A Tale of Two Incubators
I recently participated in two separate ‘startup incubator’ brainstorming programs, in the same city, a couple of days apart, with two different high-tech companies operating independently of each other. It was surprising to see how different was the quality of their results (by my own estimation), despite only a few apparent small differences in how they were run.
Both programs had 70-80 motivated and well-educated adults from diverse national and cultural backgrounds. They divided up into 10 teams of roughly equal size. Each team worked intensely over the course of a day or two to generate one new business concept for a product or service that could be offered to the marketplace. At the end, each team gave a 3-minute ‘pitch’ presentation describing the idea they had generated, there was a short question-and-answer period after each presentation, and a winner was selected from the 10 pitches.
Both programs had comfortable conference areas with tables and chairs, food, fizzy drinks, electricity and internet access, large pieces of paper and colorful pens and little more than that. No big piles of cash were dropped into anyone’s lap.
Both program organizers offered their teams a list of questions to help guide the idea formation. In one case, this was in the form of Osterwalder’s Business Model Canvas, which you can see below. In the other, essentially the same topics were covered, but as a list of questions starting with Who…, What…, Where…, How…, etc.
Having seen all of final business ideas, in my opinion the results of one of the programs seemed greatly superior to the other, both in the slickness of the presentations and in the quality of the underlying ideas. This got me thinking about what differences there were in this ‘Star’ program that might have made the results be (or maybe just seem) better than in the ‘Regular’ program. Here are a few things I noticed:
1. In the Star program, the teams were formed according self-expressed interest
The Star program started with 10 self-selected people making one-minute presentations about what their basic business idea or topic was. After this pitching session, these 10 team leaders scattered around the room and the remainder of the participants came to find out more about the ideas that intrigued them. The participants each wore sticky notes briefly describing their background and skills. The team leaders got final say in selecting who would be on their team.
In the Regular program, the team leaders and each team’s members were selected by the overall program organizer. Each participant was told a couple of weeks before the program day which team they would be on, the leader was selected by the program organizer, and the team was asked to begin brainstorming a business idea topic that they would develop on the program day.
2. In the Star program, there was a strong emphasis on validation, validation, validation
At the beginning of the Star program, participants were given an explicit list of criteria on which their idea would be judged. One-third of these criteria involved the extent to which the team had demonstrated that (1) their idea will actually work and (2) that there exists a market for it. The teams consisted of both experts in topic and non-experts, and all of the teams had intermediate appointments scheduled with outside coaches, some of whom were experts in the team’s idea’s general industry and some were not.
In addition to ‘sanity checking’ their ideas with experts and non-experts, the teams in the Star program were asked to contact potential customers. Several teams put surveys out on SurveyMonkey and Facebook. One got more than 50 replies from within their city between the hours of 10:00 in the evening one day and 8:00 the next morning. One went out to meet with prospective customers and another went out to shoot a demo video. Another set up a functional website that described the team’s idea and provided a box for website visitors to enter their e-mail address if they wished to learn more. (5 prospective customers signed up.) Several contacted support staff from different companies that might be key suppliers or partners. One even set up an in-person meeting with a key partner.
All of the teams provided basic financial estimates of unit cost and unit revenue (and therefore, unit profit) and market size. In the Regular program, the teams were not asked to estimated market size or the profit potential, and so none of them did.
In the Star program there was a strong emphasis on results and action over talk and deliberation. The participants were even told “less talk, more action”. In the Regular program, to the best of my knowledge none of the teams spoke with outside experts, contact potential customers, or even left the building to get fresh air.
3. In the Star program, teams were told what to do, not how to do it
The Star program had no template for the final presentation: as a result, every presentation was unique, some with very high quality graphics, professional looking logos, creative videos, working iPhone app prototypes, a functional website. In the Regular program, the teams were given template presentations where the teams had to ‘fill in the boxes’. Most teams used this template with little modification, and some added additional slides of nice-looking photos to demonstrate their ideas.
4. The Star program had significant outside involvement
In addition to the already mentioned outside coaches, the Star program’s judging was done a panel of 9 people, including local business founders, a city politician and a professional venture capitalist, none of whom were involved in the coaching. In the Regular program, the judging was entirely by the program participants and program organizer, with no one even from within the wider company.
5. The Star program’s ideas went through a larger number of iterations
The final difference that I think might have been important was the duration of the programs and the emphasis on iterating through ideas. The Star program ran for 48 hours, while the Regular program was a single business day. In the Star program, participants were encouraged to ‘Build, Measure, Learn’. The results of the online survey indicated that one team’s initial idea might not have a market interest. The results from the survey were used to ‘pivot’ to a related, but distinctly different, idea. The final presentation was a third idea.
There might have been other important differences, or maybe I am wrong in my assessment of the quality of the final ideas, but if I were in charge of a similar business concept brainstorming day, I would work to make the day more like the Star program and less like the other one.