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Why Corporate Innovation Labs struggle with product development… and what we can do about it.

Corporate Innovation Labs (CILs) promise unique opportunities: work on top industry challenges in a special environment freed from corporate constraints. Have the startup attitude, and the corporate resources.

Many are drawn to this enticing balance: the development of new, innovative products and businesses, but with the comfort and security of a 9-to-5.

It seems like an ideal environment for innovation. Find entrepreneurs and self-starters, and give them the information and resources they’d never have if they were starting out on their own!

In 2015, CILs sprung up in retail, finance, and consumer products

Less than two years later, we’re seeing headlines like It’s time to ditch your innovation lab, citing the shuttered labs of Disney, Microsoft, and NYT, among others. The VentureBeat author in question notes, joyfully, that “labs can torpedo morale… and sap resources.”

Why is running an internal corporate innovation lab so hard? Why have labs across industries seen low morale and misapplied resources, but few truly new, innovative products?

From chats with CIL PMs across industries, I offer the PM perspective on the challenges of innovation labs, and the infrastructure they need to actually create new products.

1: CILs need constraints and clear, focused expectations for delivery.

CILs often falter with the breadth of their opportunity. They’re told to look in and outside of the current lines of business, follow the current strategy and don’t, look for something we could do tomorrow or something we could do five years from now. Without more constraints, this environment is simply too open to produce focused results. Good product developers know that “how might we create a new successful business?” just isn’t as helpful as “how might we create a new acquisition strategy for this target customer group in the next 2–3 years?”

Two acute areas where CILs often struggle are business alignment and time horizon to business value. Without clear business goals to focus on, innovation projects can be perceived as flops that are out of touch with company needs. Without clear expectations about when value needs to be delivered, innovation projects will often lean into ‘total moonshot’ territory that is more appropriate for a market research powerpoint deck than a product development team. (Or on the other end of the spectrum, they’ll simply pick up existing work that could have been completed by a non-innovation team.)

If you’re seeing innovation projects that:

  • seem truly infeasible with near-term technology or capabilities
  • seem like they came straight from someone’s backlog
  • have minimal alignment to current business goals
  • drag on with no clear signs of near-term delivery

Your CIL might need:

  • A more limited scope — 1–2 business goals that everyone knows they’re striving for
  • A clear, written expectation that projects should be delivering incremental value (shipping MVPs, showing quantitative promise, etc) in the next 6 mos-1 year

2: CILs need the infrastructure (people and processes) to conduct rapid testing.

CILs need more than the prototypical post-its and colorful walls to launch great products. Many companies jump into CIL territory without changing their product development toolkit at all, leaving innovation teams hampered by current organizational goo.

Successful innovation relies on frequent and open access to customer feedback, which many organizations are not set up to provide. Without access to users (via recruiting or volunteer beta testing groups) or appropriate test channels (ability to conduct tests via email, etc), innovation teams can get mired in operational and legal challenges just to get the tools they need to test ideas. These roadblocks take time away from product development.

If you’re seeing innovation projects:

  • Stuck at the ‘idea’ phase, waiting for resources
  • Relying only on qualitative feedback until an MVP or pilot

Your CIL might need:

  • Better rapid prototyping and testing resources (and we’re not talking about pipecleaners). These resources could include: UX researchers on staff, formal relationships with user testing recruiters, licenses to software like usertesting.com, approved user survey platforms, etc.
  • Internal infrastructure to support new concept testing: streamlined tools to spin up landing pages, emails, in-app pop-ups, etc that can be used on a rapid testing timeline (in my opinion, < 2 weeks)

3: CILs need to manage employee and partner expectations in an environment of continuous fails.

In order to innovate, you need to fail fast and fail often… but that takes its toll on teams. We expect most innovation projects to fail — statistically, we know this will happen. But that doesn’t make it any easier to withdraw funding from a team that has gotten halfway to a new product four times in the last year, without any customer or business value to show for it. CIL values are often in conflict with personal growth goals for employees, who know they need to fail… but still feel disappointed when they have no tangible results to show for their work.

It also takes its toll on the organization’s reputation (and sometimes funding and support). While there may be an initial thrill of excitement around a CIL, that interest quickly wanes when no immediate-term results are produced (which, again, we know is likely to happen). Though we understand intellectually that innovation in market can take years to produce, it has only taken 2–3 years for many of the companies mentioned above to decide that their approach isn’t working.

If you’re seeing:

  • Employee burnout, lack of motivation
  • Lack of trust or interest in CIL projects from external partners

Your CIL might need:

  • For employees: limited-time rotations into an innovation lab environment, to prevent burnout
  • Open and honest conversations about how a labs environment (statistically, few results produced) can support personal growth in a world where we are increasingly looking for “results-oriented” people
  • For partners: room to provide more short-term value. Not every project needs to be a total moonshot. Are there near(er) term projects that your partners need help with — and that your CIL could supercharge? These projects may also offer welcome relief for always-moonshotting employees.

I believe that CILs can succeed at product development, but that we’re in the early stages of understanding and addressing their unique organizational challenges. Strong leadership, tight scope, appropriate tools, and inspiration in the face of many fails all have to come together — simultaneously — to create the kind of environment where ideas can arise, be tested, and (eventually) triumph.


If you’d like to talk about your innovation group (or one you’re thinking about creating), feel free to reach out!