Internal start-ups are an interesting new possibility where the well known start-up concept is transferred into corporate setting. Why would you do it?
First of all, many bigger corporations have the problem that how to keep innovation culture virile enough and on people's agenda. Many have corporate innovation tools where ideas are collected and then further processed. Based on my experience this process needs constant re-vitalization to keep active enough. It somehow needs additional elements to succeed.
Another reason is that corporations are built to efficiently doing the same it has done before, yet only faster or with better quality etc. Innovations often are (or perhaps even should be) disruptive, which means that by nature the organization will oppose this new idea. By taking a start-up type approach will keep the initiative separate from corporate politics, red-tape and internal competition.
Growth is the third reason. If corporations are able to pull it off in a "real start-up" fashion - this new idea will bring new customers, markets and sales. Why would anyone oppose growth? Growth also brings in valuation questions, and which company would not like to be evaluated as a growth company with matching stock prices.
Internal start-up should have the freedom from the rest of the organization but still be integrated into the corporation. Freedom is needed for quick execution and market trials and re-focusing based on the feedback. But corporations have a lot of assets and competencies which will come handy during the process. For example legal, pre-production etc services are just a call away.
Why then not just invest on a new start-up? Internal start-up is most likely best instrument if a corporation wants to try out new things, but where the new things are clearly fitting to the corporate vision and strategy. Those cases are not external, but create possibly the core of the future business. So it is better to keep the lid on just long enough.
Do you have any thoughts on the topic, or have you perhaps tried internal start-ups in your company?