Incubate To Innovate: A “Disruptive” Strategy For The CFO

Colin Sampson

Feeling the pressure to deliver fresh innovation into your company? It might be time to shift your focus from developing homegrown solutions to cultivating ideas outside your organization.

Companies have traditionally invested in internal R&D, research labs, and software development teams to support innovation. But many executives are headed in a different direction. In my recent travels through Japan, Australia, and South Asia, I met with numerous CFOs who are investing in external companies—many of them startups – through incubators and accelerators.

In these arrangements, the established enterprise provides financial support to one or more startups, which may operate independently, although the investor may lead marketing, business development, or technical support. However, some startups have the expertise to operate themselves or may be run for the investor, by third parties, or even professional venture capital firms.

The startup uses the funds to bring innovative ideas – and potentially disruptive technology – to maturity. When the time is right, the investor can sell off the startup or its inventions, take the new company public, or inject the new technology into its own business.

Invest in your future

Two of the most popular ways to invest in innovation are through accelerators and incubators. Accelerators provide seed money in exchange for a small share of equity, usually to support the build-out of a business for a limited period of time. Incubators often provide funds to germinate disruptive ideas (often early in their development) with the longer-term goal of developing a business model and a product.

It’s a great time to get involved in incubating or accelerating new technology. According to the International Business Innovation Association, the number of incubators in the United States grew from 12 in 1980 to 1,250 in late 2012. And the organization estimates there are about 7,000 incubators globally, many of which are non-profit organizations focused on economic development.

Yet some private sector firms are beginning to see the benefit of incubating innovation. SAP, for example, created the SAP HANA Real Time Fund, which is designed to stimulate investment in real-time applications and Big Data innovations. We also offer the SAP Startup Focus program, which acts as an accelerator program for companies working on predictive analytics technologies. Funds are managed by SAP Ventures, an organization that has invested in more than 100 growth stage IT companies around the world.

Grow the next best thing

SAP could, of course, simply buy these technology firms and fold them into our operations, as we’ve done many times before. But we realize that enveloping these up-and-coming companies within our own corporate culture is not always the best choice. Sometimes the rules and requirements of large enterprises can inadvertently stifle creativity and innovation. Instead, we choose to incubate and accelerate innovation outside of our four walls.

You can do it, too. By providing the funding and expertise to support innovation – but allowing it to mature and develop organically – CFOs can accelerate the development of disruptive next-generation technology. Depending on the results, you may even choose to bring new technology innovation into your enterprise at precisely the moment when it can create maximum impact.

Let’s face it. No matter what industry you’re in, your company is increasingly becoming technology-driven. You need innovation to supercharge products and services. Why not incubate and invest in a way that will allow innovation to pay real dividends for your business?

To learn more about how finance executives can empower themselves with the right tools and play a vital role in business innovation and value chain, review the finance content hub, which offers additional research and valuable insights.

Colin Sampson

About Colin Sampson

Colin Sampson is the senior vice president and SAP Ambassador for the Asia-Pacific and Japan region, and a former regional CFO for SAP. He is responsible for building long-term relationships with strategic and key customers across the region.