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TO THE POINT

In celebration of NBIA’s 25th anniversary, we are running a yearlong series that examines how the association has developed since its humble beginnings in 1985. Read on for the second part of the series: a look back at some of the biggest changes in the business incubation industry over the last 25 years.

What a difference 25 years makes: How incubation has changed since 1985

by Corinne Colbert

April/May 2010

The business incubation industry that launched NBIA in 1985 bears little resemblance to the one we know today. There were far fewer incubators, offering far fewer services, and very little was known about what entrepreneurs needed and how to help them.

As NBIA celebrates its 25th anniversary, we’re taking a look back at the association’s earliest days and how things have changed over these two-and-a-half decades.

Growth and expansion

Although the first business incubator was founded in 1959, the industry as we know it today was born in the late 1970s and early 1980s. The U.S. was experiencing significant changes in its economy as manufacturing moved from the Northeast to the South and then overseas. Competition among cities and states for new factories was fierce. “There were years there that it seemed like every community was competing for the same Ford plant,” says Dinah Adkins, a founding NBIA member and the association’s president emerita.

By 1980, there were at least a dozen incubators in the U.S., primarily in the Northeast, Mid-Atlantic and Midwest. Why did so many communities hit on the same solution to job losses?

Adkins says it’s not so surprising: “There just aren’t that many options” in economic development. You can retain and expand the businesses you have; you can attract new businesses; or you can grow new businesses. For the tail end of the baby boom, growing your own had definite appeal. “This was the first generation with lots of highly educated people who looked at the world in a somewhat different way,” Adkins says.

And incubation was appealing (and remains so) because of its flexibility. “You can use incubation in almost any community,” Adkins says. Agricultural areas can incubate value-added and specialty food products. Inner cities can incubate construction and service businesses. College and university towns can incubate technology start-ups built on faculty research.

Of course, to be successful, an incubator has to have clients. Here, too, the baby boom played a part. Millions of would-be entrepreneurs found role models in innovators like Steve Jobs and Bill Gates. The rapidly evolving technologies epitomized by Apple and Microsoft created niche markets in software, communications, medical devices and other areas that were too small for corporations to bother with. That opened opportunities for entrepreneurs to create start-ups for those markets — and for incubators to keep their programs full.

Evolution of services and models

The founders of those early incubation programs might not recognize today’s incubators. In the first State of the Business Incubation Industry report, published in 1989, services most frequently reported were access to a conference room, a photocopier, a receptionist, word processing and security.

“Shared services were a big deal then,” Adkins says. “A fax machine was a big deal.”

Not anymore. Many of those early services are now taken for granted. Networking activities, access to capital, links to universities and labs, and marketing assistance were among the services that topped the list in the 2006 SOI.

NBIA has long emphasized that incubation is about services, not space. Adkins famously forbade NBIA staff to refer to incubator companies as “tenants” because that word gives more importance to the real estate portion of the incubator contract. (In NBIA parlance, those companies are “clients.”)

Incubator models have changed, too. In the 1991 State of the Incubation Industry report, 10 percent of programs were dedicated to manufacturing; by 2006, that ratio was down to 3 percent. Programs especially for women and minorities represented 14 percent of programs in 1991; the percentage is now so low that the question has been eliminated from SOI surveys.

Some things don’t change, though: In every SOI that asked for incubator objectives, “job creation” has topped the list by a wide margin.

Professionalization

Professionalism has been a key focus of NBIA’s efforts over the past 25 years. Part of that focus has been on crafting an image: Incubation is a process, not a building. Another aspect is the emphasis on sustainability, because “every time an incubator fails, it’s a black eye for the whole industry,” Adkins says.

The greatest effort, however, has gone into the collection, analysis and dissemination of information about industry best practices. NBIA’s Board of Directors codified certain ideas in 1996 with the Principles and Best Practices of Successful Business Incubation: the primacy of services, the need for financial sustainability, the value of community connections and the importance of appropriately trained (and compensated) staff. (Read the full list at www.nbia.org/resource_library/best_practices/.)

One of the earliest vehicles for sharing best practices was the NBIA Review. When it appeared in 1986, it was a true newsletter focused primarily on association business. Over time, the Review has become almost an industry journal, with articles dedicated to reporting on and analysis of issues and trends (and, yes, articles about association business).

Professional development also has been one of NBIA’s most significant contributions to the industry. Building on early incubation conferences organized by the U.S. Small Business Administration starting in 1984, NBIA founding director Carlos Morales held the first NBIA conference in 1987. The event has been held annually since 1988. (That’s why we never call it “NBIA’s annual conference,” because it’s not literally correct. And it’s also why this year’s conference is the 24th International Conference on Business Incubation, even though it’s NBIA’s 25th anniversary.)

To give practitioners more focused training options, NBIA launched the Fall Training Institute in 1991. We also have offered regional training with funding from the U.S. Department of Commerce Economic Development Administration. More recent developments in professional training are the Incubator Management Certificate (earned by 120 NBIA members since 2007); NBIA Webinars (offered periodically online); and the Summit for Advanced Incubation Professionals (a gathering for experienced members to share innovations and discuss the industry’s future).

NBIA’s training events are justly famous, but they have to share the spotlight with books. Even before NBIA Publications was an official imprint, NBIA was publishing books on business incubation. Some of those were academic research on the subject, but increasingly the association devoted its efforts to reference books that compiled and discussed the actual practice of business incubation.

Among the association’s best sellers is Best Practices in Action, a compendium of best practices both in theory and in practice. First published in 2001, the book has been revised and expanded in a new edition that will be published this spring. (See “Best Practices in Action: Excerpts from the all-new updated, revised and expanded edition” for more details.)

The new BPIA is “light years ahead of the one in 2001,” says Adkins, one of the book’s co-authors. “There are so many more examples of people doing sophisticated things.” In part, that’s because today’s incubator managers have built on decades of incubation. It’s also a result of the increasing sophistication of entrepreneurs. “They’re coming out of college wanting to be entrepreneurs, having taken entrepreneurship courses,” Adkins says.

In the end, though, the industry’s professionalism is a reflection of its practitioners. NBIA can create events and publications, but someone has to take those classes and read those books.

“Our membership is really very special,” Adkins says. “They have a calling in working with entrepreneurs. There’s an element of idealism in it — of people striving to do better and help their communities.”

Just like those baby boomers who started this movement 30 years ago.

Keywords: best practices, client services – general, history of business incubation, NBIA programs

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