Incubating at the Fortune 500

in – cu – bate

to maintain at a favorable temperature and in other conditions promoting development

It feels like you can’t turn a corner without hearing about another startup incubator or angel fund. This model has launched several successful companies including Dropbox, Loopt, Xobni, and Disqus.

 

So the question is… why don’t big companies drive innovation in a similar way? I’ve seen a lot of corporate “startup” teams come and go. For all that’s been invested in “startup” teams at large companies, the results are pathetic. Millions of dollars have been wasted without anything to show for it. These projects are eventually folded and the talented people are slotted back into the larger teams.

But big companies do not have to be devoid of real innovation. They could have a successful startup mentality that creates thriving new businesses. The most important success factor exists at the Fortune 500: The talented people who can form incredible multidisciplinary teams. So the people are there, but real success inside the corporate walls would depend on radical changes:

1. Financial Incentive

If you work at a Microsoft, Google or Yahoo! and ship something that changes the world and makes billions, you get … not so much. The reward factor just isn’t there, and it needs to be. There has to be the dream in place that for the 10 teams that fail, the 11th team could make its members millions. Of course this sort of incentive doesn’t exists today because big companies pay great salaries to all 11 teams along the way. But truly entrepreneurial people don’t really care as much about that regular paycheck… which makes it less required and leads to:

2. Hunger & Risk Factors

Because employees on these teams make a great salary, there is no profit incentive. This is probably the biggest problem with startup teams at large companies. You can show up at 9 and leave at 5. And getting more play money is just a snazzy powerpoint away from a well connected exec. Nothing makes them hungry.

There needs to be risk factor that weeds out people who aren’t bought into the idea. The risk could be a greatly reduced salary that is redirected into the incubation fund. This fund would be used to help reward the teams who make it big and cover the cost of running these startup teams. It’s up to each team to manage the money, prove a market, and generate real ROI. Companies could still give these employees some basic health benefits, open office space, etc.

3. Independence to Change the World

Nothing stifles innovation like having to argue about internal competition. Slippery slope politics have entrenched leaders fearing cannibalization of existing customers from new initiatives. This only prevents great stuff from being customer tested. Prezi would never ship at a large company with an existing presentation application. And from the founder perspective: why would you spend 6 moths working on something that’s just going to be killed? There needs to be freedom to let these new businesses launch before they are killed off by a scared VP.

4. Finiteness

Freedom needs to be time-boxed. These teams should be given a small seed fund that would run out if they can’t start showing returns within a short time period. It’s powerfully motivating to know that without some profit my startup has a finite life span that is not on a 3 year horizon. If the “founders” want more life… give up more of the “equity” that you would have earned in the end from the new reward system. Several of these teams will die off quickly and thats OK.

5. Mentoring

At first you may have to bring in some outside mentors for these teams, but eventually the successfully graduated teams can help the new classes learn from their wins and losses. The classes taught at these companies today just aren’t designed to make something wildly successful. Most of todays corporate curriculum is about preventing failure. Instead, these teams need education on turning small wins into crazy money with a few risks along the way.

Will anyone actually put something like this together?

I doubt it. It would take a perspective shift that most executives of the current c-level generation won’t make. But the reality is that the alternative should scare them more. The alternative is bleeding talent, a lack of innovation, and a slow decay of existing market share as it’s eaten away by the same talent you let leave. Simply because you didn’t find a system that motivates talented people to build out phenomenal innovation and new markets.


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