Top 5 advantages of an internal incubator program
Giving unstoppable objects the opportunity to become shooting stars
The challenges of innovating as a large business are well-documented and formidable.
Fundamentally, large companies are designed to generate revenue and margins for existing lines of business. In other words, they have a proven business model.
Innovations have no revenue, no margins, no existing lines of business and no proven business models – the objective is to find them.
Large businesses are also designed to deliver the predictability and trust their brands represent. Failure means brand, and career, damage.
Innovation, on the other hand, is a journey into the unknown. Without well-worn paths, many of these journeys result in dead ends – however, the learnings gathered along the way move innovation forward – a prerequisite to success.
In short, internal innovation is where an immovable force meets an unstoppable object.
Worse still, the increasing pervasiveness of disruptive technology, and the extraordinary speed of diffusion, is heaping enormous pressure on large organizations to “disrupt thyself” or face the consequences.
The default plan to address these challenges has been to acquire new, disruptive market entrants, and do so before they become too expensive – no small feat. While this approach can be very successful, we’re finding a new approach provides complementary benefits and a deeper understanding of the market.
CA Technologies created an internal innovation program, CA Accelerator, in which employees pitch their ideas and, if accepted, operate as a Lean startup business within the enterprise, receiving funding via a venture capital-like model.
It’s one example of how we practice our company mission – to eliminate the barriers between ideas and outcomes.
So rather than acquiring the cool startup out there, we’re creating cool startups in here. And they have free reign to move their idea forward or to pivot should the market need not exist per their hypothesis. Rather than command and control – the enterprise modus operandi – the program opts to nurture ingenuity by funding and getting out of the way.
Based on our experience, here are the top 5 advantages of an internal innovation program:
A key element of successful innovation is harnessing new technologies to solve business problems in new ways. While companies can tinker as part of their normal course of operations, there’s nothing like a startup whose future is fully vested in the successful application of the technology (Artificial Intelligence & Machine Learning, for example). The skills developed are far more substantive than those developed in a passive environment and, with nominal effort, can be shared throughout the enterprise.
Who better to identify product and business opportunities than a firm’s employees? Tapping this vast pool of ideas from those who know your customers best just makes sense. It ensures a pipeline of well-aligned ideas rather than hoping there are startups out there building your future portfolio. It also provides the startup with an in-house pool of subject matter experts to help vet the idea and the solution.
While acquisitions have their appeal, the benefits don’t begin until the deal closes. While the advantage of a proven product, business model, etc. in an acquisition is appealing consider the opportunity cost of lacking deep insight into the business until acquisition. Innovation is a game of timing so, should the opportunity take off, the earlier the book is opened, the better.
Startups have an inherent cool factor that cannot be replicated in the normal course of an enterprise business, and can be a clarion call for more entrepreneurially-minded staff. By allowing a startup within the enterprise, employees can expand their skills by becoming an intrapreneur (think GM-in-training) while pursuing a dream. The opportunity alone is a powerful recruiting asset.
The more the organizations knows about its markets, the better. So even if an internal startup fails, and most will, the organization benefits from the market insight gained by the exercise. The insights might even include the surfacing of potential acquisition targets. In the application economy, the winners are the ones who learn fastest.
Acquisitions will continue to have an important role in driving innovation in large organizations but internal innovation programs complement this approach by offering the best of both worlds: real world startup innovation and the opportunity to see the idea nurturing from the inside.
Learn more about the CA Accelerator program, and current incubations, at ca.com/accelerator.