Perspectives on Corporate Innovation

Michael Docherty returned to Pittsburgh (his hometown) last year on a contract basis to help Innovation Works launch a regional Corporate Innovation Program. The program is focused on helping large companies connect and collaborate with our area’s entrepreneurs and startups. Mike was able to apply his global experiences as a corporate executive, entrepreneur, venture investor and as a matchmaker for innovation ‘seekers’ and ‘solvers’. After recently transitioning the corporate innovation role over to a full-time Innovation Works team, he spoke with us about his experiences, his views on Pittsburgh’s innovation ecosystem and what’s next for him.

Docherty

  1. You’ve just transitioned out of your role leading corporate innovations programs for Innovation Works. What were the challenges of these efforts and some of the “wins” that were achieved?

I started this interim position with Innovation Works (IW) about 14 months ago – it was great timing, as I was networking back into Pittsburgh at the same time that IW was planning a formal corporate innovation program to support the region. We wanted to help address the disconnect between high tech startup activity and legacy industries. A key focus has been helping both local and non-local corporations connect with local startups to fuel internal growth. Another key focus is helping these startups and entrepreneurs collaborate with corporations for first-customer pilots, strategic partnerships, funding and mentorship.

One challenge was ensuring that we engaged key stakeholders (corporates, universities, entrepreneurs, economic development groups, et al) in any new programs created. So, we started by listening. I personally spent the first two months conducting interviews to make sure we understood pain points and barriers to overcome. IW designed the initiative to support all startups in the region, not just the ones that might have come through its own accelerators and investment funds.

We recognized that a number of local corporations are just learning how to undertake this kind of work. One example of this is the need to get corporates comfortable with sharing their innovation needs externally. In February, we conducted our first Pittsburgh Reverse Pitch+Challenge. Six companies ‘pitched’ their innovation needs to a packed audience of 200+ local entrepreneurs. We then helped three of these companies conduct a 2-month ‘open call for ideas’, with the prospect of funded pilots for the best solutions. It’s been a success, in part because our university, accelerator and other regional partners came together to get the word out to the entrepreneurial community. In September, as part of Thrival 2019, IW and partners will be conducting the second Reverse Pitch+Challenge. By conducting these events regularly, we can get more entrepreneurs thinking about corporate problems that represent big, scalable startup opportunities.

We also set a goal to help local corporations learn from each other. Pittsburgh Regional Alliance (PRA) and IW came together to initiate a quarterly roundtable of regional corporate innovation leaders. It has become a great forum for peer learning and sharing of best practices in startup engagement. We’ve also been excited to see new cross-company collaborations emerging.

Other recent programming included organizing a Digital Connections event during Life Sciences Week and supporting startup teams in Ford’s City of Tomorrow Challenge. Moving forward, IW will be building on these initial successes and expanding the regional program.

 

  1. You said you plan to resume your previous business, NextBig, which you operated in New York prior to coming to Pittsburgh. Can you tell us about this company?

Large companies are great at optimizing a complex business at scale, but often struggle with breakthrough innovation and new business creation. Corporate structures and reward systems just don't support the risk-taking and agility needed for transformative ventures. Startup engagement has to be part of the mix. But corporations can still face challenges in delivering business value from working with startups. Early-stage startups often can’t deliver ready-to-scale solutions that align with corporate priorities. More mature startups aren’t always willing to pivot to corporate needs – and later-stage acquisitions require a premium price.

NextBig offers an approach that we believe combines the best of corporate scale and entrepreneurial agility. It’s a venture firm that co-creates startups in partnership with leading companies. We start by engaging with our corporate partners to identify problems to be solved and potential business opportunities. We then recruit the right entrepreneurs from our network and immerse them in the challenge; we spend no more than 60-90 days to define and validate the initial opportunity.

