Incubator CEO:
Join Us Or We Will Destroy Your Business
By Jeff McMahon
Established
businesses have to either invest in disruptive innovation or be destroyed by
it, the CEO of a thriving Chicago tech incubator said Thursday.
The
old way of funding tech innovation—by courting donors and venture
capitalists at chicken dinners—is being supplemented at 1871 by
investment from the large, established companies most threatened by innovation,
1871 CEO Howard Tullman told about 50 people at Chicago’s Metropolitan Planning
Council Thursday evening.
“We’re saying
you need to do this,” said Tullman, a serial entrepreneur who took
the helm of 1871 just over a year ago. “You need to engage with the change
and the power and the innovation of 1871 because of what we call enlightened
self-interest. Because otherwise we’re going to eat your business and destroy
you.”
“We say it
more politely than that,” he added, “much more politely than that.”
Named for the
year of the Chicago fire, which spurred a burst of innovation that remade the
city and influenced the world, 1871 is a startup hub that houses
325 fledgling tech businesses in Chicago’s vast and historic Merchandise
Mart.
The young
businesses share office space, resources, mentors, and opportunities for what
Tullman calls “lateral learning”—learning from what the others are doing.
In many cases,
what they’re doing is mining data to solve problems, and in doing so,
disrupting established businesses.
For example,
moderator Michael Krauss asked Tullman if he’d heard that Expedia had
just purchased Orbitz, a Chicago startup, for $1.3 billion. Tullman was
nonplussed.
“We’re
actually in the process of blowing up all those businesses,” Tullman
said, describing an 1871 startup called Options
Away that uses options trading technology to change
the way airline tickets are sold and purchased. Instead of having to purchase
non-refundable airline tickets at today’s price, or opt for expensive
refundable tickets, consumers can use Options Away to lock in today’s
price on non-refundable tickets up to 14 days while they decide whether to
purchase.
“So that’s
just an example,” Tullman said. “Somebody walks into your office and says, ‘By
the way I’ve decided to change the airline industry.’”
1871′s businesses have
disrupted an array of industries, often by cross pollinating technologies
from one industry to another. And according to Tullman, no industry will be
spared. On Friday Illinois Gov. Bruce Rauner attended the opening of
1871′s third expansion, housing a health-care tech incubator called MATTER.
“Disruptive
innovation is changing every single industry,” Tullman said. “We now engage on
a B2B, on a business basis, with these major organizations not
because they’re good sports, but because they’re smart businesspeople. That’s
been a huge change.”
What’s special about 1871?
“Before 1871
you were a guy in the basement,” Tullman said. “You didn’t know there was one
other person going through it. You didn’t know there were people who had
similar solutions, people who had better tools, people who could show you how
to do it better, people who could help you raise money—all of those things
literally didn’t exist until 1871 put them all in one place and made them
available to 1,200 to 1,500 people a day.”
“You were
downstairs and your parents were like, ‘Are you ever going to get a real job?’
This way you can come to a new environment.”
What’s 1871′s secret sauce?
“Data today is
the oil of the digital age,” Tullman said. “It’s ours to capture and take
advantage of. That’s where we think we’re headed.”
Is 1871 a local tech hub?
“Today you
don’t build a Chicago business. On day one you have to think about building a
global business or somebody will come in and eat your lunch.”
1871 still
hosts an annual dinner for donors and venture capitalists, “and the chicken’s
really good,” Tullman said, but that model is not sustainable because everyone
is appealing to the same sources.
“The line is
getting longer in front of the same doors and the same pockets and the same
wallets.”
Instead,
established businesses need to support the innovations that
will otherwise usurp them.
“That’s what’s
going on today. It’s where change is happening. It’s where the future is being
invented, and it’s not optional—I mean, you know, survival is optional I
suppose—but it’s not optional. This is what companies need to do.”
