Corporate Innovation Hubs

Corporate incubators fostering innovation

The following article primarily focuses on corporate incubators fostering innovation with internal staff rather than startup accelerators investing in external startups or helping upcoming entrepreneurs outside of the core organization.

The Idea: “Let’s do it the silicon valley way” About seven years ago, a lot of innovation hubs, labs, studios, or related were created on the German market. The purpose, as widely communicated, was supposed to be 

1. Digitalization: Creating innovative, new business models

2. Digitization: Optimization of current processes in support of a more distant future and the survival of the core company. 

Sometimes it was also about investing in external startups or trying to help upcoming entrepreneurs to bring their idea to life. This trend was so vivid that today we have approximately 150 of those innovation units - but what (good) do they do?

The goal: “We have to be the speedboat of the organization to help with the digital transformation” All these variously named “speedboats” had, with slight variations, one common goal - fostering innovation by testing new ideas and pushing them to the market or integrating them into the parent company. And all of this in a much shorter time than the mothership would ever be able to.

The confusion: “There are so many Innovation Hubs already, let’s do another one but name it differently.” Along with the inflation of the different titles (Hubs, Labs, Accelerators, etc.) there was, and maybe still is, no common understanding what responsibility or goals these innovation departments have or how their success should be measured. Furthermore, the lack of insight opened up a room to agonize, spend too much time on facilitation and artificial segmentation of what to do: Are we doing digital transformation or new business models or idea generation or something else? What people and skill sets do we need? Maybe designers? If so, what kind of designers? UX, UI, Strategic, Service, Business? In short, the seemingly arbitrary naming of the units equals the incoherence they possess in terms of strategic positioning, staffing, and reaching goals.

The trial of defining the innovation approach: “Let’s define who we are and what we do” Due to all the confusion about the exact scope of such projects, a lot of people saw the need to define these different innovation units. To simplify it, the following is a definition attempt, focused on internal innovation rather than external support. Nevertheless, the approach of helping internal employees innovate or external entrepreneurs is quite similar.

1. Innovation Labs - Internal Bundling of internal resources in one or more interdisciplinary team(s) for the repeated identification and prototyping of digital innovations.

2. Accelerators - External (although there are Internal Accelerators now, too) Programs for identification, selection and support of company-external startups at the further development and scaling new business ideas.

3. Company Builder - External & Internal Business units that establish digital business models successfully on the market by using internal and external resources.

The evolution of perception in innovation

As with every new trend, the perception of it undergoes a kind of development. The trend of founding innovation units is no exception. The motivations behind and receptions of newly founded innovation units can be summarized in different, chronological waves.

The First Wave - It's all about PR

• Communicated Goal: We do innovation! ...Uhhh, really?

• Real Goal: We can at least say we do innovation.

• Work done: Facilitation, space building, fancy interior, ping pong, beer, cosy clothes, ...

• KPIs achieved: PR clippings, PR reach, internal pride of being innovative

• Partners: PR, architects, interior designers, consultancies

• Thoughts: A startup is not just about the environment - if people have enough time to spare for playing ping pong, they likely do not have enough speed. By the way, most successful startups were born in a flat, garage or similar - really not fancy. It‘s important to look beneath the surface and not just impose the cliché startup flair.

The Second Wave - It's all about Design Thinking and Post-Its

• Communicated Goal: We are designing the journey of tomorrow! ...Uhhh, really?

• Real Goal: We are generating ideas and trying to design them on paper.

• Work done: Workshops, post-its, service blueprints, business model canvas, …

• KPIs achieved: # of ideas generated, # of business model canvases filled out

• Thoughts: A startup generates traffic and funding because of product and market traction, as well as real user feedback (data). Almost no startup, except one of the serial entrepreneurs with an excellent track record, gets funding because of a pitch deck with a detailed business plan.

The Third Wave - It's all about trying to deliver something

• Communicated goal: We are putting things out there, to the market! ...Ahhh, better!

• Real Goal: We really do have to try and launch products.

• Work done: Soft prototypes, first low-risk MVPs, huge launch party, ...

• KPIs achieved: # of MVPs launched, project-specific data

• Thoughts: This is actually the first good step most of the innovation units took, to successfully build a startup. Even though they mostly concentrate on low risk designs, often without a fundamental business model or revenue streams - mostly nice and easy ideas.

And now? The majority of the current innovation units have more pressure to deliver something - and by this is meant really delivering something - not an idea pipeline, not a service blueprint, not another hypothetical breakthrough. Instead, a company must add real value to the customer and be able to generate significant revenues in the future (and also revenues right from the start) - this is what needs to be achieved. So what should the next wave look like?

The Delivery Wave - It's all about launching and product-market-fit

• Communicated goal: We create companies that help us to shape the future. ...Yeah!

• Real goal: We work hard and go out of our comfort zone to build companies that enable us to shape and ensure the future of the brand.

• Work done: Idea validation through rapid testing on the market (real user feedback), up or out of idea, MVP-launching and operating, reaching product market fit, high-level venturing, ...

• KPIs achieved: # of ideas validated, # of ideas going to trash, # of ideas transformed into MVPs, # of MVPs that reached product-market-fit, company-specific KPIs like turnover, active users, or customer acquisition costs

In the end, it is not that hard - just follow the basic rules

1. Clear KPIs - measure success and failure  Every idea, service, company needs clear KPIs to measure their success right from the start. By critically evaluating the own performance and making possible failures transparent, everyone has to leave their own comfort zone, in order to get the job done.

2. Tough action plan instead of PowerPoint strategy - create, do not overthink (clear and fast approach) Receiving real market data, making decisions based on that data, doing demo days with a product that has traction (not a click dummy or thesis just based on secondary market research → the real world is different), getting real funding instead of a job creation plan and playing kindergarten; you need a clear plan on how to proceed, a legal structure (100% daughter, shareholder, convertible loans, …?). Don’t procrastinate by spending weeks in the planning stage.

3. People & culture - Bob the Builder, not Bob the Thinker You want movers and shakers instead of overthinkers and politicians. In the end, you need people that add value via operational work, who take responsibility and the risk of doing something wrong. Try to be with the real kids instead of the cool kids.

4. Honest partners - eye level is the key You don’t have 100% of the skill set in house and this is fine. You have to find the right partners. These won‘t be facilitators or theoretical consultants with a business model based on man-days instead of results (Hint: They don’t want to finish fast). These will be hands-on people that can really deliver the full skill-set to support on an operational level. 

5. Bold but realistic vision - transparent and down to earth self-image and delivery promise Having a fluffy vision or statement leads to the point that people who are not part of the innovation unit will think you do fluffy things. Phrase a bold but realistic vision and make transparent what you are aiming to achieve and how you will achieve it - open processes help others to understand the big picture. 

To be completely honest, companies should stick to their labs, hubs, and whatever else they have called it. They should not close their innovation units as a branch of experts might recommend. The best time for those units is yet to come! Just be honest with yourself and focus on the right things.

Be Bob the Builder, not Bob the Overthinker!