A comprehensive guide to help you understand how corporate startup incubators work and how you can use them to fuel growth, discover new markets, and expand beyond your core capabilities.
Over the years, corporate incubators have emerged as a proven way to leverage corporate assets, explore new growth areas, fuel innovation, and foster an entrepreneurial mindset. Multinationals like AstraZeneca,BASF and Volvo have already set up their own incubators with stellar results.
Their ultimate goal? To future-proof their businesses, boost innovation from within and create essential new revenue streams.
To give you a better idea of how incubators work, we’ve created this comprehensive guide illustrating what an incubator is, the benefits of having one, and how they’re positioned in the broader corporate venturing landscape (along with some other handy resources and examples).
So, whether you’re thinking about building your own incubator, already mid-way through the process, or simply looking to update your current setup, the insights in this article are sure to help you through your journey.
A corporate incubator is an independent business unit within a corporation that supports new ventures from concept development to a fully functioning business. They leverage a company’s corporate assets to provide young startups with mentoring, networks, infrastructure, funding and other resources they need to become thriving businesses.
Many corporations choose to start their corporate venturing journey by building their own corporate incubator. Each new startup that gets developed provides the parent company with a slew of benefits, including:
These newly minted startups can go on to become important revenue streams for their parent companies, enabling them to grow, compete with new market entrants and find disruptive solutions to traditional problems.
When executed skillfully, corporate incubators are a great way to innovate and develop disruptive new ideas that might otherwise get scrapped in favour of everyday corporate demands.
They’re especially useful for companies that are having trouble competing due to rapidly changing technologies, an outdated business model or the arrival of newer players in the market. We’ve outlined our top seven benefits of having a corporate incubator below:
Incubators often rely on internal staff and intrapreneurs to provide mentoring, expertise and pitch concepts. 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.
Example:
Capital One’s The Lab builds ventures that are paving the way for its future. Part of its goal is to accelerate the bank’s digital transformation by exploring cutting edge technologies.
It operates as a fully integrated part of Capital One, and most of its venture ideas come from employees, partners or hackathons, and have practical applications in the business. This means that employees get to create the ventures that will make their work more effective in many cases.
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.
Example:
RBCx is helping the Royal Bank of Canada attract new clients with new tech solutions. They think, act and operate like a startup while exploring new ideas that cater to unmet consumer needs and help bank expand beyond its core business.
Some of it's focus areas include fintech, AI, data analytics, security and customer experience.
Corporate incubators encourage the exploration of new opportunities and help companies leverage their expertise and know-how.
Example:
Wayra, Telefónica’s corporate incubator, leverages the company’s global telecommunications infrastructure and market reach to support startups in areas like IoT, AI, and cybersecurity.
By providing these ventures with access to Telefónica’s extensive network and customer base, Wayra helps them rapidly scale, generating new revenue streams, making the most of existing assets and fuelling innovation.
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.
Example:
Bosch’s Grow is developing a portfolio of ventures that is enabling Bosch to expand its capabilities and explore disruptive business models in 4 key areas: Mobility Solutions, Industrial Technology, Consumer Goods, and Energy and Building Technology.
Through Grow, Bosch is expanding beyond its core business and gaining access to new technologies that can provide a potential advantage over competitors.
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.
Example:
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.
When developing new ventures from scratch, companies often pick up many game-changing insights, skills and know-how.
Example:
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.
Incubators enable companies to step outside their core business (and comfort zone) to explore new concepts that might have otherwise gone undiscovered.
Example:
Neosfer, the corporate incubator of Commerzbank, empowers the company to step outside its traditional banking focus and explore emerging technologies like blockchain, AI, and sustainable finance.
By incubating ventures aligned with future trends, Neosfer is helping Commerzbank future-proof its operations and compete in markets outide its core business.
Companies across almost every industry are successfully using corporate incubators as a tool to drive innovation, identify new growth markets and create new revenue streams—each one adapting the strategy to fit their unique needs.
