Corporate Incubation: Evidence or Instinct?

It was the American mathematician and cryptographer Claude Shannon who first coined the phrase “information reduces uncertainty.” This is key to the work of corporate innovation teams as they seek to incubate new businesses in uncertain, emerging markets. They develop hypotheses, run experiments, and embrace failure in search for information about what customers want and how to best provide it. However, is learning about new markets only about gathering this evidence? Is there room for instinct in reducing business uncertainty?

This was a key question from Change Logic’s webinar “Corporate Incubation: The Key to Innovation in an Uncertain Market”, on November 10. The panel, moderated by Change Logic’s Managing Principal, Andy Binns, included thought leaders and business mangers:

• Prof. Charles O’Reilly, Stanford Graduate School of Business

• Uwe Kirschner, Vice-President, Business Model Innovation, Bosch

• Michael Nichols, Global Lead, Bosch Accelerator Program, Bosch

• Yusuf Jamal, Senior Vice-President, Devices & Platforms, Western Digital

Andy outlined several key takeaways from the webinar, including the importance of mastering all three disciplines of innovation: ideation, incubation and scaling. However, underlying these disciplines is the role of an effective leader that can create the environment of trust vital to the evidence-based approach.

A disciplined method that incorporates market data in decision-making for emerging ideas results in clear, quantitative goals that every project must meet to advance to the next development stage. The panelists emphasized the importance of setting and communicating clear goals early in the process so that the innovation team can take ownership of generating meaningful data to inform decisions.

But evidence isn’t all you need – no matter how creative your experiment design or how many hypotheses you test, there will always be a risk of failure when you’re trying to build a new business. This is where instinct and leadership come into play.

Yusuf Jamal made this point clearly during the webinar (and in a recent guest post). In Yusuf’s experience, it’s critical for a company’s leadership to trust the judgement of the innovation team, allowing them to use their skills, experience, and instincts to make key decisions regarding the project based on the data they’ve collected in the market.

Yusuf also discussed how innovation leaders must adapt to the context of a given project and the strengths and weaknesses of the innovation team. The balance of instinct and evidence that goes into decision making can vary based on the quality of the incubation team and the maturity of a new idea. For instance, some teams may be strong in the skills required for incubation but have weaker skills in ideation and scaling.

The nuance of balancing evidence vs. instinct naturally led to a discussion of innovation culture, where again, the role of the senior team is critical. The panelists agreed it’s crucial for the executive leadership to proactively maintain a state of productive tension within the innovation team. This enables the team to experiment boldly while simultaneously feeling the pressure to deliver successful new businesses that transform the whole organization.

If you’d like to hear more of what Yusuf, Uwe, Michael, Charles, and Andy had to say on innovation leadership, you can watch a replay of the webinar. To learn more about corporate incubation, follow us on LinkedIn and Twitter.

By Aaron Leopold