Over the last decade, consumer brands from right across the business spectrum invested in accelerator schemes and startup incubators as a path to future success. But few of them lasted more than a couple of years. As part of The Drum’s Retail Deep Dive, we explore what went wrong – and what marketers can learn from the businesses that stuck by their long-term plans.
Y Combinator, the Silicon Valley tech incubator founded in 2005, has a proud legacy. It can boast a list of companies that went through its vaunted accelerator program and went on to expand across the globe, such as Stripe, Dropbox and DoorDash.
But its record of backing winners including Reddit and Airbnb led a host of companies, including high-street retailers, to try their hand at hatching their own disruptors. After all, back in 2012, Airbnb hadn’t yet begun warping urban property markets and Facebook hadn’t yet been accused of “killing people” by a serving president of the United States. Back then, startups were still cool.
That was the year that Coca-Cola launched Founders, its own startup incubator. 12 months later, homewares chain John Lewis opened an incubator named JLab, which it hoped would “shape the future of retail“. Then-innovation manager John Vary explained the venture, saying: “There are so many companies doing new things, creating new technologies, new software, new applications. We just wanted to be a part of that.”
At the same time, Argos commenced a program of startup partnerships, working with would-be ’unicorns’ on a case-by-case basis. Unilever launched the Unilever Foundry. And Westfield, the company behind the gargantuan London shopping center and scores of other malls worldwide, opened Westfield Labs in San Francisco, with the aim of supporting retail disruptors as they brought their ideas to market. More improbably, rail operator Virgin Trains also launched a startup accelerator in 2017 named Platform X.
Storied ad agency Ogilvy & Mather (as it was then known) was also in on the act, launching its own incubator scheme, Ogilvy Labs, in 2008.
Models differed between companies, but in most cases the idea was simple: offer tomorrow’s market leaders your experience, connections, credibility and a chunk of cash. In return, legacy brands got equity, a healthy ROI and the chance to steer the long-term future of their market.
The trouble is, few of those accelerator programs or innovation labs made it as far as the current decade.
While Unilever Foundry is still going strong, Argos’s startup program didn’t survive the company’s acquisition by Sainsbury’s. Westfield Labs was spun out and later wound up following Westfield’s acquisition by Unabail-Rodamco. The fizz went out of Coca-Cola’s venture in 2016, after bringing firms such as Wonolo, an on-demand staffing company, and Weex, a cellphone network targeted at millennials, into the world. John Lewis confirmed in a statement to The Drum that its JLab scheme had been quietly shuttered in 2019. And Platform X’s journey was cut short along with the rest of Virgin’s railway business when it failed to retain the franchise for east coast rail travel in England.
So much for long-term thinking. What went wrong?
Rise and fall
Nicole Yershon, now the founder of NY Collective, set up and led Ogilvy Labs between 2008 and 2016. The unit, she tells The Drum, was formed – following a years-long modernization push within its production faculty – with the aim of positioning the agency at the center of the tech industry, partnering with relevant startups and, ideally, hooking them up with Ogilvy’s clients.
“Nobody really knew the huge scope of digital, no one knew about social media or gaming or mobile or VR, AI, all of these things. So we needed somewhere to have that understanding and then build those partnerships with the people starting up in those spaces.“
The program operated six-month semesters connecting agency staff with external partners and clients, themed around topics, big data or 3D printing. “In the early days, it massively worked,“ she recalls.
Its projects, launched during the formation of the social internet as we know it, saw the agency stage climate-change stunts on Second Life – anticipating the later vogues for corporate environmentalism and the so-called metaverse – and livestream content for carmaker Ford across 19 countries.
Ogilvy Labs enjoyed backing from agency leadership and justified its investment with a number of criteria. “I had a six measures of success: revenue, reputation, retention of existing staff, recruitment of new diverse talent, relationships and responsibility.“
But when Annette King (now chief executive officer of Publicis Groupe) took over as chief executive, the Labs was shut down. Yershon and her four staff were all made redundant. At the time, King told The Drum: “Ogilvy Labs’s job is now done as a separate entity, as each agency continues to innovate within their own specialist area and collaboratively across the Ogilvy Group.“
Looking back, Yershon’s assessment is a little blunter. “She canned it because it wasn’t bringing in revenue.“ With the agency then struggling against Brexit headwinds, cost-cutting arguments won over long-term business cases. “When things get tough, the first things you start off with are the things that can’t pay for themselves.“
John Lewis’s explanation of JLab’s demise rings similar bells. Apparently, the incubator didn’t fit into its latest five-year plan, and responsibility for discovering the next retail superheroes was brought back in-house.