For validated opportunities, we can build a startup in one of two ways:

  • Spin-out/spin-in: Using a shared risk funding model, we build and incubate the venture. The corporate partner still owns it and can then integrate and scale it when ready.
  • Ecosystem platform: We fund and build an independent startup that targets the corporation’s needs and can be scaled with others. Our corporate partners leverage it as key customers.

To enable the business model, we’re building a network of ‘entrepreneurs on demand’, complementing our own technical development resources and venture acceleration system. The NextBig model won’t be right for every company, but I’m confident it serves a real need in the market.

  1. You have opted to stay in Pittsburgh for this new iteration of NextBig. What’s your reason for staying?

What brought me back to Pittsburgh and the connection to IW was my desire to get networked back into the city where I was born and raised (but haven’t lived in since high school). My decision to go ‘all-in’ on Pittsburgh with NextBig comes from my belief in the momentum here. My business network is more national/international than local -- when I talk about Pittsburgh and our innovation base with my corporate contacts, it’s not a difficult sell. We’re already on the radar of these companies. Certainly Pitt, CMU and our other universities are a core reason for that. But when you combine this with our broader talent base and the burgeoning innovation ecosystem (accelerators, networks, seed funding and more), it’s unstoppable.

I had launched NextBig just prior to taking the IW role and as I refocus on it, I’m committed to locating the business in Pittsburgh. It provides us with a strong value proposition and credibility for helping corporations envision and build new growth platforms and ventures – leveraging the talent and technology here (e.g. AI, robotics, autonomy, advanced materials, life sciences). It also gives us a rich environment to recruit ‘entrepreneurs on demand’ for our projects and ventures.

Our region has a unique heritage in manufacturing and industry – an attractive combination of world-class knowledge and Midwestern work ethic (makers/doers). Pittsburgh is highly diverse, both ethnically and socio-economically – so we have a unique opportunity to put more focus on inclusion and diversity in these efforts as well. I’ve learned in my own experiences and ventures that diverse teams are more innovative. NextBig is committed to engaging women, minority and other under-represented entrepreneurs (and a supporting workforce) in our programs. The need for diverse talent is a key need for many corporate innovation groups as well, so I see it as a competitive advantage for my business and for the corporations that engage with us.

  1. A key recommendation of the Brookings Institute report “Capturing the Next Economy: Pittsburgh’s Rise as a Global Innovation City” is to “Improve the pipeline of high-growth entrepreneurs”. Coming up on 2 years since the report was issued, how is the region doing on this score?

I’m sure there are others more qualified to give the region a score – I can tell you from my own experience that we have great local talent. Strengthening our pipeline of high-growth entrepreneurs doesn’t lie in our universities, startup incubators, corporations or VC’s. The answer lies in our ability to continue to bring these groups together and collectively focus on strengthening the innovation ecosystem – creating a virtuous cycle of prosperity that’s inclusive and plays to our region’s unique strengths.

I believe the Midwest in general, and Pittsburgh in particular, is poised to play a much larger role in innovation on the world stage. New and experienced entrepreneurs are looking for opportunities, but more than that, the chance to make an impact. I work with startups in Detroit, Cincinnati and Pittsburgh – I sense a positive energy from entrepreneurs in each of these cities about being part of their renaissance.

We may never compete with Silicon Valley, New York or Boston in terms of venture capital investment. But we have an opportunity to bring corporations and startups together in new ways that provide an alternative/complementary path vs. traditional venture capital. I see increased corporate engagement as one important way for Pittsburgh to play to its strengths. And that’s going to create more reasons for entrepreneurs to come and to stay to build high-growth startups right here.

Corporate-startup collaboration creates a win-win situation not only for the involved parties, but also a big win for our region. I’m excited about the potential to play a small supporting role in helping to realize the vision of Pittsburgh as a world-class innovation city.

If you are interested in learning more about NextBig or getting involved, you can reach Mike directly at mdocherty@nextbigco.com. To learn more about Innovation Works’ Corporate Innovation Programs, contact Terri Butler at tbutler@innovationworks.org.

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