How Organizations Can Build Incubators

June 25, 2019

Open innovation has hit the insurance sector, and many of the established giants are feeling the pressure. With industry giants like Nationwide, State Farm, Allstate, and AXA forming internal incubators and innovation programs to deal with the challenge from upstart competitors, the importance of open innovation to the longevity of their organizations has become apparent.

For some time, the insurance industry has felt removed from the pace of change in other industries. While technologies changed, it did not fundamentally alter the insurance business model.

This complacency has led to the emergence of insurtech startups focused on disrupting the existing insurance model and threatening to unwind the status quo. As competitive pressure has increased, insurers have moved towards developing internal innovation labs and incubators to identify new technological opportunities and test innovative concepts.

But how can incumbent organizations build successful incubators? Here are some key learnings to building successful internal innovation incubators.

Focus on Essentials

When developing new innovation initiatives, teams frequently try to move too quickly and over promise on the deliverables from the effort. At the start, teams need to focus on the basics: developing a solid process for ideas and concepts will move through the innovation pipeline, a reliable way of sourcing ideas and outside expertise, and identifying key ecosystem partners to expand innovation network. Even if the process isn’t perfect, having guidelines for how success is measured and what steps projects need to pass through turns innovation into a predictable, measurable process, rather than a one-off activity.

Find Intrapreneurs

Teams frequently get stuck on the notion that for outside ideas they need outside hires. While outside hires can bring fresh thinking, they face significant gaps in the internal corporate knowledge and deep insight into the business. For internal initiatives, intrapreneurs are invaluable, as they have an insider perspective on improvements and innovations that can be pursued while having the context of internal knowledge and expertise to realize change. For most innovation initiatives, the struggle lies in implementing an idea rather than creating one, and many initiatives die due to internal factors rather than external pressure.

If an incubator is more externally focused, the same principle holds: industry experience is invaluable to developing industry-focused solutions, and organizations should seek out external partners that match their knowledge gaps.

Measure Results, Not Actions

For internal incubators, the end goal is not a specific idea but a solution to a specific customer problem. Focusing too much on one specific idea means that the success or failure of the incubator can hinge on the success or failure of the individual idea. Setting expectations that an incubator is an internal venue for experimentation is key, as it allows for flexibility and pivots in concepts. By setting up key metrics to measure end results rather than the process, incubators can maintain their creative flexibility while still being held accountable for results.

More importantly, organizations need to see internal efforts as an area for experimentation rather than a profit center. No single incubator project will represent much in terms of total revenue, especially in comparison to established business units. The key result of an incubator is the development of ideas and concepts that drive future growth rather than immediate top-line revenue.

Enable Champions

Incubators often get stuck on portfolio management as the running theory for managing a multitude of innovation projects, but this rarely leads to success. Rather than spending time and effort on identifying the right balance for their innovation projects, teams find more success with being directly responsible for the success of specific ventures. Having a champion within the organization can speed up progress by pushing through roadblocks, identifying problem areas, and acquiring the resources that any specific incubator project needs to succeed.

This flows back to the previous point: internal incubators are not profit centers and should not be run like a fully-fledged business unit. Instead, the focus should lie on the rapid prototyping of ideas and concepts to identify areas of opportunity.


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