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Corporate Incubation

Corporate Incubation is Like Fruit Flies Genetics

Most industrial market have endured their own Copernican revolution lately. Whether it was because of mobile, sheer customers discontent or the future threat of artificial intelligence, is of no real importance at this point. What is clear is that the old innovation playbook involving trickling down military technology to B2B and then to B2C doesn’t’ work anymore. Facing startups with seemingly random hit-and-miss business models that nonetheless aggressively push in the market and eventually succeed, what are the options?

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Corporate Incubation

How to deal with startup fever in your company, part 1

While the first wave of the digital revolution is now well over, most corporations are victims of some level of rude awakening. Surprisingly enough for me, the sovereign cure for their lack of strategic vision has been isolated: startups. As it seems, six-month-old post-internet companies without cash-flow are deemed better than multi-billion global businesses are figuring out the market. Even if you might be very lucid about this foolishness, some of your executive committee is already victim of such startup fever. Let me offer one of the many ways to deal with that issue. And then maybe, you’ll find realreasons to work with startups.

Startup fever? Really?

A first reality check would be that if your multinational is clueless on what to do next in your market, there’s not a lot of reasons to believe that startups will be better than you. They might take way more risk than you do, they might benefit from beginner’s luck, and be more in sync with your own market because they are more culturally fit, but in my experience not very much so.

Consider that in Europe the average startup shelf life is less than 2.5 years, after which they die from lack of business model — and in my opinion of too much public money. Before they disappear less than 25% reach some form of growth stage (read: actually sell something). More than 40% try to enter the soft-belly of the consumer market with social apps, games… While less than 15% tackle hard problems such as biotech, fintech, AI or nanomaterials.

In term of talent diversity this gets even bleaker. Less than 15% of EU startups have female founders — UK being off charts with a pitiful record of 33% woman founders. And if you have millennial fantasy, note that the teams average age is of 36.5 years. Lastly, there’s only 30% of the teams from international origins. Most startups are regional ventures without cultural understanding of any other market than the 100 Km around them. And that’s a best case scenario.

Still with me? Not too depressed?

I can’t change reality and would recommend that you double check all this in the last European Startup Monitor report. It does try its best to make it look good.

The key message is this preambule is simple: Are startups doing interesting things? On average no, they aren’t.

And yet, I’ve been working with them for a decade and as a professional dedicated to understanding something about innovation. I enjoy it, every day. I’m just not delusional, and know that the odds are stacked against them, while they also have to deal with tons of clueless actors in their ecosystem that need to spend public money, get tax breaks, sell their product to entrepreneurs, and many other things that don’t require the startup to succeed or even survive.

All that being said, if you’re a big corporation you might have solid reasons to work with startups. They’re not just the superficial trends that everyone are speaking of.

Paint precise and realistic targets

Corporations getting startup fever are usually pushed by small venture funds (or worst, business angel clubs) and public organisations to co-invest as minority shareholders in early-stage tech companies.

I mean, why not?

Enough tech transfer professionals have been around to know how to mitigate risks, help build-up technology around public research, and so forth. All in all, not a very efficient endeavor, but we’ve seen it works from time to time — with a few exceptions like France where the system has been broken by recent unnecessary governmental gate-keepers.

The real problems happen when corporations don’t just seek to externalize part of their research but search for their « next business model. »

Let me say first that yes, this is possible.

On paper a major company could acquire a newly-fanged startup, adopt its business model, scale it, and be successful ever after. Of course we don’t have an example of such a feat in the last twenty of thirty years… Just to be conservative (and because my business depends on actual proof of success) let me just say that “Finding your new business” would be my lowest priority if I was committed to work with startups.

I would rather consider six other possible targets (or ROIs) that would justify that your corporation plays with startups.

And, my first priority would be:

Target 1. Scouting the market ahead of competitors

That’s the really big one.

It works, it’s not too tricky to set up, and doesn’t require tons of investment. Seriously, what’s not to like?

