurship process and corporate business processes.|
|Key contribution:||Stage-gate model of corporate business incubator with core and support functions in each stage.
A systemic tool for developing risky projects within corporation environment.
Lessons learned and food for thought:
I think that corporate incubation or innovation management in general for MNCs is crucial for their survival in the future. However, even more than decade ago this question is remained unsolved for many corporations. Recent report issued by Accenture (“Why Low Risk Innovation is Costly”) revealed that innovations are not working out the way many companies expected. Even though much more capital and resources are dedicated to the innovation management (even roles such as Chief Innovation Manager appeared), many MNCs are dissapointed by results.
Let me give you some figures:
- Around two thirds of surveyed executives (out of 519) believe that their companies very dependent on innovations.
- 70% list innovations as top 5 strategic priority
- Only 18% of executives, hovewer, believe that their own innovation strategy is delivering a competitive advantage
In summary, companies tend to use renovation rather than developing breakthroughs. Secondly, companies are in the “innovation trap” meaning that companies aren’t tolerant to risks, they expect as many VСs high ROIs in short terms. I would say that companies still have lack of systematic approaches to manage innovations and are in the same trap as venture industry – short term orientation.
Good luck and see you soon!
 Gregor Harter, Klaus Hölbling, Steffen Leistner. Corporate Incubation—A New Approach to Innovation. Communiations, Media & Technology Group, Vol. 6, Issue 3.