Incentives shape behaviour – a statement to live by. One which gives more guidance to corporate and gubernatorial behaviour than anything else. It’s the reason why the disrupted, got disrupted, and why most governments in developed economies favour industrial protection over reinvention. Whenever we think about how anyone, or any organisation might behave, the best course of action we can take is to stop, and imagine what their incentives might be.
A favoured form of reinvention for companies facing a technological disruption is the birth of the corporate accelerator program. Or smaller efforts of finding and funding internal ‘entrepreneurial’ activity – the startup inside. The concept is valid, but so often the execution fails. Over the years I’ve been involved with a number of multinational corporations who’ve sponsored such activity to try and build out internal startup firms. They rarely work for one simple reason – misaligned incentives.
If you’re really an entrepreneur, the first things you want are ownership and independence. But all too often these accelerators have majority equity stakes, or expect their newly minted internal entrepreneurs to magically stop behaving like employees. They expect an entire new perspective on risk taking inside their culture. When the mindset and rewards are so often about protection and risk mitigation.
The simplest and best way to ensure anyone truly cares about anything is via ownership. People need to have ‘skin in the game’ and own the outcome. It’s only when we wear the cost of failure and benefit directly from any success that the true entrepreneurial spirit can ever be found.