Wednesday, October 7, 2015

Do Corporate Accelerators Create Real Value?

Corporate intrapreneurship is relatively new business concept aimed at helping large companies advance their disruptive innovation initiatives. Due to its novelty and immaturity, this model of corporate innovation obviously needs a lot of refinements. The upcoming Corporate Intrapreneur Summit (organized by the Institute for International Research and Culturevate), taking place on October 8 in NYC, will provide a much-needed platform to discuss gains and pains corporations can expect when launching intrapreneurship programs.
In the core of the corporate intrapreneurship concept is a belief that only by institutionalizing the culture of entrepreneurship--usually associated with startup companies--can corporations succeed in creating new businesses and new markets. Being a corporate intrapreneur means working for a large company, yet behaving as a small company’s entrepreneur who cherishes risk-taking and experimentation.
 
The key question here is how precisely the habit of taking risky bets and embracing frequent failures can be established in a large corporation with its dominating culture of certainty, predictability and precision. Some academics suggested that this can be achieved through an “ambidextrous organization,” a corporate arrangement allowing companies support the existing (core) businesses and entrepreneurial initiatives simultaneously.

Critics of the concept argue that in real life, ambidextrous organizations are rare exceptions; the concept simply doesn’t work for the majority of large mature corporations.  Instead of trying to square peg in a round hole, corporations should tap on the real source of entrepreneurship: startup companies. This particular point of view took shape in the idea of “innovation ecosystems,” mutually beneficial relationships in which startups would serve as originators and early testers of disruptive ideas, whereas large organizations would provide resources to advance the most promising projects.
 
In practical terms, corporations realize the concept of innovation ecosystems through creating corporate incubators and accelerators. According to published data, only in the last three years more than 50 accelerators were launched by industrial giants such as Cisco, Coca-Cola, General Electric, IBM and Intel.

Corporate accelerators come in many shapes and shades, depending on the degree of connection between a corporation and startups; however, they all share the same important feature: the accelerator model dramatically improves the efficiency of the corporate tech-scouting process. In the past, corporate tech scouts had to approach promising startups one by one; now, corporations launch an accelerator and get exposed to dozens, if not hundreds, of small companies willing to join the program. An additional benefit for corporations working with early-stage entrepreneurial companies is the ability to influence their development to better align them with the corporate strategic goals (the ability to “reverse-engineer” a startup, as Michael Docherty calls it).

But how effective corporate accelerators really are? A few days ago, Anand Sanwal, CEO of the startup tracking company CB Insights, unleashed a surprisingly harsh diatribe against corporate accelerators, which he called “innovation theater” and even “a farce.” Mr. Anand asserted that the accelerators represent no more than a publicity stunt designed by corporations to “look innovative” in the eyes of their peers, competitors and investors.

Mr. Anand’s penchant for “take-no-prisoners” language is well known. However, his knowledge of the startup world can’t be questioned, either. And, by the way, his bold assertion that only 2nd-or 3rd-tier startups would take part in the corporate accelerator programs is quite testable: one has only to compare performance of startups in corporate accelerators with that for “stand-alone” startups or those belonging to non-corporate accelerators.

Mr. Anand’s escapade presents a good reason to ask a broader question: have corporate accelerators already shown their ability to create real value? As of today, the jury is still out, and in all likelihood the deliberations will be lengthy and contentious.


Image credit: www.venture-spring.com

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