Necrophone

Large companies have long realized that they don’t innovate – their employees innovate.    At most companies though, the usual bureaucracy gets in the way of allowing employees to emancipate their entrepreneurial drive.   A few companies have swayed their Pessimistic Patty managers to simply get out of the way, and that in itself is a huge improvement.  But the boldest companies have initiated employee innovation support programs believing in the adage “that which is worth doing, is worth doing systemically”.

There are three types of employee innovation support programs, each geared to a specific purpose along the continuum of idea development.

Corporate Entrepreneurship School

The Corporate Entrepreneurship School (CES) is inspired by entrepreneurial leadership development curricula, such as the Startup Leadership Program, The Founder’s Institute, Startup Weekend and the Lean LaunchPad (taught at Universities).    These pre-accelerator offerings cater to aspiring entrepreneurs, offering a low-risk training ground to test their early-stage ideas, but more importantly, their resolve to enter the arduous entrepreneurial career path.    The primary purpose of these programs is to TEACH through a mix of theoretical and experiential methods (and always utilizing the modern ‘flipped classroom’).   The business model of these programs is to receive fees from participants (as ideas and commitment from respective founders still work in process, too early to consider investment ready).  Additionally, participants self-form their own teams and devote themselves part-time, usually pursuing other day-job or educational endeavors.

The corporate version of an entrepreneurship school pretty much follows the same design principles:

1. Calls for volunteers willing to generate their own ideas, not spoon-fed conscripts
2. Primarily aims to teach entrepreneurial skills (where mistakes are considered learning, not punished)
3. Encourages cross-functional team formation
4. Part-time for a defined time period, so everyone tries before they buy

The benefit of a Corporate Entrepreneurship School is a more confident, prepared and motivated workforce to tackle tomorrow’s challenges and opportunities – leave the slide-ruler ROI calculator at the door to the admission’s office.  Conducive to their primary objective, CESs do not pin their success on what happens to the employees’ ideas, nor track what happens next – that is another matter entirely and best handled by follow-on programs listed below.

Given their unfamiliarity, Corporate Entrepreneurship Schools tend to be creative to increase participation and gather company-wide attention.   The secret sauce is to generate an environment of “reality learning” – a ruse of sorts to get participants focused on developing and pitching their ideas, so that they forget they’re in training, so they actually learn more!  Some utilize a grand-challenge or an idea competition format to make their final selections (those whose ideas are not selected can usually join finalist teams anyways).   An example was my very own Qualcomm Venture Fest (which also embarked the next-step accelerator model below).    Others utilize a short but empowering kickoff workshop, complete with a ‘how-to-innovate’ guidebook and a symbolic spending account.   An example is Mark Randall’s, brilliant and often misinterpreted Adobe Kickbox.   In either case, CESs are run on a set schedule (1 or more times per year), whenever it is more efficient to batch participants with training resources and needed executive support.

Corporate Employee Accelerator

The Corporate Employee Accelerator (CEA) is inspired by Startup or Seed Accelerators, such as the Y-Combinator and TechStars.  Startups Accelerators cater only to committed entrepreneurs.  The primary purpose of these programs is to VALIDATE startup ideas, thereby increasing their funding readiness level.  The business model, or in this case, exit model, is to transition startups to post-seed round investors, making a positive return on invested seed-capital (cash, mentoring and networking for a piece of the equity at the right price) – Startup Accelerators are thus very selective and often take less than 10% of applicants (Less than 1% for Y-Combinator).  Participants (teams, not solo acts) are required full-time and at specific locations.   Recently, various companies have inaugurated in-house, Corporate Accelerators aimed at external startups (sometimes partnering with seed accelerators such as TechStars).  What I describe here is a Corporate Employee Accelerator aimed at supporting employees and their ideas, not external founders and startups.

The corporate employee version of a Startup Accelerator closely follows the same design principles:

1. Calls for volunteers with big ideas for which they’re willing to fight (self-selected Intrapreneurs)
2. Selects the most deserving ideas/teams through a competitive entry process
3. Validates employee ideas, thereby increasing their funding readiness level
4. Transitions orphan ideas and teams to a permanent sponsor home, a corporate or business unit that can officially charter a long-term project
5. Encourages cross-functional team formation AND mentoring (In the form of a ‘virtual startup’)
6. Requires a full-time commitment for a short, intense period of validated learning

 

The benefit of a Corporate Employee Accelerator is increased investment readiness for validated teams and ideas.  CEAs can be measured by their ability to transition ideas from the employee pool (untapped innovation potential) to a sponsoring business unit that can commit funding and resources to business model development – much like a startup or seed accelerator is measured by how much follow-on investment their startup cohorts secure upon graduation, starting with famed ‘demo’ or ‘investor’ days.