To give you a better idea of how incubation works in practice, here are two examples of incubators that are helping their parent companies thrive:
Parent Company: Unilever
Headquarters: London, UK
Founded: 2014
Active in: Consumer Goods
Type of innovation: Core and adjacent
Activities: Incubation, acceleration and investments
Unilever Foundry works with pioneering startups to identify and accelerate partnership opportunities on a global scale. It focuses mainly on areas that can expand Unilever’s product portfolio, including enterprise tech, sustainability, marketing and e-commerce. With two innovation hubs, LEVEL3 in Singapore and Dogpatch Labs in Dublin, Unilever Foundry has piloted over 200 startups to date.
Here are just a few of the factors that make Unilever Foundry successful:
Startups working with Unilever Foundry gain access to Unilever’s vast resources, including its global reach, distribution channels, and consumer insights, which are crucial for testing and expanding their solutions.
While Unilever Foundry operates independently to encourage unique and innovative ideas, it remains connected to Unilever to harness its expertise and market presence effectively. This balance is crucial to the success of its mission as a corporate accelerator.
Unilever Foundry connects with the external innovation ecosystem, effectively bridging the gap between corporate objectives and innovative partners. Their strategy emphasises transparent communication, aligning the needs of both sides and employing established collaboration methods to ensure the success of these partnerships.
Unilever Foundry continuously assesses the impact and viability of the projects within its ecosystem. This process ensures that only the most promising and strategically aligned innovations move forward, maximising the potential for success, impact and profitability.
Parent Company: BASF
Headquarters: Mannheim, Germany
Founded: 2018
Activities: Incubation
Managing Director: Markus Bold
Active in: Chemistry
Chemovator provides a protected space for innovation teams to turn “bold ideas into thriving businesses”. They test early-stage concepts and explore unconventional growth opportunities in the area of chemistry. The result? A pipeline of low-risk, investable ventures for BASF to internalise or turn into spin-off companies.
Here are just a few of the factors that make Chemovator successful:
Corporate processes and bureaucracy often impede the innovative process, blocking disruptive ideas from getting developed and slowing the process with too many regulations. Chemovator provides intrapreneurs with a protected space to develop their ideas free of typical corporate setbacks.
New ventures developed at Chemovator enable BASF to effectively leverage corporate assets like partnerships, networks, infrastructure, industry know-how and funding.
Employees are one of the most valuable assets a corporation can have. By empowering its employees to develop projects they’re passionate about, BASF is engaging its staff and making the most of their talent, expertise and industry knowledge.
Chemovator provides its venture teams with a support system of:
This combines knowledge and expertise from both in and outside the parent company, culminating in a venture program with the best of both worlds.
Being independent but remaining connected enough to complement the parent company is crucial to the success of any corporate incubator.
Click here for more inspiring corporate incubator examples.
The greater corporate venturing landscape features 16 innovation tools designed to help companies fuel new growth. Some of these tools include (but are not limited to):
When corporations use direct equity investments to target startups of strategic interest.
Example:
In 2019, Lufthansa’s Innovation Hub made a multi-million dollar investment in Hopper, an AI-powered app that predicts travel prices and provides personalised recommendations for optimal booking times.
Since then, Lufthansa Group has entered into a strategic research partnership with the startup to make the travel experience smoother for customers.
When established firms purchase startups and their commercial-ready products in order to access new technologies or markets.
Example:
In 2018, Amazon acquired online pharmaceutical company PillPack as part of its effort to break into the healthcare industry.
The move provided Amazon with a built-in customer base, a proven business model and the technology to compete with the likes of Walgreens and CVS.
A venture development studio, startup studio, company builder, or venture builder is a structure that creates startups based on shared resources and a multidisciplinary team. It provides what is known as “Startup as a Service”.
Example:
Bundl is an excellent example of how a venture development studio works, teaming up with corporates to create new ventures and discover new markets.
Check out our cases page to learn more about how we build corporate ventures.
Corporate accelerators offer highly structured programs that typically last about three months.
These programs provide startups with the facilities, resources, and expertise needed to speed up their product development and prove themselves on the market.
Example:
Wells Fargo Startup Accelerator has a six-month program to help young startups test, prove, and grow their concept.
Financial services startups that make it into the program gain access to the bank’s industry expertise, networks and mentors - not to mention a possible investment of up to $1,000,000.