The key idea is to consider a portfolio of startups that will scout for you some of the weak signals, trends, new opportunities, or key hypothesis that could elucidate your next business model. See? I phrase it as a lawyer would do, because I want to set your expectations right: you’ll have to work about it and have a plan. This won’t be a fire and forget solution.

Still, it’s tremendously powerful when used right.

You have to understand the beauty of this approach: you don’t have to find the perfect startup. And by that, I mean that it’s not about finding a younger, more risk-taking version of your own corporation. It’s about finding a startup that will test something key for your future.

Say for example, that you’re in public transportation all over Europe. Things that you need to test urgently are: how and where mobile payment will pragmatically start? How could mobility as a service be integrated in cities’ current infrastructures? How could people let go of their personal vehicle? Etc. This is you thinking about the next step for your business. And, these are very precise, but also very big questions. If you’re running bus lines, you’re not literally looking for a startup trying to launch connected buses, or self-driving buses… You’re exploring the big picture and how to crack a dozen of new societal, political, economical, technological, environmental, and legal problems.

Your strategy is as follow:

  • Map your key incertitudes for the next five years;
  • Find startups that depend on resolving them, even with other products, or even in other markets (innovation ecosystems won’t be too bad at helping you out on this one, because they are eager to get your money);
  • (Don’t give money for that);
  • Weed out startups that don’t have a solid team (you’ll be a good judge, don’t be fooled by us, innovation experts);
  • Have a roadmap of questions to be addressed, and hypothesis to be put to the test by the startup along the way (this is your ROI);
  • Invest as lightly as possible, as many times as possible (don’t aim for majority shares, or even significative minority stake, you just need a seat at the table and to be able to look under the hood).

Ready to spend 20-50K per startup over 24 months? In exchange you could have a map of the pitfalls that you’re facing in the future of your market, of smart positioning to avoid them, and maybe see solid openings before Gartner or Deloitte start to explain what you should do, because all of your competitors have already done it.

Given the size of your business, this is sweet, sweet ROI.

Along the way, most of the startup you’ll be working with will fail. You’ll learn from that, which is more ROI. Some others will succeed after pivoting away from what you expected them to do… It’s fair, you’ve only invested so much and can’t force them to die so that you get to practice an interesting autopsy. But also, once in a while, one of them will actually be directly interesting for your direct business. That will be a statistical odd event — to put it in another way, they’ll be more surprised than you will ever be — but having been among the first around the table you’ll have build a solid relationship. They could be happy to see you acquire them.

I’m not shy of saying that scouting is the most realistic, achievable, and reasonable reason to work with startups. But there are other reasons and other targets…

We will explore them in the next parts.

Categories
Corporate Incubation

Trading risks keynote

Follow this link for further details.

Categories
Corporate Incubation

How to prepare for corporate incubation end of party

My last keynote with the FabMob program, during a private event involving selected startups and industrials at Autonomy 2016 in Paris today. The idea was to discuss how corporate incubation end-of-party is coming quickly to Europe and illustrate the five most prevalent impediments that corporations have to overcome to engage further partnerships with startups.

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Corporate Incubation

Should your startup apply to a corporate incubation program?

Startups have become a cheap excuse for corporations in lack of innovation strategy. It’s not even breaking news; if you’ve been in the business of guiding companies through the innovation minefield for a while, you’ve already endured several trends coming and going every three or four years. Open innovation, intrapreneurship, design thinking, now startup incubation programs.

These trends pretty much rely on the same narrative:

As a big corporation, our natural inertia drives our competitiveness in the ground. Facing disruption from nimbler and more digital-ready competitors, we need to find new resources to reboot our innovation skills.

This narrative is pretty much an honest one.

What poses problem is that multinationals too often seek straightforward recipes to solve their innovator’s dilemma. It’s way past lazy; it’s irresponsible. But I won’t dwell here on the corporate perspective — I’ve started to write a few things on how to write a dedicated playbook for corporate incubation here and here, and a full article (in French) on the failure of innovation methodologies.

Instead, let’s examine the perspective of startups in that game, which is rarely considered by anyone.

