7 Benefits of corporate incubation as an innovation strategy

We've outlined 7 benefits driving business leaders to invest in corporate incubation. Find out exactly what you will gain from this innovation strategy.

During the last decade, corporate incubation has grown to become a common staple in the innovation space. Corporations around the world and across every industry have used it to boost profitability, access new markets, test new technologies and experiment with novel business models.  

Today, incubators exist in all shapes and sizes with different companies adapting the strategy to meet a variety of needs. While some incubators are built to accelerate digital transformations, others focus on expanding beyond core offerings or improving existing products and services.

Regardless of their goal, corporate incubators are a proven tool to boost growth and remain competitive in today’s fast-moving business landscape. To give you a better understanding of how corporate incubation can help your business, we’ve outlined its top 7 benefits.

But before we get into the good stuff, let’s kick things off with some context.

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What is corporate incubation?

Corporate incubation is one of the 16 tools for disruptive innovation. Under this strategy, corporations use internal resources to develop new value propositions and take them from concept to thriving startup. The goal is for the incubator to act as a catalyst tool to stimulate innovation and create a pipeline of successful new ventures.

Corporate incubators are usually set up as autonomous units within a corporation. In most cases, their branding and mission reflect those of their parent company (e.g. J-Labs by J&J, Lufthansa Innovation Hub, by Lufthansa Group, Rabo Frontier Ventures, by Rabobank). New ventures are developed strategically using existing corporate assets, including internal expertise, infrastructure, networks, funding and other resources.

The new ventures provide a wide range of return on investment, including:

  • Access to new markets and technologies
  • New revenue streams
  • The opportunity to try out new business models
  • Expansion beyond core business offerings
  • Valuable insights that are usually outside company purview

Now that we’ve covered the general concept let’s take a look at some of the specific ways corporate incubation can help boost your business.

Benefits Corporate incubation
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The 7 benefits of corporate incubation.

As previously mentioned, incubators can be adapted to meet a variety of goals and objectives. No matter what their main focal point is, here are some of the general benefits they can bring to your business.

1. Involve employees in the innovation process.

Incubators often rely on internal staff and intrapreneurs to provide mentoring, expertise and pitch concepts. Chemovator by BASF, for example, provides a space for employees to build ventures from unconventional ideas.

The approach creates a sense of involvement among employees prompting them to bring game-changing ideas forward, test them and learn fast, unrestrained by corporate boundaries.

2. Lead to the discovery of new value propositions.

Each new venture developed within an incubator holds the promise of reaching a new market segment, turning into a new revenue stream or creating a value proposition that will pave the way for the future.  

For example, RBC Ventures, by The Royal Bank of Canada, was built to attract new clients. They think, act and operate like a startup while exploring new ideas that cater to unmet consumer needs. Specifically, its mission is to attract 5 million users in the space of 5 years through various new digital offerings. The ultimate goal is to convert 10% of those users into RBC banking clients.

3. Use existing corporate assets to increase profits.

Corporate incubators encourage the exploration of new opportunities and help companies leverage their expertise and know-how. This particular benefit is nicely illustrated by Whirlpool’s W-Labs.

Its mission is to identify unique consumer pain points and turn them into new products and services. In this incubator, products are developed on a small scale, tested quickly, and gradually improved to meet customer demand – all with existing corporate resources. The Vessi home beer fermentation system is an excellent example of how existing corporate assets and know-how can be leveraged to bring in new profits.

Benefits corporate incubation
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4. Acquire insights to increase efficiency.

Experimenting with new concepts, ideas and business models often leads to insights that help companies solve problems faster, streamline their operations and increase cost-effectiveness. Store N°8, for example, focuses on developing capabilities to improve customer experience and streamline processes within Walmart.  

In-Home, one of their projects enables customers to receive seamless, unlimited deliveries with no added fees or tips, which has been especially useful during the Covid pandemic.

5. Foster a culture of innovation.

Incubators facilitate innovation by encouraging creativity, experimentation and learning by failing. They reward out-of-the-box thinking and enable an entrepreneurial spirit to resonate throughout the organisation.  

Google’s Area 120 highlights this value by developing core business concepts from internal staff instead of external sources. The approach enables them to leverage the talent and know-how from within the company to create disruptive new products and services.

6. Provide access to new ideas, skill sets, and technologies.

When developing new ventures from scratch, companies often pick up a plethora of game-changing insights, skills and know-how. Lufthansa Innovation Hub, for example, works to spearhead its parent company’s digital transformation.

Each new venture they develop and test adds to their skills and expertise, enabling them to learn more about their target audience and how to use technology to heighten customer experience.

7. Expand a company’s strategic vision.

Incubators enable companies to step outside their core business (and comfort zone) to explore novel new concepts that might have otherwise gone undiscovered. Samsung’s C-Lab is a great example of how an incubator can encourage out-of-the-box thinking and leverage its talent to create exciting new products and services. The idea is to encourage employees to use their talent to come up with innovative value propositions.

Some of their recent projects include an invisible keyboard, a smart highlighter and a window that provides artificial sunlight. Now that’s out-of-the-box!

Benefits corporate incubation
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Is corporate incubation right for you?

The benefits of corporate incubation have been proven time and time again through ventures that have succeeded far beyond what was initially expected. Corporate startups like Disney+, GE’s Evidation Health and DNB’s Vipps are changing their industries and paving the way for their parent company’s future.

That’s not to say all ventures succeed as spectacularly as the ones mentioned above, nor that they should be the standard of success for an incubator. The truth is, more often than not, ventures fail. The trick is to learn from the mistakes and use the insights strategically to strengthen the business. Every venture provides a new opportunity to know what works, what doesn’t and enable you to move forward more efficiently.

During this time of rapid change, corporate incubation is a useful tool for companies struggling to accelerate their digital development, looking to update their business models or compete with new players in the market.


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