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Sunday, April 25, 2010

Incubating Innovation in the Middle East

What Business Incubators in the Middle East can do to Contribute More to Innovation

by Kamal Hassan

Incubating Innovation in the Middle EastHave you noticed that business incubators are popping up in the Middle East like falafel shops? The Entrepreneur Business Village in Dubai. The Bahrain Business Incubator Center (BBIC). The BankMuscat Business Incubator. iPark in Jordan. Ibtikar incubator in Abu Dhabi. And nearly every country in MENA has a technology incubator.

It's not a bad thing at all, as long as we keep the supply in line with the demand. What concerns me, however, is the assumption that an influx of incubators will somehow increase the region's innovation capabilities. It won't - unless we structure them correctly and incubate real innovation instead of just another falafel shop.

Innovation is an Art and a Science

Like art, innovation requires creativity, which incubators such as The Shelter in Dubai try to encourage. However, the process of creating a work of art is different than creating an innovation. An artist can sit down in front of a canvas and make something beautiful, or at least unique. The result doesn't have to be good in the technical sense, or make the artist famous. It just has to fulfill the vision the artist had in mind.

Innovators, on the other hand, require the end result to meet certain criteria. It must solve a problem, create new value, work better than other solutions, and be affordable and, ideally, sustainable to produce. Remember, we're talking about innovation, not invention. Inventions can afford to rely on creativity with a bit of problem-solving thrown in. Innovation cannot.

None of this is meant to disparage artists or inventors, only to remind us that innovation must go beyond creativity to be successful. Similarly, new businesses must go beyond being part of an incubator to earn the title 'innovative'. If the business doesn't offer something different and of value, it's not innovative, it's just another start-up.

A recent Zawya article on the obstacles facing small businesses in the Gulf underscores this point:

"The average Saudi small and medium-sized enterprise (SME) only survives for seven years. This is due not only to the return of foreign managers to their home countries, but also to the lack of differentiated and specialized products and services, which renders companies vulnerable to market changes."

Of course, there are other reasons that start-ups and entrepreneurs struggle to survive in this region, which only makes it more imperative that the struggle is worth it. If our incubators are merely supporting the business effort, without taking steps to ensure the effort adds real and sustainable value to the region, they are only doing half the job.

Technology Parks are not Incubators.

Technology Parks Feed Incubators with Ideas.

With all the so-called incubators popping up here, we are starting to resemble California's Silicon Valley 20 years ago. This area is now is home to such global giants as Google and Apple, and dozens of other technology companies that started out with innovative visions and managed to make them real.

For many people, the success of Silicon Valley is the ultimate innovation success story. While there are great lessons to be learned from Silicon Valley innovators, I think the lessons often get lost and the conclusion people come to is that "technology equals innovation."

Technological advances are often innovative, but it's not the only industry that can and does benefit from innovation. So I am concerned when I see that most of the incubators in the Middle East (or at least the ones that are supposed to increase innovation) are really technology parks, not incubators. What's the difference?

First, incubators are dedicated to small, early stage companies; technology parks typically house companies of various sizes and maturity, and even government and research facilities.

Second, incubators are designed to provide a temporary space for new businesses; technology parks boast more long-term projects and participants. The technology park business model is to host (lease offices) for big R&D and technology companies as long as possible. Incubators, on the other hand, focus on providing support for start-ups for a certain period of time before pushing them toward the door, which supports the incubator business model of keeping new businesses, and revenue, coming in.

Much like a premature baby grows and gets stronger in a newborn incubator, the point of a business incubator is to make a new business strong enough it can leave the incubator and survive in the 'real' world. For the start-ups in our regional incubators, what is the survival plan? I am not sure I see exit strategies for many of them.

So, what's the problem with incubators in the Middle East? They may work well for new businesses, but there is no guarantee the new businesses will offer innovative products, services or business models. On the flip side, technology parks work well for innovation, but typically on a large scale, which doesn't engage many entrepreneurs. They also limit innovation to technological advances, which is only one area we need to innovate.

In my next post, I'll explain how business incubators in the Middle East could better support entrepreneurs and innovation in the region.

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Kamal HassanKamal Hassan is President and CEO of Innovation 360 Institute, and is responsible for leading the company's global operations and customer acquisition.

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Blogger Anh Tuan said...

Thank you for a great article! Business incubators can foster innovations, but the current practice doesn’t exactly pinpoint them to sustain it. But, at the same time, the influx of business incubators does generate the necessary momentum and initiative for start-ups to emerge. If there is a will, there’s always a means. And the will and desire for a community of collective innovators is already apparent. With that, new business models that attempt to ensure those start-ups to sustain their growth will surely emerge and some of them will become the rightful models. Maybe I am a bit too optimistic and missed the point, but I believe it is the drive that will bolster creativity which paves the way for new, sustainable business models to emerge.

4:52 PM  

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