Blog Overview

Corporate Innovation Needs a Major Makeover – the 7 Rules of Excubation

Author: Markus Anding, Cologne

For years, corporations have been going after the holy grail of innovation. The challenge of finding the right approach has now become even tougher as digitization and lowered barriers-to-entry speed up and heat up the competition with greenfield start-ups that disrupt corporations’ existing business models. As intrapreneurship and incubators continue to fail, excubation could be the long wished-for solution to the innovation challenge.

In a nutshell, excubation is a smart separation of corporation exploitation and exploration endeavors, where new ventures are given access to existing corporate assets (client base, etc.), while also being allowed to bypass the typical limitations of the corporate conventions and processes. The “smartness” of this approach lies in ensuring a cohesive, tight exchange between then- and out-flow of innovation.

Re-integration as the biggest challenge of corporation innovation

Separating corporate entrepreneurship activities too much or too little from the core business has been a hurdle for innovation success. Current approaches like intrapreneurship programs, corporate incubators or accelerators have been failing for this very reason, as innovation efforts were either suffocated by the core business, or starved as an external start-up that could not be integrated because of culture and process divergence. Re-integration has so far been the biggest challenge for most corporate innovation approaches that – more often than not – has resulted in pure financial engagement of a corporation with a start-up firm and fallen short of the core purpose of corporate innovation.

The recurrent flow between execution and innovation entities, where innovative ideas are fed forward and new businesses are fed back, is the critical element of the excubation approach. It ensures that the innovation entity receives sufficient support and resources; more importantly, it ensures that a certain part of the execution DNA is incorporated into new ventures, which in return will make it much easier to re-integrate the venture once it has taken off.

Importantly, establishing your “excubator” does not immediately require creating and heavily funding a new legal entity. Running a pilot, start-up-like excubation project that successfully creates an innovative product or business model will provide valuable experience and help build a repeatable model for future innovations.

Excubation vs. other means of corporate entrepreneurship

Experience shows that, while there is not a clear pattern for companies choosing a given approach, the more traditional innovators (GE, 3M, Nordstrom, even tech companies like Qualcomm and Adobe) tend to experiment with intrapreneurship models, while smaller companies and players with less history in traditional innovation (Otto Group, ProsiebenSat1, Commerzbank, Bayer) more often run accelerator programs.

The term “excubation” is derived as a contraposition to “incubation”. Given this, start-ups are developed outside of the cooperation as opposed to being developed within the cooperation. Excubation aims for a better balance along a set of key parameters that can be grouped into “innovation level and source”, “anchoring within the organization” and “financial engagement”.

Excubation takes a more balanced approach to the sourcing of teams and ideas, leveraging internal and external resources synergistically. Regarding anchoring, the approach is more aggressive, offering more independence and decision authority for the start-up team, which is different from what is typically found in intrapreneurships and incubators. Looking at examples, you will find companies like Microsoft Techstars, BASF, SAP (Innowerft) and eon already running excubation-like approaches.

Boiling down the excubation approach into actionable and implementable elements, seven “rules” of corporation entrepreneurship for every corporation to follow, can be defined.

  1. Separate innovation from execution: Find a smart balance between moving the start-up closer vs. further away from the core business with respect to organization, processes and incentives.
  2. Attract entrepreneurial talent: Ensure availability of internal and external entrepreneurial talent with the right skill and will profile, set incentives for effective development of innovations.
  3. Facilitate innovation flow: Run an effective process for developing digital innovations, leverage corporate resources, give decision authority to the team, manage towards a tangible outcome.
  4. Manage innovation portfolio: Ensure a balanced portfolio of tangible digital business innovations with sufficient potential revenue contribution, comprised of the corporation’s own start-ups and external start-up investments.
  5. Inspire employees in the core business: Create a passion for corporate innovation activities and followership within the core employee base to trigger support and motivate potential intrapreneurs to partake in innovation activities.
  6. Educate employees: Provide training and education for employees in the core and innovation business, enabling them to get used to the day-to-day deployment of innovation methodologies and entrepreneurial thinking.
  7. Support idea flow: Ensure that sufficiently many and tangible new business ideas are generated from within and outside of the company.

While the implementation of these rules needs to be tailored to the starting point of the respective company, as a whole they outline the necessary, mutually reinforcing steps that serve as a reliable guideline for excubation.

In the upcoming blog posts in this series, each of these excubation rules will be covered one by one, and insights into client examples and approaches to implementing these rules will be provided.

Dr. Markus Anding is Co-Founder and Managing Director at Excubate Corporate Startups, a firm focused on helping large corporations innovate like start-ups. Together with his team, Markus builds corporate start-ups and respective incubation environments for companies across industries and helps them implement the excubation approach. Markus has an academic background in information systems and combines long term practical experience as an entrepreneur and as a Principal at Bain & Company. He also acts as Managing Director for the Munich Center for Internet Research.