The ways large corps can partner up with startups are many. It’s not limited to corporate incubation, but I’ll stick to this mode because it’s as for now, the most talked — if not spread — about.

I want to be extra sure that you understand I’m not touching straightforward investment or acquisition deals.

If you’re a startup, this is about the fuzzy stage before real money and capital are exchanged — if that happens. This is about the flurry of initiatives where industrials will try to get startups on board of a program with the words ‘incubation’, ‘agility’ or ‘digital.’ This is about you, not wasting your time in a clueless corporate initiative, while you’re still not making money on the market yet.

In term of corporate incubation initiatives, the supply and demand have always been very imbalanced. And, despite what most startups would think, they are the ones in short supply, even if by nature most of them will die by cash flow depletion within six months.

As a startup, if you doubt that you have such a bargaining power, rapidly check in your ecosystem how many industries are calling for startup initiatives, or how many corporate incubators were created around you last year. Wherever you are, the numbers are staggering.

Everyone is fighting to sustain some level of interest and attracts startupers in the gravity field of their market.

What should you do about it?

Well, when you consider partnering with an industry leader or entering a corporate incubation program, things will look like a gamble.

It’s not. Let me offer a conservative checklist of the due diligences you should make before signing up for anything.

Let me offer a compact checklist of five critical questions you should answer in that very specific order before you get into any program:

1. What’s in it for you?
2. What’s the track record?
3. Who’s in charge?
4. What will be on paper?
5. Who’s going to try to kill you?

Let’s examine them step by step, shall we?

1. What’s in it for you?

This question is not as trivial as it seems. For many startups without experience considering partnering with a big name corporation, there are obvious envies that are entirely misplaced.

There are basically two types of fantasies a startup will entertain:

  1. First, their worldwide recognition will put your unknown project in the spotlight, create brand value by association, and give you credentials to convince banks, investors, and potential customers.
  2. Second, they will open resources and contacts that you don’t have access to, speeding up overall time-to-market, and in some cases be the first leading customer, or add your offer to their portfolio.

In theory what’s in it for you should be that simple. In practice, the story is entirely different.

The first fantasy you entertain about sharing brand value is somehow correct, but it’s extremely weak and highly volatile.

As soon as you get in a big name corporate incubation program, if you know how to spin the news, you might get the same brand impact as getting invited to a local news TV show. We’re speaking of a two to three days attention peak. After that? You’re back to normal.

This lackluster result stems for what we evoked about the explosion of such programs. At the end of the day, who’s not incubated by Google or Microsoft? So OK, getting in does indicate your project might have some value, but you’ll be instantly drowned in a mass of other startups that got selected. Right now it seems that provided you don’t want to bomb a plane and write it down in a business plan, you’re in.

There is also the fact that most of these programs just don’t know what they are doing and after two to three years, it starts to show.

Sorry to burst your bubble but the corporate incubation program you find so sexy, might just be there to communicate to the stock-market on the fact that they are close to the high-velocity disruptive actors of the market (that would be you). On the other hand — and this is somehow worse — some of them genuinely believe that putting you in an office next by, will allow their complacent teams to inhale your luminiferous aether energy and morph them into intrapreneurs. More than often, it’s simply a case of a plain bored department in free ride mode trying to work on cool things for a year or two before they’ll have to deliver something real.

Brand value in all this? Not so much.

The second assumption you have about resources, contacts and joining forces with them is plain enough to make sense, except they might have no reason to share.

Let’s go back to the fact that most programs don’t have a solid strategic purpose to work with you. Understand that as such you’ll get nothing past a table in a redecorated office close to the cafeteria, and weekly meeting where they’ll try to understand how you’ll make a million euro next quarter when you only have for now two hundred unique visitors a month.

Unless you’re in biotech or pharma, where everything is pretty much square — if not very friendly –, let me reiterate: they probably don’t know what they are doing with you. It means that there’s no way you’ll get access to anything valuable unless you’re good at corporate guerilla, meeting room backstabbing, or coffee machine politics.

The thing is, you are a startup. You don’t have this kind of time and you have other expertise to develop beside these.

