Many corporate innovation labs are not delivering any value. According to this Capgemini report 80–90% of innovation labs fail. Or are not living up to the expectations. This is called innovation theatre.
Innovation theatre is to innovation what greenwashing is to sustainability. It’s saying your company is working on innovation, but it actually isn’t, or at least the efforts are not leading to innovation.
So why are these labs popping everywhere?
- Labs enable established companies to execute their innovation strategy efficiently and effectively.
- It gives the companies organization the image of a modern, agile, and fun employer.
- Shareholders are reassured the company is ready to counter startups who try to disrupt the market. Our corporate startup teams will out-disrupt them!
In this post I’ll go into detail what aspects I look at to determine if a lab is a facade, or will actually deliver value in both short and long term.
I’ll spoil the surprise right away.
Asking for the success stories of an innovation lab will not help you to tell the difference between imposters and truly innovative companies.
Want to know if your lab is a theatre or not? Below I’ll explain 6 signs to look for.
1. No room for failure
I don’t believe in studios where no innovation initiatives fail. Research shows that about 1% of startups reach success, and less than 50% of corporate startups exist after a year. Given those failure rates, I don’t believe in innovation labs where everything goes according to plan.
Innovation studios or labs are environments where teams should be in a position to learn at an accelerated pace. They learn by running experiments to validate or invalidate, assumptions. They learn from success but learn even more from failure. And because innovation is unpredictable and involves risk, there’s always a fair chance of failing.
The problem is that failure is perceived as a bad thing in the corporate context. A common response is to kill a project when milestones are missed or results stay out.
In a lab, the primary response to failure should be to get up again, pivot if necessary, and continue.
Fail fast and cheap is the credo. It should be seen and explained as a positive step in their journey to success.
Room for failure requires strong leadership from the business sponsors of the lab. They need to stand behind the innovation teams and keep supporting them. Teams need time and resources to incorporate their learnings into their next move.
2. No mandate (and budget)
Labs (or corporate innovation teams) which are not backed by upper management are doomed to fail.
Mandate helps to overcome the inevitable internal conflicts that will arise when innovation teams obstruct the running business.
For example, conflicts caused by breaking with internal procedures or reaching out to external prospects/leads/customers. When there’s no senior management standing behind the team to support the team, it’s likely the innovation team delays, shuts down or at least will never reach their full potential. And so, innovation theatre.
Senior executives need to believe in innovation.
- They need to underline it is an important way to stay relevant to customers.
- They need to understand it is required, for example to stay ahead of competitors.
This should lead to an innovation strategy, which translates into setting up governance and a clearly formulated mandate concerning resources, budget and authority for the innovation lab.
3. No focus on new business models and markets
Labs that solely execute on ideas to improve operational excellence and core capabilities will surely have positive effects on revenue, costs and customer satisfaction.
However, those innovation initiatives will not explore new adjacent business models and markets, leaving lots of opportunities on the table for their competitors to grab.
Also, these projects could be led by departments. You probably don’t need a lab for this.
Innovation can take place in three horizons (McKinsey):
- Horizon 1 represents those core businesses most readily identified with the company name and those that provide the greatest profits and cash flow. Here the focus is to improve performance to maximize the remaining value.
- Horizon 2 encompasses emerging opportunities, improving existing products, moving products into adjacent markets or addressing additional customer segments.
- Horizon 3 or disruptive innovation is where new products are created under conditions of extreme uncertainty, i.e. where (among others) Lean Startup shines.
The labs I work in shoot for a mix of Horizon 1 and 2 projects. This leads to quick wins (H1) and new business models and markets(H2). H3 is often too much of a stretch for the corporate, involving too much risk and taking too long to breakeven.
4. No quality teams: the best of the rest
Just as with normal startups, the success of a corporate startup lies in the hands of the team members. Those team members should be chosen wisely. It can’t be that corporate innovation teams consist of people who just happened to be available.
A team consisting of interns or young professionals with less than a year of working experience at the corporate won’t fly either.
The innovation teams I coach are composed of 2 types of people:
- Intrapreneurs (entrepreneurial employees from the corporate) who are eager to learn and know the politics
- Entrepreneurs from our community of pioneers. People who are committed to solve problems and have a track record in creating new business.
Before we start working on an innovation project, we organize matching sessions to find the best combination of intrapreneurs (from the corporate) and entrepreneurs.
Intrapreneurs should have domain expertise and know how to navigate inside the company. Entrepreneurs bring hustle, a relevant network, and creativity to the table.
5. No internal resources: completely outsource innovation
Put your resources where your mouth is. Want to innovate? You have to take responsibility and have your colleagues in the trenches.
I’ve seen corporates who hired partners to (in)validate value propositions for them. Most of them failed miserably. From experience, I would always recommend having a mix of intrapreneurs and entrepreneurs (see #3 for more about team composition):
- Having intrapreneurs (from the corporate) in the team ensures a soft landing when the corporate startup team has outgrown the innovation lab and is handed over to the corporate organization. Without intrapreneurs, you’ll likely get bit in the ass by the “not invented here syndrome”.
- By having intrapreneurs work on innovation projects, they’ll learn new skills, for example, a lean approach to tackling problems. This should lead to a more entrepreneurial culture eventually.
Completely outsourcing innovation won’t fly for several reasons:
- If a company can only provide budget but no (key) resources, then it shows how important this journey is for them. Not important at all.
- In my opinion, the success of a corporate startup relies for +50% on stakeholder management. How well do the external hires know your organization?
- You’re taking a risk by having your corporate being represented by someone who’s not corporate startup teams reach out to people outside the organization, they explore new markets, interview new customer segments etcetera. When reaching out, you want to be represented by someone from your organization.
6. No innovation framework and coaching
Last but not least. A lab needs an innovation framework and access to experienced innovation coaches. Sending teams on training, giving them a Lean Startup book, and expecting they’ll come up with the next Uber is wrong.
Corporate startup teams have to deal with a lot of uncertainty. It’s their goal to make sense of the enormous amount of question marks, assumptions and data points they collect. A framework provides the teams with tools, metrics, and a clear roadmap of milestones which should lead to a growing business.
Remember: a framework is not a magic bullet. You’ll need innovation experience to know what tools to use when.
That’s where the coach comes into play. Innovation coaches help teams to use the right tools and show how to use them. In addition, they support teams in making tough decisions and ensure they reach milestones on time.
A corporate innovation labs is a valuable way to foster innovation and an innovative culture. It gives companies control over innovation, making it more efficient and effective. It’s a place where innovation teams build on the fundamentals laid by earlier initiatives. Lessons are shared. Newly learned skills amplify an entrepreneurial spirit inside organisations. It is not easy to do it right from the start, and I hope this article helps.
Do you know more innovation theatre signs? Let me know in the comments below!
Hi, my name is Bas Wenneker. Great to see you got this far. Please, hit the 👏 button if you enjoyed the post and make sure to follow me if you like to learn more about Corporate Innovation, Innovation Labs/Studios and The Lean Startup. If you have any questions or want to get in touch, contact me on LinkedIn!