This post also appeared June 16, 2014 in PE Hub.
I was watching an episode of the sitcom Modern Family on TV the other day and one of the subplots was about one of the kids, Luke, trying to invent the next great kitchen innovation. Among his attempts are a toaster that butters and toasts simultaneously, the coffee-bot (never fully explained), and a self-flipping pancake whose mechanism of action is embedded popcorn. Phil lauds his son’s entrepreneurial spirit and zest for innovation.
And why wouldn’t he? Innovation is everywhere these days and if you haven’t got an innovation initiative at your corporation or an investment strategy that supports is, you are so five minutes ago. Unfortunately the term “innovation” has become synonymous with the term “entrepreneurship” and, while often related, they are not the same thing. Innovation means the creation of something new and different. Entrepreneurship means starting a new enterprise that involves a significant amount of initiative and risk; it doesn’t necessarily mean that the enterprise offers something different and unique. It could be a new laundromat or gas station or, god help us, another Starbucks in a new location. It is only the combination of innovation and entrepreneurship that really moves the wheel of progress forward.
I recently saw Guy Kawasaki, former Apple Chief Evangelist, speak at the Xconomy Napa Summit, and he illustrated this point beautifully with a chart (which I have slightly embellished to include the words he used to describe it). The chart demonstrates how you can have something valuable that is not unique (albeit something that is likely to be sold at commodity pricing); in other words something that is entrepreneurial but not innovative (see bottom right quadrant). The self-flipping popcorn-embedded pancake would, I am pretty sure, be in that upper left hand quadrant, aka stupid.
This concept really hit home for me because I am working on a great project for a client that includes a landscape review of all of the healthcare-focused incubators and accelerators that have emerged over the last several years. So far I have identified over 60 such entities and I know there are far more. I bet that there are over 100 healthcare-dedicated entities focused on incubating and/or accelerating companies (and that doesn’t even include the tech incubators/accelerators that host the occasional healthcare startup). And that, my friends, is a whole lotta acceleration. I think if you could harness the collective increased rate of speed claimed by these entities, Usain Bolt would be nervously looking over his shoulder.
There are as many business models as there are incubators and accelerators, but one of the big trends I have noticed is that there are some such entities that are designed to solicit any and all unique and different ideas across a wide swath of topics (innovation) and then try to make a market for them. I will call this the outside-in model: it brings ideas from outside and hunts out customer organizations that will take them inside to solve problems. The contrasting and increasingly prevalent model is more of an inside-out one: sponsoring entities identify the problems they want solved inside their organizations and then reach out to attract people to come and create the solutions, which may or may not be particularly unique (entrepreneurship).
The question this raises is: how big is the overlap in the Venn diagram between entrepreneurship and innovation in these endeavors? Certainly it is not the case that all things evolved in accelerators/incubators are innovative in the unique/different sense of the word. And certainly the business risk is mitigated for so-called entrepreneurs when there are built-in customers asking for a solution. The overlap between the two is the place where great innovation spurs great entrepreneurship and the creation of something new, different, viable, scalable and desired; aka, the Holy Grail.
The challenge is that all of it is called “innovation,” even when it is, essentially incrementalism; and, all of it is called “entrepreneurship” when it is, essentially, opening up a new Starbucks. Knowing the difference is, I suppose, what separates the girls from the women. As large companies continue their march to build innovation centers and appoint chief innovation officers and spin up businesses left and right, it is essential that they are mindful of this difference. Most importantly, they must become especially good at identifying that place in the middle where the magic happens, which is usually just up and to the left of the typical corporate comfort zone.
Hey, this may be an opportunity! Perhaps what we really need is a new accelerator that supports the creation of algorithms to identify which companies have the optimal combination of innovation and entrepreneurship. Now, all we need is a little seed funding….