Amit Sharma's Extreme Innovation

Sunday, January 08, 2006

Innovation Incubators and radical innovation

In this post I discuss how radical innovation can be brought about by innovation incubators. This is significant because we must increasingly rely on the systematic search for radical innovation, rather than depend only on the individual brilliance of maverick entrepreneurs.

First things first- what is an innovation incubator? This is an example of what we could call an "innovation incubator"- an entity that helps entrepreneurs in successfully launching innovative ventures. Incubators provide varying levels of support, from office space to common resources (printers, network access) to venture capital to financial and managerial guidance...Overall, they specialize in launching new ventures. This is another example of a different kind of incubator- one that has lesser ownership of the ventures it support.

What are radical Innovations? See this page at Rensellaer's website and this. To set the stage, these are the kind of radical innovations I am talking about:
  • Steve Jobs in his roles at Apple and Pixar, virtually created two new industries.
  • Robert Giuliani- the New York mayor who brought down overall crime by 57%, and reduced murder by 65%. New York City - once infamous around the world for its dangerous streets - has been recognized by the F.B.I. as the safest large city in America for the past five years.
  • Finally, Muhammad Yunus- the father of the micro credit revolution in Bangladesh.

In the following discussion, it is also important to keep this equation in mind:

Innovation = domain-specific components + cross-domain components

Obviously, incubators primarily cater to the cross-domain components of innovation, reducing them to standardized and repeatable processes which can be used in a variety of contexts. So you would find the same incubator supporting innovations in a variety of industries- perhaps a couple of software services startups and one wireless venture.


Overwhelmingly, almost all radical innovations seem to arise not from such incubators but from individuals working in companies or entrepreneurial ventures. One fundamental question which comes up is: How c
an cross-domain Innovation be incubated most effectively? In particular, can incubators lead to radical innovations in the marketplace?

The following are some insights on how Innovation incubators can effectively pursue radical innovation:
  1. Invest more time and effort per innovation. Steve Jobs had to struggle for years before his animation company- Pixar- took off. It was an idea not yet ripe, which is often the case with radical innovations. If the incubator focuses on the short term, it is unlikely to reap the exponential benefits of a radical innovation (which takes time to be fully adopted by the market).
  2. Ensure domain expertise in the venture: Radical Innovations often require special insights and a deep understanding about the domain. The incubator has to ensure that such knowledge is either available in-house (the incubator itself specializes in certain domains), or available in the entrepreneurial team it is working with. A team consisting purely of generalists is a bad idea, because such a team would lack the depth needed for radical innovation.
  3. Have ownership in the ventures: Working without ownership is highly unlikely to lead to radical innovation in your ventures. Don't be an outsider, be an owner!
  4. Have a balanced portfolio: It is important to have a long term view of certain incubations, and allow the venture to persist if there is little or no initial success. For this, the financial model of the incubator should allow it to balance its own portfolio between short term and long term investments. An excessive focus on short term returns may prevent exponential returns from radical innovations.

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