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Can An Incubator Inside Your Big Company Actually Work?

Once your company reaches a certain size, the inevitable feel of bureaucracy sets in.  New ideas don't have as much of a chance as they used to, and there's a certain type of employee your company starts missing - the risk taking, low rules professional that likes to create a solution rather than simply delivering it.

Big companies like the ones below (GE, Tyco, Mastercard) are attempting to develop programs to give portions of their company a startup feel.  Click on the image below from Fortune magazine to blow the graphic up (email subscribers may need to click through to get the image) and get a taste for how these programs are structured:

Start up programs

More on this movement from Fortune:

"Unlike special skunkworks projects of the past, intended to hive off a single project into its own unit, these efforts are intended not only to ­nurture profitable new entities, but also to infuse entrepreneurism into venerable operations filled with layers of middle managers.

Beyond becoming more agile, the companies want to discover the entrepreneurs already in their ranks and lure new ones. At least 90% of millennials say they would rather work at a startup than a corporate giant, according to James Canton, a futurist and author of Future Smart: Managing Game-­Changing Trends That Will Shape the World. “There is a fierce war for talent,” he says, “and a startup has a feeling of newness.”

It’s not that big companies don’t get what startups do. It’s just that replicating the unstructured, unfettered moves of, say, a five-person outfit is difficult to do with the systems and vast teams needed to operate on a global scale. “Big companies tend to hire managers, not explorers,” Butler says. “You tell them to do this and keep doing it, not explore new ways to do it. Early-stage companies employ nothing but explorers.”

It’s too early to tell whether the approach is working. Most of the efforts are nascent, the baby enterprises mere months old or not yet born. Optimists would say this will allow some decades-old enterprises to sip from a fountain of youth. A pessimist might worry that it’ll be the corporate equivalent of middle-aged parents donning tight clothing and awkwardly twerking to demonstrate to their horrified teenagers that they’re keeping up with the times."

That last sentence says a lot - Are these companies middle age parents trying on a pair of skinny jeans and embarrassing the kids?  I'm not sure.  What I do know is that these companies face the following challenges when they attempt to become more nimble and have a startup division:

1.  The biggest barrier to success for big companies acting small is they still don't get the pure candidate who's going to be successful in a startup.  More often than not, they're going to get a candidate who likes the "vibe" of the startup, and views the fact that the security of the big company is behind the incubator as a positive.  That's fool's gold from an entrepreneurial standpoint.

2. Long term comp is still a huge issue.  The pure startup candidate joins a startup for equity or an accelerated career path.  Big company incubators have a hard time providing either.  They're not ready to make someone rich for being in on the ground floor of an idea they own, and the "tweener" candidate they attract isn't going to be a great fit elsewhere in the company.  The rewards aren't there to truly draw the type of candidate they want.

3. Risk-taking is still viewed as, well, risky.  Even as the incubator inside a big company espouses the virtue of risk, the DNA of the big company - or the unspoken assumptions that are reinforced by body language, email and more from the big company parents - are going to naturally dial down the risk taking inside the incubated company.

4. Leadership "cult of personality" is hard to come by.  Most times, startups need the driving force of a near-mad (and at the very least, incredibly driven) founder to drive them forward.  Some of the behavior by that founder to do what's necessary to survive might look like abuse to the mature company.  The fact that the big company will have problems attracting this alpha is problem number one - the fact that the company is wired to prevent some of the insane behavior across all of it's employee base is a trailing issue if they are lucky enough to attract the alpha.

I love the idea of an incubator inside a big company with a lot of resources.  I'm sure one of the four companies featured above will figure it out.  I'm also sure that the effort will feel like the equivalent of your 55-year old dad wearing skinny jeans and going to an Imagine Dragons concert in some of the others.  Kind of forced...

Comments

HD

I love this concept, and it's one that Cox has decided to focus on as a growth strategy. Autotrader actually started as an incubator out of our parent company and we have our hand in in-house start-ups, liked Videa and Rare, that will provide long-term job security, as well as out-of-house investments like Rimidi and Clutch, that will provide the big payoffs described above. From an employment branding and talent acquisition angle, figuring out how to market both our start-up culture and legacy businesses as one/separate cultures is going to be an interesting journey...

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