I was watching an episode of the sitcom Modern Family 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 were a toaster that butters and toasts simultaneously, the coffee-bot (never fully explained), and a self-flipping pancake whose mechanism of action was embedded popcorn. Phil lauded 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 it, you are so five minutes ago.
Unfortunately the term “innovation” has become synonymous with the term “entrepreneurship” and, while often related, they are really 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 the enterprise offers something different and unique. It could be a new laundromat or gas station or 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 Forum 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 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 there are more than 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.
There are as many business models as there are incubators and accelerators. One of the big trends I have noticed is 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 create 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…
Photo courtesy of ShutterStock
Take your pick!
- Buyouts delivers exclusive news and analysis about private equity deals, fundraising, top-quartile managers and more. Get your FREE trial or subscribe now.
- VC Journal provides exclusive news and analysis about venture capital deals, fundraising, top-quartile investors and more. Get your FREE trial or subscribe now.