Introduction
This article uses a case study from Intel Corporation’s internal new business incubator to illustrate the challenges many large organizations face when trying to scale transformative new business opportunities. The Hawthorne project described within is based on several real projects that the authors had direct involvement with over many years working in the incubator but modified into a single composite project to simplify the narrative and to respect the confidentiality of the actual projects. The opinions expressed in this article are those of the authors alone and do not necessarily reflect the opinions or strategies of Intel Corporation or its worldwide subsidiaries.
The Case Study – Intel’s Hawthorne Project
The new business development group within Intel Corporation® had just spent eight months incubating a new transformational business, codenamed the Hawthorne Project. The team had just completed the incubation part of the innovation process and embraced many of the leading theories for implementing a transformational innovation.
- The internal incubator was an implementation of an ambidextrous organization with unique and independent governance for both the incubator and the new business ventures within.
- The incubator and the project team embraced stage-gated investment and the iterative and agile Lean Startup tactics.
- The Hawthorne team had interviewed potential customers, tested product-market fit, built several minimum viable products to test the market further and get customer feedback, and significantly reduced the uncertainty associated with the product and business model through a series of experiments.
- The use case domain had significant long-term potential but was still emerging. Only a few very small startups were competing to address similar market needs.
The team was excited with the results and was now seeking a significant new funding increase to scale the new business. As the funding meeting closed, the conference room was full of energy; the team was excited about how big an impact the new business could have on the company. The Hawthorne Project felt like the transformational innovation the company had been looking for, and the team was proud of its work. The project had passed all the milestone-based funding hurdles during the incubation period, and the team was on its way to scaling the effort significantly. But the business was doomed to fail. Just eight months later, the Hawthorne team would return to the same room, asking for more time and money, with only a laundry list of excuses for failing to scale the innovation.
Transformative vs. Incremental Innovation
Transformational innovations (see Brown and Anthony, 2011 HBR article for a more expanded definition) continue to be problematic for large corporations. Since 2000, fifty-two percent of the Fortune 500 companies have either gone bankrupt, been acquired, ceased to exist, or dropped out of the Fortune 500. Burgelman and Grove (2007) concluded that the principal reason for the demise of large companies is that they are unable to balance sustaining and transformational innovation efforts. An example of a transformational innovation would be the iPod/iTunes, which offered a new category for Apple and allowed them to enter the music and digital services space. Prior to the introduction of the iPod, Apple’s competencies were based on Apple PC’s integrated hardware and accompanying software. The iPod/iTunes was a transformational innovation for Apple since many elements of its business model required significant changes. In contrast, sustaining or incremental innovations like P&G adding flavors such as cinnamon or wintergreen to their toothpaste rely on their current business model.