A spokesperson says: “We ran JLab, our retail tech innovation program, from 2014 to 2019 and were delighted with the level of interest from startups and the successes we had. It offered startups the chance to learn from our experts and business leaders and to receive investment, and in return we learnt from them.
“Our business is going through a period of transformation and we have a new five-year strategy. As part of these changes we have reviewed our approach to innovation and have a new team dedicated to Commercial Development and Innovation.“
Yershon suggests modern retail companies don’t have the appetite for long-term investment in incubators. “They’re constantly looking at shareholder value every quarter. They’re not looking at long-term thinking, they’re looking at very short-term thinking.“
What of the accelerator programs that have made it, then? Unilever Foundry, commissioned with a brief to ‘unleash disruptive innovation’, is still going strong. According to Baz Saidieh, global head of the Foundry, it’s helped bring the mindset of a market disruptor to one of the largest advertisers in the world.
“The biggest successes are that the Foundry has helped drive a startup mentality across Unilever and has led teams to trial new innovations across products, channel and capabilities,” Saidieh says.
Another example comes from Barclays, which launched a fintech-focused accelerator program in 2014. In association with a variety of partners across the world, the bank usually runs a 13-week course for selected startups each year, in each of its major trading territories.
Those selected for the program are given investment from both Barclays and its partners, and many also receive later investment from the bank’s other divisions. In exchange for equity, those in the scheme receive training, mentoring and space to work in. In its seven years of operation, it has worked with over 200 companies.
Mariquit Corcoran, group chief innovation officer at Barclays, says: “We launched this program with the thought that, not only are we going to be able to spot trends and work with innovative companies, but that we can actually create new opportunities. If we find technologies that we think are great, that we could potentially offer our clients or customers or colleagues, then we can leverage the accelerator to get some of those interesting technologies in early and actually use that to deliver better outcomes for our own customers and clients.“
While the program has evolved over time, it’s stuck fast to its original mission. “I think the opportunities that working with these emerging companies can give us and finding those new technologies, whether it’s retail, our card business [Barclaycard], our markets business or our investment banking business, that’s all part of our real goal.“
At Unilever, Saidieh says the Foundry has also adapted successfully over time, while remaining focused on its original goals: “Our teams are fully integrated, which is central to our success. We have also evolved over the years, and this agility has enabled us to deliver credible solutions.”
And while Barclays keeps an eye on the pennies, Corcoran says it prioritizes questions such as: “What impact have we made in terms of leveraging new technologies? What impact have we made to help a company grow and develop?“
It’s seen several successes along the way. Flux, a London fintech firm that enabled customers to create more detailed digital receipts, was incorporated into the tech stack behind Barclays’s consumer banking app. The banking brand maintains a minority stake in the startup. And Chainanalysis, a blockchain startup that joined its first New York accelerator program, made unicorn status last year.
Corcoran has solid advice for brand marketers hoping to champion long-term thinking and the principles behind accelerator programs at their business.
Firstly, brands need a partner to bring expertise. “Most companies don’t do this as the regular course of business,“ she notes. Furthermore, that partnership must be equal. “You have to be involved, you can’t just delegate your accelerator to a third party.“
Being an active partner is just as important. “You need to have people from your company who are focused on the results you want, to actually engage from start to finish.
“There’s a lot of time to be invested. We’re looking for companies that can provide innovative opportunities for Barclays. There have to be people from Barclays involved; we have to be there, reviewing the companies and then working with them day-to-day and trying to make those connections for them with our internal business colleagues, as well as our external contacts. That’s a key part of getting the success and the returns you want.“
Staying specific to a sector or area of expertise is another guideline. Corcoran advises: “Come up with a problem statement ahead of time and then target your programming ... to help address those opportunities.“
Finally, she suggests aligning programs with existing business units, so a brand can actually take advantage of its work with a startup when the time to leave the incubator arrives.
“Unless you have the actual business units that can get the benefits from working with these companies, you’re not really going to be able to take them much further than getting through a program.“
With Corcoran’s arguments in mind, it’s worth keeping an eye on Coca-Cola. Despite canning its own incubator five years ago, in April it joined Unilever and Colgate in backing the AB InBev 100, an accelerator program set up to solve problems relating to water stewardship, sustainable agriculture and renewable energy.
Clearly, with a range of buzzword priorities and an ROI on the menu, Coca-Cola is still thirsty for the startup life.