From best practice adoption to value creation; where should business incubators focus?
By: Thomas Mensink
Tags: Coaching, Literature, Mentoring, Business Support Services, Business Incubation

Recent posts and blogs on the topic of value creation in Business Incubators (BI’s) have started the debate on the performance assessments that are currently in place. Are these assessments fair? Are the outcomes and the best practices derived from these outcomes usable?

The EBN, NBIA and similar organisations have been reporting incubator performance for many years now. Extensive and correct defined performance criteria are used, all constructed through with SMART properties in mind (see: this.pdf page 34). This gives a broad and clear image of the BI performance. The following indicators were used in the EC-BIC Observatory 2013 for example:

Based on these indicators, best practices are identified. But, is this approach the one we should use? Does it lead to the improvement that is sought after? Does the adoption of best practices based on SMART-constructed criteria lead to an increase in the value creation in the start-up firms? As incubators are focussed on laying the tracks for the train of success, who is powering the success-train? Merely facilitating the path for success does not automatically constitute value creation. After sitting down with the incubation manager of one of the major innovative regions in the Netherlands, it became clear that the challenges faced by the incubation managers have begun to change.

The issue is no longer the absence of information, but the selection and balancing of all the information that studies on BI’s have gathered. A mixture between academic studies, EBN/NBIA/etc reports and own experience leads to the initial programme set-up. Programme improvements are based on the EBN/NBIA reports and through networks with colleagues.

So it is time to get to the core of the BI business. Creating value in the tenant firms. Strengthening them in their fight for survival and growth. The focus needs to be on their needs and the drivers for their success. Why start offering more legal advice or revamp the marketing assistance when what your tenants truly need is help on their product development for example?

What lessons can we learn from literature?

Literature reveals some interesting insights on this subject. Mian (1996) was one of the first to assess the tenants’ view on the contributions of incubator services, from a value creation perspective. Mian interviewed six incubation managers and received 47 responses on the questionnaires by tenant firms. In the questionnaire the tenants had been asked about the listed services value added contribution (no value, minor value, moderate value or major value). In the graph below, the outcomes of the research can be seen.

We can see three business support services stand out:

Business connections outside the incubator Business connections between tenants Business planning

Besides these services, the value added contributions steadily drop. Some even drop to 40% (rent breaks), showing a a large part of the tenants doesn’t see value creation as a consequence of these services.

A slightly different methodology was used by Abduh et al (2007). Their results are not comparable when it comes to their direct score, but the rank is eligible for a direct comparison. Some differences between their rank and the findings of Mian seem to exist. Business planning does not stand out and assistance to gain government grants and loans is rated as the most important. So a shift has happened over time.

Limitations of these studies

The results of the two studies mentioned above, have more than 10 years between them. Some shifting in the results can be seen. But the most important part is the fact that these studies (and other similar studies) are not sector-specific. Now that sector- or even branchspecific incubators are coming to life across the globe, the need for specified data is high. But then again, how transposable are the outcomes of the sector-specific studies?

Focussing on the value creating aspects based on the needs of companies elsewhere can still result in business support services that are barely used. A study defining the supporting services that contribute most to value creation among IT & Internet startups will give more applicable data than a study carried out among a mixture of IT, life science, clean tech, nano tech, etc. companies.

Even though there will be differences in the needs of every start-up, with more in depth and sector specific studies on how to create value within these start-ups, a more suitable incubation programme can be formed. In the end, the incubator should focus on the value creation within its tenant firms. The next blog will be about how this focus can be generated.

Articles:

Abduh, M., et al. (2007). “Investigating and classifying clients’ satisfaction with business incubator services.” Managing Service Quality 17 (1): 74–91.

(1): 74–91. Mian, S. A. (1996). “Assessing value-added contributions of university technology business incubators to tenant firms.” Research Policy 25(3): 325–335.

This blog is part of a series reporting the progress of my bachelor thesis research: ‘Which support services deserve the focus of the incubator? A value creation perspective.’