Should You Give Up on Home-Grown Innovation and Just Invest Instead?

Every few years the same argument comes back around: corporate innovation labs or incubators don't work, so stop building and start investing or buying. Shift the budget from your own incubator to corporate venture capital and acquisitions, and let the startup market do the hard part for you. Pieces like VentureBeat's "It's time to ditch your innovation lab" make the case cleanly, and the frustration behind it is real.

The diagnosis is mostly right. The prescription is wrong. Most internal innovation programs do underperform, but giving up on home-grown innovation trades a fixable problem for one that is much harder to fix, and quietly assumes that writing checks to startups is a substitute for knowing what you're doing. It isn't.

The false choice: internal incubation or corporate venture capital

The decision is usually framed as a fork: keep developing new businesses internally, or shift to corporate venture capital (CVC) and let external startups carry the exploration risk and share the cost. But it's a false choice, and that's the heart of this piece. The hard part of new-business growth isn't which vehicle you pick. It's the structural problem underneath all of them. Shift to CVC without fixing that problem and you don't solve it; you defer it. With acquisitions you defer it and make it a far more expensive failure. Fix it, and you can do both internal incubation and CVC well.

Both routes can create value, and they fail in very different ways, on different timelines, and with different visibility. But notice which failure mode you can actually control. Internal incubation fails for reasons of your own strategy, metrics, and governance — all of which you can fix. CVC's failure mode is largely outside your control, because you're depending on someone else's company and an exit you don't drive.

Corporate venture capital's quiet problem: how do you really intend to capture value?

CVC looks like the safer bet because external startups are more flexible, aren't bound by the same internal constraints, and share the early risk. The trouble is that its value-capture path is often ambiguous or undefined. Ask a corporate venture team how an investment is supposed to pay off for the parent company and you'll typically hear one of three answers, each with its own challenges:

• Indirect uplift on the core business. The startup's product or technology is meant to make your existing offerings better or stickier. Real, but diffuse, hard to measure, and easy to overstate when the program needs to justify itself — and it often doesn't produce a sustainable new vector of growth.
• Financial return when the startup exits. You're a minority investor hoping for an outcome you don't control, competing with venture firms who do this for a living. A reasonable goal for a fund; a strange one for a strategic program, since it's a one-time benefit rather than a sustainable new vector of growth.
• A path to future acquisition. The option to buy later. But "later" usually means after the startup has proven itself, which is precisely when the premium is highest, so the option to acquire often just locks in a more expensive purchase. And when you try to integrate it, you face most of the same antibody challenges that killed your incubated ventures in the first place.

None of these is wrong on its face. The problem is that many CVC programs run for years without a clear, agreed answer to which one they're actually pursuing, only to face the same complex challenges achieving sustainable growth that the incubated ventures did. The vehicle changed. The underlying problem didn't.

Three companies, one capability gap

The autonomous-vehicle race provides a clear and recent illustration, because the same underlying bet played out three ways.

Waymo grew up inside Alphabet as an internal project, given genuine autonomy and patient, sustained capital. It is today the clear leader in the category, running hundreds of thousands of paid driverless rides a week across several U.S. cities. That is what internal incubation looks like when it's done right.

Cruise was acquired by GM in 2016 and funded heavily — more than $10 billion over time — as a largely independent unit. Even with that autonomy, it hit a safety crisis in 2023, lost its driverless permits after a serious incident, and in late 2024 GM stopped funding the robotaxi business and folded what remained back into the company. Autonomy alone wasn't the answer; the discipline to run high-uncertainty work safely, and a corporate parent's commitment that could survive a setback, were both missing.

Argo AI was the CVC version: Ford and Volkswagen invested billions in an external startup with no clear, shared answer to how value would ultimately be captured. When the returns looked too far off, both backers walked, and the company was shut down in 2022 — Ford alone took a $2.7 billion write-down.

Same capability gap, three outcomes. The difference between them was not build versus buy versus invest. It was whether the company had the discipline, governance, and staying power to make any of those vehicles work.

Why internal incubation usually fails — and it isn't because it can't work

If home-grown innovation can produce a Waymo, why does it so often produce nothing? Drawing on decades of practitioner experience in corporate innovation and new business development, including years inside Intel's New Business Incubator, we see three structural problems drive most of the failures, and all three are fixable.

It isn't a precise part of the corporate growth strategy. Too many innovation programs sit alongside the growth strategy instead of inside it: a portfolio of interesting projects with no explicit mandate for what they should contribute, by when, and how that ladders up to where the company needs to grow. Without that, the program is the first thing cut when budgets tighten.

The metrics are wrong. Internal ventures get judged against core-business yardsticks, or against near-term revenue and profit they were never positioned to deliver. But the unique value of early-stage internal work is cheap, early learning, option value, and risk reduction that informs your biggest strategic decisions before you commit real money. A startup investment or acquisition can de-risk a specific bet too, but only once it's proven and priced accordingly, and without building your own knowledge of the market or your ability to judge the next opportunity. Measure a young internal venture by core metrics and you'll kill the ones doing exactly that job. (We've argued that the absence of meaningful innovation metrics is a choice, not a necessity, in The Elephant in the Room.)

RPP misalignment goes unmanaged. Every company runs on Resources, Processes, and Priorities (RPP) tuned for its core business. A new venture almost always needs different ones, and when those mismatches aren't surfaced and intentionally governed, they build into the cumulative friction that quietly strangles the project: the pattern behind the walking-dead innovation project. The fix is not to go invest elsewhere; it's applying the right level of autonomy and the right governance to non-core work. And here's the part the "just switch to CVC" advice misses: an acquired venture has to clear the very same RPP gauntlet to be integrated — you've simply paid a premium to face the problem later.

Build the capability, not just the lab

Here's the reframe. The point of internal incubation shouldn't only be to produce new businesses organically. Done right, it is the capability that makes every other path smarter. It generates option value and market knowledge cheaply. It surfaces the RPP risks that sink expensive M&A integrations before you've spent the money. And it gives you the evidence to decide, on any given opportunity, whether to build, partner, invest, or acquire, and what a fair price actually is. (We've made the case for using these vehicles together rather than treating them as either/or in Combining Organic Incubation, Equity Investment, and Acquisition for Diversified Growth.)

That's the argument the "ditch your innovation lab" case misses. A company that can't develop new businesses internally has no good way to judge the external bets it's being told to make instead. Solve the structural challenges that make internal incubation hard, and you can succeed with both incubation and CVC. Shift to CVC without addressing them, and you'll likely just buy a slower, more expensive path to the same outcomes.

From alchemy to science

Much of what we now call science was considered alchemy before anyone understood the chemistry and physics underneath it. Corporate innovation is on the same path. Plenty of practitioners are still mixing ingredients and hoping, but the discipline is maturing into something closer to a science: explicit strategy, honest metrics, and governance matched to the nature of the work.

The companies that win the next decade of growth won't be the ones that gave up on home-grown innovation. They'll be the ones that finally learned to do it well, and used that capability to make every other move, including their venture investments and acquisitions, a great deal smarter.

BRI Associates helps companies grow by drawing on decades of practitioner experience in corporate innovation and new business development — practitioners, not pundits or academics — through direct consulting, training workshops, and Growth Forge® Software, built for the unique requirements of corporate innovation and growth organizations.