Innovation


Corporate Incubators: 4 Tactics That Work (and One to Avoid)

Enjoy all the upsides of start-up culture without the pitfalls with smart management of corporate incubation spaces.
— By Daniel Perez

In-house business accelerators and incubators (BAIs) are an attractive option for companies looking to shake things up and grow market share. They are also a win for early-stage entrepreneurs looking for a safe space to grow fast. However, if not managed correctly, they can become stagnant ponds where good ideas drown and millions flow down the drain.

How can firms keep the ideas – and income – flowing and thriving in their BAIs? Over the last decade, multiple studies in Canada and abroad have pinpointed the top tactics of smart, successful BAI initiatives. Here, four of the leading-edge best practices for incubators will be shared, along with one tactic all companies should take pains to avoid.

Working Tactic #1: Define Success at the Start
Before opening a BAI space to applicants … or setting aside funding … it is important to define what a successful outcome might look like. Is it a spin-off company born from within? Is it an adjacent service group that can expand market reach? Should there be specific levels of revenue, growth, or sales?

While it can be challenging to pin down success even before the first seed venture is planted, having these difficult discussions beforehand can make all the difference.

According to a world-wide review study by UBI Global, while any start-up that spent time in a BAI had a greater chance of survival as a company, there was a difference for start-ups that had clear benchmarks vs. those who had none. The odds that a seed venture would make the five-year mark increased 15 percent when benchmarks were present. Add in ongoing key performance indicators (KPIs) to the mix, and survival odds shot up even further. Thus, by beginning with clear parameters and understanding what types of success make a difference, BAIs can ensure both sides are maximizing the odds of success.

Working Tactic #2: Check and Double-Check the Cultural Fit
Both the sponsors and the firms inside a BAI should be confident there is a good cultural fit. This means alignment on core values, key business practices, and elements of employee treatment. It is a bit more “touchy-feely” than the typical pitch-deck, but it eliminates venture-killing problems down the road.

A major component of cultural fit is mutual trust. Can the corporation trust the ventures inside the BAI with trade secrets, executive time and funds? Conversely, can the BAI trust the sponsoring firm to uphold its promises of mentorship and financial aid, to protect and respect new IP, and to maintain the appropriate managerial boundaries? If there is any doubt on either side, it is best to part ways before deep investments are made.

After all, it does not matter how amazing the tech or service might be. Where there is not trust or a good cultural fit, there is potential for dysfunction, inefficiency, and frustration. As a study by Ottawa’s Eric Sprott School of Business a Carleton University revealed while looking at more than 3,000 firms inside Canada’s incubation spaces, faults in fit and governance were the most influential factors in venture failures. Minimize that risk by spending extra “getting to know you” time in the application stages.

Working Tactic #3: Practice Constant Communication
A BAI that is a black hole serves neither side. According to a July 2019 study from Canada’s Technology Innovation Marketing Review, one of the biggest failure factors for incubated firms was a lack of communication.

In the qualitative notes of the study, the authors noted that it went deeper than simply “pinging” the venture to check in on a regular basis. Meaningful conversations about business issues, project progress, and marketing challenges were needed.

The flip side was present, too. One case study noted that while the “demo days” in the corporate BAI were for internal sponsors only, having the opportunity to showcase what was going on and take questions helped drive the firm to a successful and sustainable launch outside the BAI.

Working Tactic #4: Pay Attention to the Marketing
The last tactic is something almost all BAI ventures report wishing they had spent more time on … marketing! So much effort is put into wireframes and testing that marketing is often shortchanged, but this is an area where an established corporate partner can contribute the insights, experience, and resources to truly make a difference for a start-up venture.

Secrecy is a tactic BAIs should avoid in favour of encouraging all members to engage in transparency and sharing.
Use in-house brand experience to help build fresh, well-branded voices in the BAI. Help the start-up craft exciting origin stories and vibrant customer journeys. Leverage corporate resources for distribution of press releases, test results, and product reviews. Share proven advertising methods, including effective ROI management. It can be the life-or-death difference for a young firm, especially when it is time to leave the safety of the incubation space for the open market.

Give This Tactic a Hard Pass
One thing that is very tempting for BAIs is secrecy. In start-up mode, protecting discoveries and breakthroughs can be a tactic to avoid competitor copycats or thefts of intellectual property. However, keeping mentors, coaches, and sponsors in the dark about what is going on within the start-up can cause multiple problems, loss of trust, and even loss of funding.

As a result, secrecy is a tactic BAIs should avoid in favour of encouraging all members to engage in transparency and sharing. Want to keep sponsors excited about progress? Tell them. Want (or desperately need) help with business hurdles? Share the challenge. And, from the other side, worrying that the start-up company is not performing? Ask, and expect answers.

With clearly defined benchmarks for success, a strong cultural fit, continual communication, and marketing help, there is no place left for secrecy or dissembling. Instead, by leaning into the positive side and current best practices, every firm can have a BAI that is a winning investment and positive space for growth.