The success of early accelerators from Silicon Valley has intrigued many businesses in recent years. Some executives have even gone as far as copying the startup accelerator model and pasting it into their corporate environment.
And because everyone wants immediate value, these programs are typically judged on short-run losses – otherwise, the next-best measurement would take 5–10 years, when an innovation yields ROI, to show any results.
According to lean startup coach Tristan Kromer that's a fundamentally flawed premise to start with.
“Corporate accelerators are copying Silicon Valley ‘best practices’ without noticing the massive difference between a corporate environment and a startup ecosystem. Without any short-term measurement of effectiveness of these accelerators, these companies are basically just throwing money out the window and hoping that a unicorn will magically appear.”
In prep for his talk and workshop during Intrapreneurship Conference Stockholm, we caught up with Tristan to see how this copy-and-paste approach is impacting business innovation and what companies should change to shore up their success.
Tristan, which model is having more trouble innovating and bringing the idea to market – startups or corporate accelerators?
It’s very much the same problem for both. While a startup accelerator seeks additional funding from venture capitalists to proceed, an intrapreneurial startup requires money and support from business sponsors.
Corporate accelerators need a big vision or disruptive technology framed in an innovation thesis to help select those startups that the main corporate stakeholders will later accept. All too often, accelerators try to get along without a coherent thesis, resulting in potentially great ideas with no business sponsorship to bring that next round of funding needed to continue the project. And in some cases, executives will reject ideas specifically because they are disruptive to the core business. As Dan Toma, author of The Corporate Startup, likes to say, the project is orphaned.
Have you seen an accelerator model – corporate or startup – that works better than others?
There’s this presumption that an accelerator program is defined by a specific format. But from what I’ve seen firsthand, successful corporate innovation is not always strictly structured as an accelerator.
The core part of being an accelerator – that I reject – is a batch structure. The premise of this line of thinking is the same used by high schools and universities: There is one smart person who enters a room and conveys knowledge to the masses. This approach seems very cost-efficient.
However, a batch only makes sense for accelerators if there is truly one expert who is irreplaceable and crucial to the success of a homogenous group of startups. In a group of tightly focused projects at the same stage in the same industry, in the same market, one expert might help. But, this is rarely the case.
Most startups aren’t even remotely similar to each other. They are pursuing different business models and they are in different stages of development. Often the expert’s specific knowledge is wasted in a batch. What’s more, by running in batches, accelerators throw away their most valuable asset at the end of the program: the culture.
Startups in Silicon Valley thrive because they look to the right and to the left and see other startups working hard, running experiments, and talking to customers. They can learn by example. They can ask for help. They are surrounded by a culture of entrepreneurship that doesn’t have to be taught; it is absorbed.
Accelerators start from zero culture and have to build it up every time. By copying the surface appearance of Silicon Valley accelerators, most companies overlook the culture that drives innovation.
A better approach is to create an exponential growth of knowledge and culture that will make intrapreneurship go viral.
If you are trying to bootstrap a chain reaction of intrapreneurship, then skip the batches. Start with one corporate innovation team. Teach the teams how to be intrapreneurs one on one. Then, bring in another team and teach them.
This may seem very inefficient, but only if we don’t count the impact that the more senior team can have by having them assist the junior team. We not only teach intrapreneurship, but we can teach them how to teach.
Teams start bouncing ideas off of each other and learning together how to apply principles such as lean startup, rapid prototyping, and growth hacking. With this level of peer-to-peer mentorship, supportive programs, and shared services, startups can keep moving. As innovation teams learn to help each other and culture components come into play, we have one team helping another. Then two teams helping two others. Then four and four.
While the cost of the first few teams is higher per team than a traditional accelerator, the cost goes down over time as network effects and viral knowledge take over. This makes intrapreneurship an exponential, linear.
Very quickly, the accelerator turns into this organization resembling a nuclear reactor – unleashing exponential innovation as intrapreneurs collide and intersect with each other. I call this model a Reactor.
Does this reactor model help address common problems encountered when innovating within a traditional business model of intense hierarchy and stability?
The obstacles found in a traditional business model tend to kill innovation regardless of the structure of the accelerator. If you have a strict form of leadership that doesn’t accept failure, then it won’t matter what the startups do. A sole interest in ROI will eventually shut down innovation because any return won’t be visible for years. It is important to give innovators permission to fail and to learn from those failures collectively.
Beyond ROI, what are other ways that can help companies manage their portfolio, communicate it, and secure funding?
The concept of ROI is not entirely useless. It’s great for core products and infrastructure. Anything that lowers the cost of iteration and learning has an ROI. Buying a machine that can produce widgets at scale has an ROI. It has an initial fixed cost, but the reduction in cost per widget is the return. Accelerator programs can be measured in much the same way.
For example, investing in a 3D printer to allow intrapreneurs to innovate faster has a return. If we measure the cost of each iteration, we will find that the 3D printer lowers the funding needed to get an innovation to market and to learn from it.
The ROI of the 3D printer is then calculated on the basis of innovation infrastructure improvement. An accelerator program can be measured just as a 3D printer can – the reduction in the cost per innovation.
For the actual projects themselves, we can demonstrate the return in a different way. We can think about them in the context of market research. Instead of purchasing a report from a fancy consulting company that relies on highly dubious surveys for hundreds of thousands of dollars, a startup can deliver a prototype to customers to learn how they react and experience it for a fraction of the price. That information is far better than a research report. If these early-stage projects are viewed as an investment in information, not a product, then the whole ROI argument is avoided.
I believe that startup results should be tied to information gathering, not necessarily the delivery of a product. When the startup reaches a point where more funding is needed, it can work with the stakeholders to determine whether the project should proceed or stop.
Even the project is halted, the startup may have learned valuable information that may lead to a new project, which is then funded accordingly.
If you're interested in understanding alternative models that some corporate accelerators are creating and having a chat with Tristan about anything metrics related, join us in Stockholm.