Finding Lab-Business Fit
How to invent and reinvent a successful innovation lab in your business.
In 2015 a report found that 38% of 200 of the largest companies in the world had innovation labs. But, according to that same 2015 report, an estimated 80–90% of those labs fail.
We believe innovation labs fail because they don’t find lab-business fit.
An innovation lab, with its foreign methods and alien ethos, is always going to be at odds with its parent company, is always going to make the core business uncomfortable. So the parent business reacts, forcing the lab into their corporate process shaped hole and smothering its ability to fulfil its role: innovation.
Lab-business fit is achieved when the innovation lab and the parent business have found the right balance between freedom and process, between technology and anthropology, between ticking the box and getting results.
Whether you’re setting up a new lab, your current lab isn’t producing results, or you’re a lab lead struggling to be recognised by your parent company, our Innovation Lab Blueprint will serve as a tool to help you achieve lab-business fit.
DEFINING AN INNOVATION LAB
These days, the term ‘Innovation Lab’ is generally used to refer to an innovation team who operate in a dedicated space, usually away from the core business office and usually with a remit to experiment. We’re not talking about incubators or accelerators — working with startups is a whole different beast — and we’re not talking about R&D labs. We’re talking about business functions whose purpose is to create new value in the short to medium term for the company.
There are two ways innovation labs can deliver value:
- Creating new products, services and experiences which unlock new value from new or existing customers
- Generating lessons which can be brought back into the core business to enable the core team to perform point one
Yet, companies set up innovation labs for all sorts of reasons including PR coverage, culture change and because their competitors just launched one. That’s definitely one factor contributing to their high failure rate.
If you’re hoping for PR value from the launch of your innovation lab, that’s not really going to fly. Customers don’t care how you create your services, they just care that they solve their problems. Investors and analysts are too cynical to care about your lab, they just want to see the effect on your quarterly results. And sure, you can attract new talent by setting up a lab, but only to the lab itself. So that just serves the second point of value creation. And if you want to change the culture of your core business, hiring a dozen twenty-something designers with unfamiliar job titles and alien ways of working isn’t going to achieve the results you want.
Dan Taylor, General Manager of Innovation at TAL, an Australian life insurer, sums it up:
“The labs that work and that have a long life are those that are closely tied to critical business challenges.”
There is only one compelling reason to invest in an innovation lab: your business has a tough problem you need to solve and you don’t have the confidence that it can be solved within your core business. If you think your problem can be solved within the core business, you probably don’t need a lab and setting one up would piss off your core team. If the scale of the problem is small, you’re wasting resources on a lab when really you should be investing in fixing your core processes.
Before you get stuck into the details of setting up the lab, revisit the problem you’re trying to solve and ask yourself if a lab really is the right way to solve it.
I am a Senior Consultant at Market Gravity, the proposition design consultancy. For nearly four years I’ve been designing new propositions for clients in financial services, automotive and lottery all over the world and have helped several clients to set up and evolve their own innovation functions.