In the end, forget all your fantasies. If you want to move in a big-name corporate incubation start by challenging your assumptions and be perfectly specific about what your startup intends to get out it.

This is how to do it:

List specifically what you want to obtain or achieve. Give a metric to each item, a timeline, and a priority. Don’t be greedy, but aim for things that will significantly speed up your very own agenda.

Present it and discuss it with the formal or informal board of your startup (you have one right?). If it’s unrealistic or if it’s too vague, stop right there. Pass on the opportunity you’re not ready.

If it seems doable, then present your clear expectations to your potential corporate partner. Take the acceptable risk of not asking for any contractual document (except if IP is involved) and time how long it will take for them to say yes or no. If it’s more than one week, you’re unreasonable, OR they are not prepared to commit. Then again, pass on the opportunity.

If they demonstrate they understand your precisely explained expectations and are agreeable to them (with unavoidable adjustments), then you can move forward to the next question.

The central idea is that getting your startup on a scalable market before cash-flow depletion is the non-negotiable top priority.

This is about you succeeding at launching a business, not getting selfies with rock-star CEOs, getting invited to high-profile events, or being able to add prestigious logos to your website.

2. What’s the track record?

Unlike the previous one, this is a simple assessment. Once you have identified a program that could work for you and deliver the specific results you aim for, you have to check the track record of said program. The majority of them are now a few years old, even in Europe. They have worked with dozens of startups each.

Ask the question: where are the startups from three years ago?

If anything, corporations tend to be predictable in everything they do. Even if the manager of the program has changed, the infrastructure, the mindset, and the culture will be stable.

In the end, the few really shitty corporate incubation programs are very well-known. Ask around; they are already red-flagged. Unless you don’t want to know, you’ll know.

Most programs though are trickier to assess.

They may not have been through enough startups yet to score a few wins. You may encounter very active and committed potential partners that are just launching the initiative and evangelizing to their own top management…

If there’s no positive track record, assume there won’t be and move away.

This is probably harsh, but again keep in mind you don’t have the time to play around and waste even a few weeks in a dead-end. This is about you, not them and you cannot waste your time on goodwill and positive intents. If they haven’t delivered yet they are a distraction from your core mission. Move away.

In any case, this should be the practical approach:

Find out what other startups have been in the program these last few years, and determine their situation as for now. If all of them are dead, go away.

If some of them survived or were even somehow successful, track key members of their team on Linkedin, connect with them and ask for an off-record honest debrief of their experience.

Match if what they got out of the program will be what you decided you needed from question 1. If it’s the case move to the next question!

3. Who’s in charge?

Now, say that you know what you need and have identified a corporate initiative that matches what you expect with a good track-record, what’s next is to determine who’s the executive in charge.

Like the previous point, this one is also very straightforward. I know that I’m about to write will be shocking, and I do have several examples of me being wrong about it, but here it is nonetheless:

If the leader of the corporate startup program you are considering is not a senior VP or a member of the executive committee, move away.

I don’t want to be demeaning for junior managers or senior engineers in charge of such incubation programs. They may be perfectly skilled in leading them, but the thing is that such programs when successful are under immense internal political pressure.

You might think it’s nonsense and that a program that delivers will be on the contrary a gold mine for any corporation. But no, it’s not.

This is real life.

Unless it’s backed up by a key influential figure within the organization, the rest of the managers will try to kill it.

You have to understand that any startup achieving better results than a core business unit or the R&D department will activate the corporation’s immune system. And its antibodies will prove incredibly powerful. Unless there is a high-profile and influential executive leading the program, it will be stalled and eventually stopped, or cornered in a vague HR gizmo initiative.

The only kind of partnering with startups that a corporation will not try to attack from within are vanity programs. And you don’t want to be in these right?

Then you have to deal with reality.

4. What will be on paper?

We’re closing in now and have a perfect alignment of planets: you know precisely what you want to get and you’ve found a solid program with a strong leader protecting it from the rest of the organization.

The next question is a bit touchy. It’s about putting a deal on paper.

