Startups find a home in media companies

August 9, 2012, 7:15 PM UTC

The Irish Times Digital Challenge

FORTUNE — The New York Times may not be called the Gray Lady because of its age, but most people identify media companies as slow, heavy-footed enterprises. In an effort to jump-start their online brands, The Irish Times and the BBC’s commercial arm, BBC Worldwide, are turning to startup power by establishing intercompany startup incubators to harness young businesses’ disruptive energies.

The goal of the challenge is akin to the plot of a Hollywood movie: a young up-and-comer works with a grumpy old mentor to overcome a problem, learning a valuable life lesson in the process. In this case, the problem is how to better monetize a company’s online presence and the life lesson is the experience startups get by working with a large company, says The Irish Times Chief Innovation Officer Johnny Ryan.

Ryan is the brains behind The Irish Times Digital Challenge, in which five early-stage companies  — 81 applied — spend eight weeks working at the Times to translate their pitch into virtual reality. While their ideas widely vary, their end goal is the same, to win €50,000 (about $61,000) from venture capital fund DFJ Esprit. The winning team must prove to the Times that its product provides the largest revenue potential and improvement to reader experience.

BBC Worldwide Labs, a new business accelerator for startups, takes a similar but distinct tack. There is no competition between the fledgling companies and no prize money, but the six-month program offers a trophy of a different sort: the startups get a first client worth billions.

“The BBC can be a great first customer,” says BBC Worldwide Labs Head Jenny Fielding. The broadcasting giant can be “a partner at the point of commercialization for these companies.”

What makes these programs distinctive is that the startups operate just down the hall from the people implementing their products. This proximity to the client is designed to overcome obstacles usually found in interactions between startups and large corporations.

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Working with big companies is difficult for fledgling businesses. Fielding, in her role as the head of Digital Ventures at the BBC, often has to personally guide startups through the BBC’s diverse ecosystem. By situating the program in the BBC’s London Media Center headquarters, she expects the smaller startups to more quickly acclimate to and efficiently work with the larger BBC.

Neither the BBC nor The Irish Times will take equity stakes in the young companies they incubate. Instead, the media companies hope to establish a relationship with these startups that is ultimately scalable into a larger, future partnership.

The focus on startup-driven innovation is both an attempt to harness the next generation of young talent and a result of disappointing internal work. Originally at the forefront of online journalism, The Irish Times’ digital efforts have sagged since launching their website in 1994, while the complexity of the BBC confounds potential startup collaborators.

Both Ryan and Fielding expect their company’s internal startup incubators to get adopted by their industry competitors. “I think the writing is on the wall,” Ryan says, “Newspapers often act as cathedrals, and we need to open ourselves up to the bazaar.”

These types of internal startup incubators are a practice already adopted by other industries. PepsiCo10, a business accelerator that matches startups with various brands in the PepsiCo family, is about to enter its third year, expanding from its original U.K contest to ones in Brazil and India. Ryan cites the program as inspiration for his digital challenge.

Director of Global Digital and Social Media at PepsiCo Josh Karpf isn’t too surprised to see media companies adopt PepsiCo’s idea.

“Technology is affecting every industry today, and media is no different, he says in an email to Fortune. “Companies that are trying to find technologies that will impact their businesses three to five years down the line are the ones who will win in the future.”