Satellite Incubators & Innovation Labs: How Big Enterprises Stay Relevant

by Knotel: May 02, 2018

In a world where startups like Uber and Airbnb can disrupt well-established industries and become dominant players in a few short years, how can slower-moving enterprises with gargantuan pedigrees keep pace?

If you can’t beat ‘em, join ‘em.

To stay relevant and keep pace with their more agile competitors, many smart organizations are launching satellite incubators and innovation labs.

Satellite incubators aim to help external startups navigate business growing pains. In exchange for equity, established companies give new ones access to their expertise and resources hoping that, one day, they’ll reap hefty dividends.

On the other hand, innovation labs tend to house internal startups that are working on strategic initiatives and specific goals that are unique to the organization. Instead of bogging down agile teams at the corporate campus, companies can instead send them to innovation labs where they have more freedom and space to be creative.

Why are companies investing this way? Because startups and established organizations have complementary skill sets. Where startups are great at innovating and building new ideas, successful enterprises know how to scale them.

In some instances, these enterprises aim to attract startups that are working on mutually beneficial solutions. Nike, for example, recently opened an accelerator for startups that were leveraging its Nike+ platform.

In other instances, since “intrapreneurship” efforts fall flat 70% to 90% of the time, enterprises launch their own innovation labs away from their main campuses and headquarters. This enables them to unlock the entrepreneurial spirit and—if all goes as planned—become more agile and positioned to pivot faster.

“In a large organization, there is a center of gravity to the business,” Vanessa Colella, managing director and global head of venture investing at Citi Ventures, recently told TechCrunch. “When you are close in, you are necessarily pulled by the gravitational force. We found at Citigroup that if we sit further away, we can bring outside innovation in.”

Satellite incubators and innovation labs provide established organizations with several benefits:

  • Increased productivity. Workers don’t have as many standing meetings to attend or mundane tasks to take care of each week. They’re able to get more done in less time.

  • More ideas. When you work out of an innovation lab, you’re in close proximity to several other startups—and the talent that powers them. Teams are exposed to a whole new set of ideas and perspectives, which can inspire their innovation.

  • Faster decision-making. Because teams are leaner and their focus is narrower, it’s easier to make decisions quickly and pivot when necessary—thereby avoiding costly errors or missing out on great opportunities.

  • More success. Let’s say a large organization launches an innovation lab for 20 small complementary startups they’ve thoroughly vetted. Not all of those have to be winners in order to return significant dividends. Shell, for example, invests in 30 to 40 startups each year—some internal and some external—hoping that 10%–20% of them work out.

  • Increased engagement. Innovation labs are exciting places to be. It comes as no surprise that companies that use these facilities tend to have employees who are more engaged and less likely to look elsewhere for work.

Enacting change at a large organization that’s done things the same way for decades can be difficult. But it’s not impossible.

Due to the agility, innovation, and environment they provide, expect more and more established enterprises to open satellite incubators and innovation labs as we move further into the future.