Innovation and growth: these two words are on everyone’s lips in large companies. And for good reason. Traditional players are now easily in competition with new brands and startups coming out of nowhere. For example, in distribution, new, small, innovative brands are growing three times as fast as the major brands that were symbolic of the industrial era. Also, over the past few years, large companies have spent increasing amounts of time and money trying the usual alternative strategies: “Make” through intrapreneurship; trendy new methods like “culture” safaris in Silicon Valley or China; “hackathons” and internal incubators; “partnering” through open innovation and partnership programs with startups; “invest” with corporate venture funds; “buy” by acquiring startups meant to help transform businesses and organizations.
Obstacles to innovation hinder businesses’ development
However, we must admit that the success rate of these approaches is low. For the “make” strategy, intrapreneurship projects are a disappointment, a victim of a lack of an entrepreneurial mindset from ex-managers-turned-intrapreneurs hindered by internal constraints that deprive them of agility (a margin for decision-making, average speeds). Hiring outside entrepreneurs to manage these “intrapreneurship” projects often fails since they are unable to adapt to large companies’ constraints and lack internal support. For their part, incubators and labs are often victims of a lack of critical size or resources.
For the “partnering” strategy, open innovation and large company/startup partnerships suffer from differing objectives, strategies, interests, and culture between the two types of organization. Concerning objectives, the study “David avec Goliath” for the Raise foundation shows that many start-ups feel like they are being used by large companies for communication purposes rather than as levers for growth. In terms of value creation, these large companies have profitability constraints. They hope to create a proprietary competitive advantage by partnering with the startup, and they naturally hope that this independent startup will become “captive” so that it cannot sell what was created together to the highest bidder, particularly to one of the large company’s competitors. For their part, startups want to keep their acquisition options open and not be “captive” so as to maximize their exit value.
The “invest” strategy in a corporate ventures fund also has limits since it requires investing significant sums to own 10-15% of several startups without having control, which doesn’t help the company to grow. The “buy” strategy of acquiring a successful start-up is very expensive and is very difficult to make accretive and integrate the start-up culturally and operationally into the core business.
No doubt it is time to consider new approaches and ask the right questions ahead of time.
Finding a balance between large companies’ power and startups’ flexibility
Thus, the ideal would be to take the best of both worlds by combining the power of large companies and the agility of the smaller ones. This means creating projects that are totally aligned strategically and culturally with what the large company wants, so as to take advantage of its initial competitive advantage, while remaining operationally agile and flexible to reduce time-to-market, compete with independent startups and maximize the chances of success. And, of course, so that all this does not come with the exorbitant price tag of an acquisition.
To rejoin this ideal, a new type of player is emerging throughout Europe. Their goal is to create new organizations, brands, business models or “corp-ups” for and with large companies, define the specifications together and then align their benefits through co-investment in particular. Independent teams of experts then take care of launching and developing autonomously and outside the large company to better re-integrate it in the future.
Execute new, innovative projects quickly through excubation
More and more large companies are discovering this model and want to try it. In addition to the strategic alignment and the operational agility and speed, they find other, less immediately obvious benefits. For example, the risks of hiring and reputation are borne by the company builder. The latter, with its experience of successes and failures, can change the members and skills of the project team to fit its needs without the large company having to reassign these people elsewhere. For large companies, the costs of these projects can be allocated to Opex and not Capex, which is much easier for a director to manage.
Of course, there is no ideal model that will work in all situations, and excubation is no exception. However, what makes the difference between success and failure is not the brilliance or relevancy of the idea but the ability to execute quickly and go from 0 to 1 then 1 to 10. Excubation is designed to do this before passing the relay to large companies that are organized to go from 10 to 1000.
About the author:
Frédéric Colas is a founding partner of Fast-Up Partners, the European leader in the excubation of new brands and digital activities. Frédéric is a pioneer in digital marketing. From 1996 to 2000, he was Procter & Gamble’s first digital marketing specialist in the United States and Europe. As such, Advertising Age has named him one of 12 “global media innovators”. He was then one of the historic leaders of Fullsix, a leading digital agency in Europe until its acquisition by Havas in 2013. Innovation is one of its engines, even in his personal projects. He thus realized the first “Facebook-powered” charity round, to finance several education projects in Africa and South-East Asia. Frédéric graduated from Essec.