Incubating Innovation General Use Incubation New Venture Model

Produced in partnership by Propellerhead and adaptos [email protected]

A New Take On Digital and Future Innovation

Why Incubation?

A Culture of Innovation Not Management The culture that empowers innovation must be pervasive. The traditional organisation’s current culture is optimised for stable, business as usual management and operations; it is not inherently innovative.

Creation Not Repetition In order for new things to emerge, a first principles approach is required. This means no assumptions and no predetermined tools or processes. Variances are welcome and encouraged. The traditional organisation’s current processes, operating policies and practices are optimised for repetitive, everyday processes where the variances that drive innovation are not wanted/needed.

Empowerment Not Adherence Innovation comes from people who have been empowered and given permission to change and try things. The skills the traditional organisation needs to run its operations do not include creative and innovative thinking.

Bottom-Up Not Top-Down Innovation is emergent and is not something that can be managed downward or forced. Innovation rises and the right processes need to be in place to ensure it gets seen, heard and acted on. Top-down management controls are suitable for business as usual operations that change infrequently and are tried and tested.

The Optimisation Challenge Traditional Organisation Maintain a small group of mature products and services efficiently, ensuring a minimum service level is met.

Why Incubation? Tension Operational Goals

Future Co. Develop new ideas from conception to independent product as quickly and cost effectively as possible, failing early and iterating on success.

Standardised, simple and repetitive reflecting the nature of the business as usual operations necessary to support mature products and services and ensure reliable minimum service levels.

Processes

Agile: high-level processes that focus primarily on how people work and communicate. They are not prescriptive and are founded on strong values and attitudes e.g. Humility, Trust, Transparency

Perform key business as usual tasks in a predictable and timely fashion as determined by mature business processes. Variation from process introduces risk to achieving minimum service levels.

People

Think creatively and act quickly in small, incremental steps. Bold, valuedriven and collaborative, people need to be comfortable with creating and defining a path rather than following one.

Rewards

Reward comes validating or discounting an idea as quickly and cost effectively as possible. Satisfaction comes from creating new ideas often and growing them through to independence.

The people and the organisation are rewarded for achieving or exceeding the minimum service levels for the products and services as cost efficiently as possible. Risk is managed through process optimisation and operational controls.

Risk

Processes pre-determine the pace of operational actions and agility is not necessary for managing mature products and services.

Speed and Agility

Centralised and top-down. Focused on managing and removing variations from the organisation reducing risk and improving certainty and predictability around process outcomes.

Management

Growth is incremental and predictable subject to any external factors/shocks.

Growth

Risk is managed through acting in small, incremental steps and retrospecting on lessons learned from failures and successes. Move quickly and adjust the approach to idea development based on feedback and lessons learned. De-centralised and strong part for vision and leadership to provide direction and guidance. Support teams with services and resources they can draw on rather than be forced to adopt. Measured by the portfolio of ideas incubated including the successes and failures.

The Key Ingredients An Incubator Provides For Innovation Trust and Permission

Clarity of Purpose

Innovation emerges from minds that are free to think without fear of reprimand. Permission and trust are foundational elements required to unleash the creative thinking that drives innovation.

Understanding the reasons why we are acting, especially if the reasons are compelling and clearly defined, provide a strong compass, filter and vision for action.

Urgency and Constraints

Independence

Creating an environment where people need to be resourceful and are not distracted or made lazy by excess drives efficient innovation. Pressure and badodds help focus and motivate people.

Self-determination of culture, processes, tools and other critical aspects business development is essential for creating an environment and operation that is optimised for innovation and not management.

Tolerance For Failure

Agile Fluency

Accepting failure is an important part of innovation and progress is vital. To counter the risks of failure, good innovators keep failures small, contained and learn from them. True failure only happens when you stop innovating.

Innovators need to be able to work and communicate together in a way that allows them to quickly adjust and adapt to changes in the environment or new information. Thinking in an agile way drives and de-risks idea development.

Size

Skills and Capacity To Learn

Small teams that work closely together in a collaborative and agile way have proven their ability to produce positive outcomes. Being small is an advantage when it comes to innovation.

Innovative teams need to have a mix of complementary skills ranging from technical to strategic to communications. Capacity to learn is a vital skill for indviduals in order to cope with the forever emerging information and changing environment.

Why Incubation?

Incubation Model - A Different Approach To Innovation

Why Incubation?

Traditional Organisation

Investment

Incubator:

Return

1

Future Co.