To give you a better idea of how corporate incubators fit into this greater landscape, we’ve created an overview detailing their position:
Although some people use these terms interchangeably, incubators operate quite differently than accelerators:
Incubators nurture disruptive ideas to help them transform into an independent company with a solid business model.
Accelerators are the next step in the process, helping young companies expedite their growth and scale their existing business models.
Here are a few other key differences:
Now that you know a bit more about corporate incubation, you’re probably wondering what your own corporate incubator would look like, what its goals would be and how you can get started.
The first thing you need to do is map out a solid framework you can use to:
During this step, you'll be:
The exercise will help solidify your incubator’s long term mission, goals and positioning.
We’ve already outlined some of the key benefits of having a corporate incubator, but what does it take to ensure its success? To answer that question, we’ve outlined our 10 step strategy below:
Start by envisioning what your end goal is and why your company needs an incubator. Once that’s done, figure out what the scope of your incubator will be (e.g. What expertise will your incubator have?).
Based on that, you’ll have a pretty good idea of what your incubator’s direction will be and the resources you’ll need to get started.
It’s important to have a clear idea of how far you want to branch out from your core business. A good way to start is by figuring out the type of innovation you want to achieve (e.g. radical innovation? adjacent innovation? core Innovation?).
Once you have a good idea of what your new incubator’s product or service will be, the next step is to figure out the type of expertise you’ll need to make it a reality.
Depending on what your new offering is, you might need to bring in experts from outside your company. If that’s the case, you’ll have to choose between building a new team with only external experts or a mix that includes people from within your corporation as well.
Find new tools to compliment your incubator activities, e.g.:
Focusing on the right criteria will help you make well-founded decisions when refining your venture ideas later on. Work on defining things like your solution fit, company strategy fit, market validation and your business case.
Covering your bases early on will significantly increase your chances of success as you move through your incubator program.
Make sure you have detailed outlines illustrating the duration, process flows, milestones and deliverables of your incubator program. Taking this step will help keep you focused on your goals and avoid unnecessary delays.
New ventures need resources to get up and running, and it takes a lot more than just money to make it all happen. Make careful decisions about which resources you can use to strengthen your new venture.
Having a clear idea of what resources your incubator program needs will help you quickly and efficiently reach your scale phase.
Setting up an effective incentives program is a crucial factor in the success of any new venture, so put careful thought into the type of incentive programs you’ll use.
Taking this measure early on will ensure that your team is adequately motivated to build your next breakthrough product or service.
Positioning your incubator close to the executive level of your company will help you bypass long chains of command and expedite your approvals.
Remember, no matter how brilliant your business ideas are, your venture runs the risk of being delayed or even phased out if you don’t have the right positioning, connections and internal support.
Decide on what happens when your venture is incubated and ready to scale.
Having a long term plan will keep you focused and working towards your pre-established goals, increasing the chance that your business unit will become a prosperous company when the time comes to scale.
Find out more about the ten key steps in this handy report.
As a venture development firm, we often have the privilege of speaking to some of the world’s leading corporate innovators about the work they do and what it takes to succeed in that space. Some of our most recent interviews included Richard Faas, former CIO of the Legal Tech Studio (currently COO Faas Psychologie) and Lisa Besserman, former Head of Program at Indeed’s Global Incubator (currently Managing Director at J.P Morgan Chase). Here are some of the insights they shared with us:
Corporate leaders and stakeholders play a huge role in determining the incubator’s greater mission, its growth goals, and they serve as key advisors and influencers. Their involvement and support are critical to the success of your incubator.
Collaborate with different areas in the company to create a multidisciplinary approach to your projects.
Make a conscious effort to share your learnings through events like Lisa’s Learning Initiative. An event created to share Global Incubator’s knowledge throughout the company.
Adding short-term projects to the agenda enables you to produce results quickly and gain the support you need for bigger projects.
When executed skillfully, incubators are a great way to innovate and develop disruptive new ideas. They’re especially useful for companies that are having trouble competing due to rapidly changing technologies, outdated business models or the arrival of new players in the market.
If you recognise any of these traits in your company, it might be a good idea to take a closer look at investing in your own corporate incubator.
For more inspiring corporate incubator examples, check out the 60 corporate incubators report.
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