Remember we are not talking about investment or acquisition of your startup. This is supposed to be a friendly collaboration between you and a large corp, and friendly is good.

But in the long term friendly doesn’t cut it in business.

In that regard, I could be shy of engaging preliminary discussions on your incubation with draft contracts, jurists or attorneys, but eventually, you’ll need to get there. The question is when? When are you going to ask for a written agreement or a contract, stating what both parties commit to?

The usual way I deal with this question is as follows: since you’re considering a program that demonstrated some level of success, and you know what you expect for your startup then…

Draft a letter of intent and share it with the executive leading the program. Chances are they already have their own template if they have a track record.

Add a two-part statement. Part 1: what do you expect (question 1.) and Part 2: what are you ready to deliver in exchange.

Finalize a contract… at some point.

I’m not going any further with my recommendation here for one simple reason: it will depend on the context. There is no unique scenario to offer, and you may never finalize this contract. It would be uncomfortable but won’t necessarily shout move away…

Just consider that some large companies are more or less regulatory-based than others. If you’re in retail, luxury, or web services, you’ll probably face fewer regulations than in airlines or medical businesses. And in any case, be wary if working in fintech or insurtech and not getting any contract done.

As such, you will have to adapt the extent of what you’ll put on paper, and how soon it will be OK to ask for it. There’s a delicate balance in being flexible about it, and obtaining formal commitment.

But there is another difficulty here which is even more important than the paper thing: many startups are initially quite confused on what they can offer to a big name company that has already been successful at working with other startups.

Past the obvious things such as IP, here are some ideas:

  • In case your future core market is also flagged as a nascent opportunity for them, you can offer to be their scout, produce formal reports or seminars for key executives.
  • In case you’re doing something trendy enough, and that using one of their new technologies would accelerate your time-to-market, you can pose as a decisive use case for their marketing.
  • In case you’re experts of a domain they just started into (think AI), you can train some of their teams, or help them re-engineer some key processes and facilitate their transition.
  • In case you’ve been active in a market segment they’ve lost traction in, you could offer to share sales information with them selectively.

There are many, many more possibilities.

Some of the ones I’ve listed might make you cringe, and you’d be right. They could be dangerous for you. But it’s a matter of giving something and gaining much more in the trade.

Based on your initial offer, when they have agreed on what will motivate them, make sure that the trade is indisputably favorable to you and be open about it. Although it all comes down to a trade, you’re smaller and much more fragile. If you invest time with them you accrue your frailty; this has to be compensated more than fairly.

If the trade is not clearly favorable to you… move away. If they want nothing, they won’t be serious about the program… move… away.

5. Who’s going to try to kill you?

The last question just goes back to having an internal champion to protect you from the corporation’s immune system. You will address it after a few months in the program, but there’s no reason not to tackle it right away if possible.

Say now that you brilliantly managed to align everything perfectly and that you actually start to boost your startup. Congratulations, you’re now in the spotlight for everyone inside the company. Doing so, you demonstrate that an external team (helped from within) has been better and quicker at doing someone’s job.

Who’s that someone? You should know; he is already out to get you.

I don’t judge, it’s human nature and you have to deal with it:

Your success will trigger internal opposition from the corporation; try to identify as soon as possible where the antibodies will be coming from, and be prepared.

The good thing is that the more your incubation program’s leader will be interested in your success, the earlier he will have anticipated where the problems will appear. He’ll be usually very open about this from the get-go; listen carefully and do not underestimate the early warnings.

In conclusion

If corporate incubation programs can deliver a tremendous boost to your startup, don’t be fooled by their intricacies and don’t expect all of them to be really serious about innovation. The only ones that are simple to deal with are the ones that have no real purpose.

If you still have some patience with me, let me add a last remark:

In about ten years of consulting for, or designing corporate incubation programs, the best ones I worked with are the ones you don’t know about and  will not know about. When such programs are strategic assets for highly competitive multinationals they fly under the radar. No bling, no glamour, no cameras, no tweets, selfies or politicians invited to parties.

