Whereas discovery competencies generate or recognize RI opportunities, the incubation competency involves activity that matures radical opportunities into business proposals. A business proposal is a working hypothesis about what the technology or business platform could enable in the market, what the market space will ultimately look like, and what the business model will be. Incubation is not complete until that proposal (or, more likely, a number of proposals, based on the initial discovery) has been tested in the market, with a working prototype, and first revenues are flowing in.
We’ve observed that the skills needed for incubation are experimentation skills. Experiments are conducted not only on the technical front, but, also for market learning, market creation and to test the business proposal’s match with the company’s strategic intent.
In most of the companies we studied, most projects entering into the incubation phase were filtered out when the experiments failed for one reason or another, due to the high uncertainty associated with what initially appeared to be a promising opportunity. One BI portfolio manager described his frustration at the ‘churn’ rate in the portfolio at the early phases of the projects, when they were moving from the idea phase to early technical and market experimentation. Still, he admitted how that was to be expected given the high level of innovativeness, and therefore risk, of the ideas.
It turns out the incubation is the hardest competency to develop and maintain in companies. It takes too long. We don’t train business students how to do it. Certainly not how to evaluate it. We call incubation “The Long and Winding Road.”