There’s a crazy game played in Japan that looks like a cross between rugby, wrestling, and capture the flag. It is called “Bo-Taoshi” and the goal is simple: defend your pole while simultaneously attempting to topple the pole of your opponent. Sitting on the top of the pole is the “ninja,” and it is his job to counteract the forces trying to bring him down. The game is not unlike business: the CEO is the ninja, with challengers seeking to disrupt the leader by being agile and attacking vulnerabilities. When you are at the top, the real challenge is being equally agile enough to stay there.
In his now classic 2004 book Why Big Companies Can’t Invent, Howard Anderson argues that it is hard to innovate when you are on top because all your natural instincts urge you to preserve the status quo. That is why the model of the integrated R&D lab as the engine of invention no longer works. Yet PwC’s recent CEO survey shows that 61% of CEOs consider innovation either their utmost priority or one of the top organizational priorities. So if the current model of innovation is broken, how can a large corporation invigorate its business?
Anderson’s advice is to replicate the environment of entrepreneur-led startups, which by their very nature have the inherent potential for invention and dramatic growth. But that’s easier said than done. How does an established company with tens of thousands of employees capture some startup magic?
The answer is “yes,” but carefully.
Incubate to Innovate
The solution is an internal incubation program mimicking the dynamics of a startup and tapping into the upside of that model. These “intrapreneurship” programs and internal incubation competitions are not new. One of the first instances of an intrapreneurship, dating back to the ’80s, is Apple’s Macintosh team.
Building a startup from the inside can be a tricky proposition, and since the time of Anderson’s publication, many companies have tried with mixed results. Take the example of Qualcomm, whose exploration of internal incubators started in 2006 with support from the highest level in the organization. Ricardo Dos Santos, Qualcomm’s director of New Business Development, was charged with leading the new “Venture Fest” program, which was open to employees from all divisions, with a plan to bring the best ideas to top execs and then implement them with existing business or R&D units. Some promising products emerged, like a wireless gaming console called Zeebo, but by 2012 Venture Fest had shut down. What went wrong? Dos Santos said challenges of culture, structure, and organizational alignment were all factors. More recently, Amazon’s Lab126, an internal incubator that evolved into a 3000-strong work force, is being reorganized following the disappointing launch of Fire Phone.
Before large corporations seek to emulate the scrappy creativeness of startups, it is vital for leadership to understand the four key ingredients that make startups hot houses of innovation but also fundamentally different from established firms. All these factors and the spirit of innovation that goes along with them should be encouraged, not squashed.
1. High Stakes
The entrepreneur leading a newly formed startup has all of their eggs in a single basket. Their professional survival is inextricably linked to the future of the business, and as a result, they will nurture and push their idea no matter what the hurdles may be. There is no Plan B. The entrepreneur has stakeholders in the form of angel investors and venture capitalists, and they are inherently comfortable with a high degree of risk. Contrast the entrepreneur with the large, established corporation.
For a company like Qualcomm, internal incubation efforts were a side bet, something separate from the core research and development process. Such programs may receive funding and resources, but this investment is typically minuscule when compared to the core R&D budget. Unlike the entrepreneur, there isn’t really a whole lot at stake should this initiative fail. Large companies must find a way to make these incubator initiatives feel like meaningful, all-or-nothing endeavors.
2. Controlled Chaos
The startup process and organization may seem haphazard, but it is this chaos, agility, and speed that makes the startup easily pivot to latch on to new opportunities.
At Artefact, we had to find the right balance between structure and process that gave us the freedom to disrupt and reinvent. When we go into incubation mode around a promising idea, we provide the team with the independence they need to be daring. And when our confidence increases that we have a winner, we spin it off into a separate entity, as we did with our sister company, 10,000ft, whose genesis was in a project management and planning tool.
3. Patience You Must Have
Another key consideration when fostering intrapreneurship is patience. It can take a long, long time for an idea to be developed cohesively and its potential fully realized. In the corporate world, these long timelines can test the mettle of the executive team and stakeholders alike. Where entrepreneurs dream of diamonds, corporations often see only coal.
Entrepreneurs and their investors willing to support a promising idea that might turn into something down the road, even as it evolves and changes. Perhaps, the most recent example of that is Lytro, whose light field technology continues to excite investors while refusing to settle into a single form factor.
4. Investors: Act Like One
Companies still in touch with their own startup roots have created hugely successful internal incubators. Microsoft’s internal accelerator, Microsoft Garage, spews off “some of the most interesting software to come out of Redmond,” according to TechCrunch. Microsoft describes it as a “a protected habitat for Microsoft employees and their wild ideas.”
To stay on top through innovation, corporations need to adopt the hands-off stance of an investor. Internal programs might be run like well-known investor competitions such as TechCrunch Disrupt, where hopeful entrepreneurs pitch their new product ideas, with winners receiving a prize in the form of funding, resources, and dedicated time away from core responsibilities. Then the incubator team needs the freedom to experiment without management looking over its shoulder.
Finally, when an incubator has cooked up a new product idea, rather than forcing it into an existing corporate infrastructure, the parent company needs to consider spinning it off as an entirely new entity or division, in the process nurturing not just new ideas, but also future business leaders from within their own ranks.