Maybe that should be the quickest thing to consider next time you receive a call to apply for a corporate incubation program…

Categories
Corporate Incubation

When corporates meet startups

As a quick follow-up on my first two articles on corporate innovation (part 1 and part 2), I’ll be presenting a keynote on the relation between startups and corporations in Europe, for companies in the mobility market.

The key focus may be a tad concerning if you are a startup that doesn’t know anything about multinationals. Despite all the current hype on how this should be a match made in heaven, you actually have nothing in common. Zero. Nada. Niente. So if you think that a multinational has to be a key asset for your growth, you may want to think again.

This is not about technology

This is not about buying technology - merkapt

First and foremost, when corporates meet startups they often thing they’re going to eventually buy a new technology out of them. Given the global horrendous track record on this one, this is pretty absurd.

Any given multinational will pretty much halt any agile tech development by throwing resources at the startup. What was a fast, iterative process of prototyping and getting things done, will refocus on: who’s accountable of what? What shareholders will think? How legal can cope with that? Etc. Then someone key in a well-fed business unit will start to see the project appearing on its radar. Disruption you say? Other my dead body! Why would we cannibalize what we currently have going on with customers?

If you consider the recent deal between Microsoft and Linkedin, this will probably be another Yammer scenario. The best case scenario of startups and corporations working together is precisely when it’s not about technology, or acquiring a community of customers.

Although, Apple investing in Didi could be another story. If Apple undubiously want to smooth out political tension with the Chinese governments by broadcasting their “love” of local innovation, don’t be mistaken, the key thing is that they expect to learn a thing or two on mobility in a massive economy. This is a key investment in learning, unobtainable in another way for Apple.

Life cycles are incompatibles

Life cycles are incompatibles - merkapt

Secondly, when startups and corporations have engaged a relationship, they soon realize that their internal clock is not running at the same frequency. This could be explained in many ways. Some of them are quite obvious, such as factoring the number of people necessary to take a decision in a culture or the other.

But there’s maybe something that you may have overlooked. Startups and multinationals don’t process market informations in the same way.

In that regard, picture the best startups as carnivorous big cats: they pounce on a key information, digest it quickly, and build what is sometime a narrow-minded vision, but also an extremely focused one. Their approach to innovation is a radical one, filtering out a lot of market information, biasing facts if need be, but feeding their own narrative and their challenger culture. Creating a reality distorsion field is not a scientific technique.

On the contrary multinationals strive for a comprehensive approach to market information, by making sense of the markets in a consensual way. They are heavy herbivores, grinding information at a slow pace, sending it back and forth the internal pipes several times, before it’s finally metabolized through committees, competitive clusters and various Gartner’s reports. They cannot catch the weak signals, the burgeoning trends, and any fast-paced markets at all because their cognitive process lag behind.

In that way, a typical multinational will be well aware of Google and Facebook, will fear Uber without having formed an opinion about it, and will have no clue on Didi Chuxing. The fact that Didi has been operating in more than 400 cities in China, and was valued as one of the few unicorns on the planet did not register yet.

You must admit that it’s quite a challenge to build a fast-paced approach to the market when your vision lags five, to ten years behind. Can you imagine getting all your emails as a single document at the end of the month when searching for a new job? This is what we are talking about.

There is no digital transformation

There is no digital transformation - merkapt

The last key problem is directly fed by the unprecedented level of hype around the “digital transformation”. We are talking Y2K bug level of bullshit here. The last I checked it seemed that 80% of the consulting firms where selling snake-oil solutions to become a digital organization. The fun part is actually that most of the “old economy” multinationals are pretty decent at digital, if not the real leaders on the playfield.

I realize that saying that is probably nowadays the ultimate provocation.

Now think about. For instance, we can agree that automotive manufacturers really suck at being socially connected to their market. In that regard they haven’t done their digital revolution. Nonetheless, a run-of-the-mill modern car harbours more line of code than Facebook’s infrastructure. What do you make if this? In my book, we’re talking hardcore digital technology here. That doesn’t mean that our old car manufacturers are not going to be disrupted by Apple, Tesla or Google, but don’t put that on digital incompetence. It’s more about being an industrial platform born in the early 19th century or in the late 20th.

