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Model Management: Business schools hatching incubator nest eggs
The FTDynamo team this week turns its attention to the need for leading business schools to embrace the Next Big Thing. Having belatedly caught on to important trends in the recent past, is their focus on incubating internet start-ups going to leave them with egg on their faces?

By FTDynamo FTDynamo

Published: Tuesday 09 January 2001

Business schools just can't seem to get it right. When they ignore the latest business trends and retreat into their ivory towers they are roundly criticised for being out of touch with the changing business world. When they try to be proactive and embrace the next big thing, they become fashion victims.

The problem is that business schools have an unhappy knack of picking up trendy ideas just as they cease to be trendy. With a few exceptions, they were noticeably tardy converts to Japanese quality management techniques that swept Western companies in the early 1980s. When they did embrace them at the end of the 1980s it was just in time to see the Japanese bubble economy punctured. Undaunted, in the mid-1990s they arrived late at another party hosted by the consulting industry - belatedly adopted the business process reengineering mantra. On cue, the reengineering bandwagon promptly derailed.

Their latest big idea is internet incubators. Incubators aim to speed up time to market for start-up businesses and reduce the number of failures. Although government sponsored incubators have been around since the 1950s, the new breed of commercial incubators emerged from the technological ferment of Silicon Valley, where they were viewed as a way to accelerate the launch of internet start-ups.

At the beginning of the year, internet incubators were at the height of new economy fashion. Commentators were touting the early successes of companies such as Idealab!, CMGi and Softbank as a new model for wealth creation. Even consulting firms such as McKinsey and Bain launched their own versions. Then came the downturn in dot-com valuations that has left many trying to reinvent themselves. Of late, Bill Gross, CEO of Idealab!, and David Wetherell, chairman of CMGi, have both said they would rather their companies were not called incubators at all.

But for once, business schools had been quick off the mark. Spotting an opportunity to bolster their entrepreneurial credentials, they vaulted onto the incubator bandwagon with unaccustomed alacrity. One of the first to embrace the idea was the Haas School at the University of California. The school now has two incubators. Thorne Sparkman III, founder of one of the two, Incubator Inc, says: "Incubation is the modern equivalent of the garage."

UK business schools, including Cranfield School of Management and London Business School, followed suit. Both have set up facilities to support MBA students and alumni setting up their own businesses. Cranfield established its CranfieldCreates.com incubator in January 2000 as a separate business in conjunction with the American IT company Science Applications International Corporation (SAIC). Along with office space, the Cranfield incubator offers a range of services including IT infrastructure and access to a network of business angels and venture capitalists. In return for the services it provides CranfieldCreates.com takes a small equity stake in each of the businesses it incubates.

LBS too has high hopes for its incubator unit, the Gavron Business Centre. The school says the aim is to "make LBS the wellspring and preferred support network for dynamic, fast-growing new businesses". LBS graduates can also apply to Sussex Place Investment Management, an IMRO-authorised management company, for early-stage funding. Henley Management College is the latest to go down the incubation route. It is pursuing a different model aimed at incubating intrapreneurs within large organisations.

All now look vulnerable. Quite apart from concerns over whether business schools should get involved with venture capital, the incubation role carries other risks. Launching new businesses exposes the theorists to market forces. Their credibility is on the line. The risk for business schools is that in their attempts to nurture fledgling internet firms they end up with egg on their faces. Two businesses in the Cranfield incubator have already fallen by the wayside.

All may not be lost, however. What might be a disaster for a commercial incubator can be a learning point for a business-school. Professor Leo Murray, head of Cranfield, says: "We have already learned a lot from the incubator. We are now looking to integrate it with other parts of the MBA programme."

Spin is in the air. Unless the outlook improves dramatically, the trick for canny business-schools in the coming months will be to reposition their incubators as living laboratories of the new economy. If their ecommerce experiments can help faculty understand new business models, then incubators may yet hatch eggs of purest gold.