Recession notwithstanding, there are sound reasons companies should set up an incubation unit, says Columbia Business School's Rita McGrath
As the economy shows some signs of shrugging off its doldrums, growth is back on the agenda. After cutting costs for a year or more while repeating the mantra "do more with less," should companies be looking to special groups to jump-start growth?
Corporate venture groups, incubator "greenhouses," and other units dedicated to identifying and incubating growth opportunities have a checkered corporate history. Often begun with flashes of significant enthusiasm, they are often first on the chopping block when executive sponsors change, costs need to be cut, or the fashion of the day swings away from growth and back to basics. Nonetheless, there are great reasons why companies should be giving some serious thought to setting up an incubation unit, and also some great lessons learned on how to avoid some of the more serious mistakes.
Why devote resources to a unit specifically to focus on growth? The simplest answer is that nobody else has the time to devote to looking for insights, developing new business plans, creating alliances, building networks and doing all the other work that is essential to promoting a robust pipeline of growth opportunities. When all around you are working 24/7, who has the time to think, reflect, and do any more than just get through the day? So a growth-oriented group is a good idea if your organization wants to do more than just extend today's business or make acquisitions.
There are, however, some things to watch out for as you set the group up. First, the person in charge of it should be incredibly well networked, respected, and taken seriously in your company. Second, make sure that the people in the growth group understand that this is neither a fiefdom, nor a career destination. It's generally not a good idea to make the growth group the place from which ventures are launched—indeed, that is often a recipe for the corporate equivalent of organ rejection, which defeats the purpose of developing the idea to start out with. It should be relatively small; around 6-8 people is about right, depending on the size of your company. And it should be seen as a place that helps divisions or lines of business, not one that puts additional burdens on them.
One of the most important jobs a growth group can do is create an opportunity inventory—both of ideas that are floating around in the organization but don't have critical mass, and of ideas that are currently being resourced but perhaps not managed explicitly. Without an organizational home, these critical jobs tend not to get done, hampering the organization's ability to grow.
Companies that have done a good job leveraging their incubators or growth groups include IBM with its Emerging Business Opportunity program, Swiss Reinsurance and its new product development group, Air Products and Chemicals and its new business programs, and DuPont, which developed a concept they called the "knowledge intensive university" to get growth on the agenda and keep it there. Companies such as Microsoft, too, are beginning to embrace the idea of groups dedicated to learning, discovery, and experimentation that have the time, the resources, and the respect to launch new ideas.
What are your experiences with growth groups?