Incubators: How Companies Benefit from Innovations of Young Start-Ups [5 Reading Tips]

Incubators Reading Tips — Source: Unsplash/Tim Mossholder

Developing innovative ideas requires time, flexibility and space for creativity. However, there is usually too little of all this in everyday working life. Nevertheless, progressive ideas are necessary for companies to move forward in times of digital transformation.

According to the Fraunhofer Society, around 70 per cent of all companies listed on the DAX operate separate innovation units to further develop their business model outside their core business. As incubators, large companies support young start-ups in implementing cutting-edge concepts and in turn benefit from the development of innovative products and services for their target audience as well as the creation of completely new business models.

Incubators Rely on Teamwork

Incubators are institutions, usually large companies, that provide founders with both technical and financial support to help them build their business. Unlike other forms of assistance such as accelerators or digital labs, which promote the rapid development of new products, the incubator model takes a long-term approach.

The resulting innovations should benefit the incubator and be transferred there as a »spin-in«.

Many large companies and groups use this approach to develop new products, processes, business models and technologies outside their core business for themselves and their target audience or even to tap into a new market.

For this reason, founders often have to give up higher shares and influence to incubators in exchange for support.

Incubators Promote Innovative Ideas

In order to break free from rigid structures and create enough space for creativity, the start-up is set up separately from the parent company (the incubator).

The start-up mentality is intended to help break up existing thought patterns of the parent company and develop radical innovations. Especially in companies with strict hierarchies and many bureaucratic guidelines, opportunities to further develop new ideas are severely limited.

Incubators: A Creative Idea Alone Is Not Enough

There are many creative ideas. However, not all of them are suitable as incubator projects for large companies. Even if the supported start-up operates autonomously from the parent company, the results should provide value to the incubator. That is why innovations must fit in with the strategic orientation and core business of the parent company.

For the parent company, this means that the process is not completed once an innovation has been developed. It is important that all employees are informed about the development steps and the added value of innovations so that they are ready to work with them later.

Besides innovations, the necessary knowledge must also be transferred to the parent company. Prototypes are a good way to illustrate how innovations work and how they can be used.

Especially radical, i.e. completely new innovations often lead to a restructuring of skills in the parent company. This frequently requires adapting existing processes and structures.

This effort is worth it because companies must constantly evolve in order to hold their own in the market and meet the growing and changing needs of their target audience.