Vision and Leadership | Operations and Resources | Governance and Accountability

Dedicated Team

Shared Incubator Resources and Teams

Ecosystem of Independent Products and Services 2

Independent Team and Product

3

7

4

Shareholder, Shared Services and Administration 5

The incubation cycle STARTS when an idea emerges.

Partners

Ideation

Pre-Seed

Seed

Startup

Product

1 hr 1 week

1 week 1 month

1 month 3 months

3 months 6 months

6 months 18 months

Failures / Lessons Learned

6

Establishing The Incubator 1

Independence, Leadership and Resources The traditional organisation as the primary stakeholder, must seed the incubator with resources (people and funding), strong leadership and vision, permission to act and fail and most importantly independence. Once the incubator is established, the traditional organisation does not have a role in the day-to-day operations. It takes up a stakeholder and advocacy role similar to that played by an angel investor, venture capitalist or shareholder - providing governance but most importantly, making its strengths of size, networks, distribution, communication and marketing available to the incubator to leverage and accelerate success. Support is pulled into the incubator rather than pushed on to it.

2

Resource Allocation Resources including people and funding are distributed based on the demands each product in the incubator has at each stage. Ideation, Pre-seed and Seed: Shared Resource There is an advantage of using a shared resource or team to work on multiple ideas at a given time.

Why Incubation? Early stage ideas benefit from cross-pollination and shared learning given their elasticity and flexibility. It is probable that ideas will merge with or emerge from other ideas. Startup: Dedicated Team As ideas take shape and gain maturity, the operational processes become better defined and the advantage of having subject matter expertise grows. A small dedicated team is best suited to serving the needs of a fast growing startup as they can build on specific lessons learned. The dedicated team pulls resources from the incubator and externally to develop the startup further as it grows towards greater independence. Product: Independent Team Products by definition should be self-sustaining and independent. Although products may pull resources from the incubator, the traditional organisation or other parties, these resources are provided through partnership. Products and their independent teams over time will graduate from the incubator, joining an ecosystem of products and services.

Key Stages of Incubation

Why Incubation?

3

Startup: 3 months to 6 months

Seed: 1 month to 3 months The Goal: simplify and clarify seed idea into a clear value proposition and early stage product/service offering that can be used and purchased by real customers. The idea and value proposition behind the idea is stable, iteration is focused on product and service development and operational practices.

The Goal: early stage growth and scale founded on stable operational processes and technology. Developing maturity in marketing, sales and distribution, refining communications to target product market and improving the value of product and service by developing new features. As the startup becomes more independent, external capital may be needed.

Ecosystem of Products and Services Product: 6 months to 18 months

Pre-Seed: 1 week to 1 month The Goal: quickly refine working prototypes and release to a closed market to gauge user feedback. Iterate on the idea as much as possible based on feedback to determine whether the pre-seed idea can/does produce value.

Ideas/Customer and Market Feedback/Lessons Learned

The Goal: independence, growth and scale. The product will have a clear business model and growth plan. The customer base of the product will continue to grow and the systems, processes and people that support the product or service will be maturing and self-sustaining. The product will have its own culture, brand and voice.

Ideation: 1 hr to 1 week The Goal: to conduct lots of experiments and learn as much as possible about ways to solve problems quickly and cost effectively. Ideas emerge from free thinking, curiosity and engagement. Successful ideation arises from detachment to any one idea and being methodical. Ideation may involve building basic prototypes and lots of customer/market engagement.

Ecosystem, Feedback and Integration 4

Ecosystem Development

5

The Ecosystem Evolves Overtime products will come and go. Once successful products may fail and this is a natural part of a healthy ecosystem where customer and market demand is always changing. The lessons learned from the failures are recycled and help improve the approach and odds of success for the next generation of ideas.

Lightweight Shared Services The role the traditional organisation plays in this ecosystem of products and services is to make available resources and support that each product can draw on much in the same way it supports and resources the incubator. The traditional organisation as a primary shareholder in the products the incubator produces provides this support and earns returns from the productivity of the independent products.

Products that graduate from the incubator join an ecosystem that is made strong by the independence of each but the connections that develop between them. The traditional organisation is the primary shareholder in the products however external shareholders in the products may also exist. The ecosystem is not exclusive to incubated products and may include partner products and services.

6

Why Incubation?

7

Iteration and Feedback Successful products that graduate from the incubator will continue to iterate and grow using the same approach used by the incubator. It is possible that products or ideas that emerge from successful products will be fed back into the incubator for development. The innovation cycle is constant and cyclical.

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