3 Keys to debug the relationship

How to debug corporates and startups relationship - merkapt

This all may sound dreadful. It’s not.

I believe that it’s part of the pack if you’re a startup trying to deal with a multinational, or a leading corporation trying to connect with challengers on a mission to disrupt you.

If you manage to drop the pink goggles, and cut through all the crap that is sold to you there are many reasons for corporates to meet startups and build cooperation:

Startup are a fantastic (if not the best) vehicle to explore risks that a typical multinational cannot afford to face. If you know how to deal with a strategic portfolio of risk explorers scouting the edges of your market, you’re building strong awareness and resiliency around your core business.

If your life cycles are truly incompatible, it doesn’t mean you cannot have strategic touchpoints through specific business interfaces. You don’t get this jargon? Think design studio, prototyping hub, pop-up stores, junior brand, etc.

Lastly, and this is key, as a multinational build your startup strategy around one key revenue: new business models (possible, but unlikely — this is the mother of all hype); harvesting knowledge on future markets (think Apple); or rebooting your innovator’s culture.

In conclusion you may want to follow the white rabbit through to La-La Land. I’m not saying you shouldn’t. I’m saying you should know why you would do it and have a sound strategy about it.

Categories
Corporate Incubation

Writing your corporate incubation playbook – Part 2

To follow up on our last article on your corporate incubation playbook, we’ll explore further the ROI architecture of such a program, starting with the “business” revenue. 

Categories
Corporate Incubation

Writing your corporate incubation playbook – Part 1

After years of strain and pressure from new digital opportunities that passed by, multinational corporations seem to have found  their innovation mojo back. Their idea has been incredibly simple after all: let’s embrace the strategies that created Uber-like challengers out of nowhere. By creating your own disruption engine — and keep it under control — you will finally outrun all these puny startups, and find new business models of your own.  And after that, ramping up new businesses should be simple enough given your scale: even unicorns in the billion-dollar valuation club can’t really beat you at that game.

Categories
Corporate Incubation

Car manufacturers are the new Nokia

For anyone seriously involved in innovation, it’s stunning to realize that the industry learned nothing from early 2000’s Nokia. Regarding the car industry, people still think of it as a hardware business. It’s all about the car, the engine, the brakes, the dashboard, the performance, the security, the comfort. We barely register that vehicles are now being hacked into, that accidents happen because of dozens of millions of lines of code that make a modern suburban vehicle today, or that mapping, geolocalization, and communications are now indispensable.

Now consider the autonomous vehicle market and cut through the wishful thinking debates: it’s not a new market growing in a new envelope. It’s a replacement market, trying to push in a shrinking envelope. It’s probably the key reason why the autonomous car is currently thought as the CD was, for the magnetic tape. It seems only to be a pretense to make current customers renew what they already have, pay more for it, and become even more locked in with the industry.

The slight problem that no-one wants to look in the eye is that the autonomous car brings nothing to customers. Not even more eco-friendliness and probably not security in the foreseeable future (and by the way let’s see how the first thousands of kilometers outside of the gentle, sunny and dry Californian weather work out).

When mobile phones appeared, they were pretty much in the same spot. They were thought at first to be an upgrade from land lines, managed as a premium product by the telecom operators, and were not bringing any tremendous added value to anyone outside of key executives circles.

Then many things happened, and slowly the market started to appear.

Eventually, this market hit critical mass, and network effects transformed it into a wildfire, and here we are today spending a significant part of our life plugged to our mobile.

But during all this time, every phone manufacturer was stuck in a hardware paradigm: how do we make the sexiest phone? How do we offer the most functionalities, the cheapest mobile, the most elegant one, etc.? The best player at that game was Nokia, introducing every six months ground-breaking technical innovation, such as the first camera on a phone, the first data connection, then lo and behold, the first mobile internet connection.

