Networking and knowledge management for incubators
How would you describe the current situation in business incubation?
The current situation is very fragmented. It has a lot of the characteristics of an emerging business: many actors with heterogeneous structures and services, many of them with insufficient size for a viable business. There is pressure to consolidate: the complexity of innovation and the increasing quality requirements of investors as a result of the rapidly declining euphoria for young high tech businesses are driving the services of incubators towards a higher level. In that context, there is a need for more specialised and professional innovation business.
Some of the big five consultancy groups who, years ago, said they were going to be very active players in the early incubator stage are now retiring one after another from their initial commitment. They prefer to focus on later stage companies with high growth rates. On the other hand, there are still many incubators being led by people who have some personal capital, a lot of availability but no special skills and an insufficient organisational background for this challenging job. This is a dangerous incubator environment for start-ups.
I see a movement towards professional coaching of start-up entrepreneurs. Professional coaching means offering a holistic approach to a business. Most of the start-ups have a partial view. Coaching, by definition, needs a larger network of partners in order to respond to the extremely diverse characteristics of start-ups' needs. To obtain the necessary critical mass in terms of networking, rather than concentrate everything within one building, incubators will be forced to become network agents. In other words, I see a trend towards virtual incubators with very close co-operation.
I think it is dangerous in the very early stage (pre-seed) of a new business to bind a start-up to an incubator by taking share options or creating other dependencies. Such dependencies often turn out to be constraints for the future options of the entrepreneur. Other sources of income for incubators from government, foundations, and others may be crucial for the economical viability of an incubator supporting early stage business innovation. There are always exceptions: highly specialised and focused incubators in the biotech area, for example. But many of them will have difficulties in surviving without additional third party money. The commercial model of incubator will be very, very difficult to work in this early phase.
One critical question is how long a start-up will navigate inside such an incubator, and when to arrange the passage to other partners like the big five or other professional venture capital driven incubators or coaches. This question has to be answered on a case by case basis. In my practical experience, even the top high-tech start-ups who are later funded by venture capitalist have a challenge to manage innovation in transforming an invention to a real business. The second challenge is how to structure the company in order to launch sales, to set up management and logistics and so on. Many of today's incubators and venture capital companies cannot respond to the needs related to those challenges. Answers have to be found.
You are currently working on solutions to some of these problems ...
If I speak as managing director of the CCSO incubator network, we are under tremendous pressure to adapt and enlarge our services. Thats why we have to increase our partner network and become an open network. The number of cases of start-ups is increasing. With today's best practice management solutions and IT communication, we cannot match these enabling needs. So several years ago we decided to make heavy investment in a new generation of an open virtual incubator network platform which is being developed within the Harmony project. The core product will be the Knowledge Base Tool (KBT) which is an ASP software platform dedicated for incubators that want to share knowledge and do real networking around start-ups. It is extremely difficult to manage networking. Incubation networking means managing many internal and external actors and partners on dedicated value creation processes for start-ups. The key issue of network management is the interfaces between the process and the large number of partners. The KBT allows us to manage the interfaces in a network so that we have a highly flexible management approach which, at the same time, remains under control. By managing the interfaces, each mandate handed over to a partner is an implicit contract in which the mandate is structured. We know what to expect from a partner, the partner knows what we expect, we know about the price,... So networking can be controlled in a virtual environment.
Networking interfaces are not just a question of logistics and financial control, they are to a certain degree a question of quality assurance. If every partner uses different terms or different definitions of the same terms, you will have a problem in networking. For example, if you define market volume or market potential differently, you will have problems later on in your business plan. This has to be defined. This is knowledge. In addition to network management, the second major part of the KBT is knowledge management. This means sharing the formalisation of knowledge and sharing the knowledge itself between networked partners. This will probably be the biggest challenge in the future.
The KBT is a learning process.
Networking without accelerating the learning process is a blind alley. The only reason for networking is to learn faster than you would alone. And possibly the second reason is that you are more flexible with regards to the ever-changing needs of your customers. So adaptability is very high.
When will the KBT be operational?
In developing the KBT, it is not just a question of creating the software. The key issue is the foundation of a real management philosophy and concept of knowledge based networking. This management concept has been formalised throughout the last ten years by our organisation and by partner organisations. The software has been developed and the first version will be tested in several international pilot clusters of incubators at the end of September, this year. The pilot phase will serve to validate the software and the management concept on which it is based. We will no doubt considerably improve the input of knowledge in this tool so that during the next year we can increase the number of early adopters. The real growth and market penetration is planned for 2003.
Dr. Christophe Meier, Managing Director of the CCSO, responsible for the development of the KBT within the Harmony Consortium
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