Corporate Employee Accelerators need to be creative on how they allow for employees to spend a 3 to 4 month full-time ‘sabbatical’ to materialize their new ‘virtual startup’ possibility.  This requires a great level of upper management commitment as well as integral involvement from HR to ensure the employee’s sidestep from their current job is not a career limiting move, rather a career building move (independent of results of the accelerator – since the company benefits from the exploration of a high-potential idea anyways).  An example is Cisco’s new Innovation Rotation Program (the last phase of its Innovate Everywhere Challenge), where I’ve had the pleasure to consult and mentor participants.   My own Qualcomm VentureFest also included elements of a CEA, but on a ‘pop-up’ basis – A few of the most promising teams/ideas from the startup school feeder (the 3 month part-time ‘bootcamp’), were given the opportunity to continue full-time for a trial period, once schedules could be coordinated with sponsoring units and employee managers.

Corporate Startup Incubator

The Corporate Startup Incubator (CSI) is inspired by Startup Incubators, aka Startup Builders, such as Bill Gross’s Idea Lab and Daphne Zohar’s PureTech.  These outfits combine the capabilities of seed-stage venture capitalism with entrepreneurialism to start new companies from scratch, smartly spreading common overhead functions across a portfolio of bets.  The primary purpose of these programs is to SCALE a business model for an in-house idea (spinning off validated ideas into stand-alone startups, that can then seek additional funding or an acquisition exit).  The business model of these programs is to make a positive return on invested seed and early stage capital (including the value-added, overhead ‘sweat-equity’).

Similar to Accelerators, Incubator participants (startup teams, not solo founders) are also required full-time and at specific locations, with the difference that Incubators usually host teams for longer time periods, anywhere from 6 to 24 months, and accept new entrants anytime during the year (as opposed to the Accelerators’ scheduled batch system).

The corporate version of a Startup Incubator also follows similar design principles:

1. Calls for volunteers with validated ideas for which they’re willing to execute (recognized Intrapreneurs)
2. Selects the most deserving ideas/teams through a competitive entry process and due diligence
3. Primarily aims to successfully launch and scale new startups (As separate legal entities)
4. Encourages cross-functional team formation, mentoring AND shared overhead support
5. Requires a full-time commitment for an indefinite time period, sometime past launch (open to pivots), so everyone embraces scaling the right business model, not an intransigent march to artificial deadlines

The benefit of a Corporate Startup Incubator is the ability to scale growth options detached from the core business and also a way of properly incentivizing entrepreneurial-minded employees (by granting them a true startup risk/reward lifestyle).  Corporate Startup Incubators can be measured by their ability to transform internally created startup ideas into scalable business models (alone and/or through partners).   They can also be measured by their ability to support and learn from intrapreneurial talent, instead of seeing employees quit to form startups completely out of the corporation’s ability to influence or benefit.

Corporate Startup Incubators need to be creative on how they allow for employees to leave their current job to pursuing their startup idea with the right risk/reward incentives in place (and of strategic interest to the company).    CSIs may not immediately grant independent startup status to their projects (may want to peg formal startup formation to certain validation milestones, which could include the raising of external funding or finding a joint-venture partner).   Nevertheless, there should be entrepreneurial incentive systems implemented from the start (e.g. team based bonuses, phantom shares, etc.).  A notable example of a Corporate Startup Incubator is Google’s recently announced Area 120 – If there’s one company that’s probably tired of seeing its employees leave to form intriguing startups without as much as a proper good-bye, it is probably Google.    CSIs are also advised to recruit external domain experts as Entrepreneurs-In-Residence (EIRs) to complement internal talent.  In fact, I currently hold an EIR role at MAS Holdings incubation unit, dubbed FutureWorks.

Key Takeways

• Corporations have to realize their employees are the key to innovation
• The worst thing to do is to turn a blind eye to the bureaucrats that continue to get in the way
• To unleash innovation, corporations really have two positive-sum choices:
  • Get the bureaucrats the “heck out of the way”, or better yet
  • Figure out a way to formally support intrapreneurs
• Three employee innovation support programs to consider are:
  1. Corporate Entrepreneurship School (To Teach)
  2. Corporate Employee Accelerator (To Validate)
  3. Corporate Startup Incubator (To Scale)
• It’s important to understand the purpose of each employee innovation support program and clearly set expectations accordingly. The programs described above can be stitched together, acting as three different stages in the continuum of innovation
• We’re entering the entrepreneurial age, where land, labor, capital and knowledge have become a commodity – the only scarcity is the ability to act in the face of uncertainty
• Corporations will soon realize entrepreneurship as their business model – “Great Scott!” – Isn’t about time to start experimenting with employee support programs and stop paying lip service to a culture of innovation with nothing tangible to show?