They died a shameful death being number one at selling mobiles on the planet, not making money, and being ignored everywhere except in Africa and India as sturdy commodity products.

The now well-understood drama of Nokia was to be the best at what wasn’t that important for the market: the product itself, missing the key element: the underlying platform that operates the product, connects people together and opens up the market to exponential growth.

With the autonomous car, history repeats itself perfectly, and car manufacturers are the new Nokia.

As it is a car is everything but just a piece of hardware. For what it’s worth as a comparable, there are more lines of codes in a modern car than in Facebook backend:

This will probably double or triple in just a few years from now…

It’s early 2016, and the car is already under a perfect storm of network effects, meshing together communications, mapping, weather, photos, video, music, payment, shopping, social experience and more. There is no shadow of a doubt that the one building the most pervasive platform will own this market.

How many car manufacturers are working on the underlying transportation platform? Or to be fair, how many of them have a real platform culture and corresponding key assets?

The thing also is that such a platform may or may not be for consumers first.

Dream all you want, but it’s doubtful that by 2020 laws and regulations will bend to adapt the autonomous vehicle for Main Street. Among the many problems that will stop that, there are probably two that will predominate:

  • Fatal accidents caused by the irreducible 0.001% blind sight of autonomous vehicles would be much less socially acceptable than drivers killing themselves or each other. As bad as they are, we are used to the latter. And in a culture that thinks that total security can be achieved we won’t react like the proverbial Homo Economicus: even if the road death toll falls 50%, we’ll reject “the horror” of machines killing people. And then who are we going to blame? The car manufacturer? The non-driver using the car? The city?
  • Even before we get there, we won’t switch off overnight the car as we know it. What will happen when we have 20% of autonomous vehicles on the street? Who’s going to give them way when they have priority, knowing that no matter what they will let you pass for security sake? How bad will be the impact of autonomous cars driving around in cities, while the rest of the traffic will react in oh-so-slightly different ways?

So in all probability, if you want to predict the future of the autonomous vehicle, you should probably look more into trucks isolated on dedicated highways lanes. We were promised video games with our kids while the family drives around all by itself, we’ll get freight convoys reinventing train logistics with dirt cheap infrastructure and real-time supply chain management.

Then ask the question again: who’s working on that?

Just like with Nokia all other again, it’s not a Toyota, GM or BMW that will lead this market. And if we were still in the early 2000s, it could have been an IBM or a SAP stealing away the autonomous vehicle market.

But we’re now in 2016, and there’s a huge difference: the platforms are already there, powerful, sitting on mountains of cash and very active.

In 2011, when NOKIA’s CEO, Stephen ELOP, addressed his teams in the now famous “burning platform” memo, he wrote:

The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.

If you’re now on the board of any car manufacturer, you could probably change iPhone for Tesla, Android to… Google car, and resend the memo Monday morning to your teams.

Except that, hey, you don’t even have a platform yet.

Categories
Corporate Incubation

It’s not Uber, it’s you!

Not many corporations believe that someone will just “walk in”, and steal their market away from them overnight. Playing at getting scared hits a weird, but clear, pleasure zone in our brain. Once the horror movie is finished playing, we consider our boring everyday life with a kind of new appreciation. Except that, many of these corporations don’t get what kind of trouble they are facing. And I can mostly agree that no, there’s no Uber-like bogeyman in the cards for them. If they fail, it won’t be under the attacks of a small, psychotic killer rabbit. They’ll die because they suck.

Categories
Corporate Incubation

Risk, the most valuable currency between startups and the industry

Tomorrow, I’ll be presenting a keynote titled “Trading Risk, the Most Valuable Currency Between Startups and the Industry” for the CEA at the LETI Days event. The main points of this discussion will be on the positive nature of risk for businesses, the cultural gap that French (and Europeans) have regarding dealing with risks, and on how to strategically game the innovation rules.

Categories
Corporate Incubation

La jeune pousse nouvelle culture d’entreprise (Libération Économie)

Article publié dans le cahier Ecofutur de Libération du 13 octobre, en suivi de mon dernier article sur l’incubation interne