Innovation Labs: Boon or Bust?

Innovation labs, for a variety of businesses across industries, yield both outstanding successes and expensive failures. To evaluate the charge on their impact and long term viability, it’s important to analyze the factors dictating the (often polarizing) results.

What are Innovation Labs?

Innovation labs are teams, and often dedicated workspaces, established within a corporation to focus on technological expertise and nurture a creative startup mindset (aka, R&D). Ideally, these labs promote a more free, untethered climate for forward-thinking ideas, experimentation, and research.

These groups operate with the agility of startups, while making use of large business budget, access, and resources. Anthony Gregorio, a senior manager at Home Depot’s Innovation Center, points out “it’s all about the size, scale, and resources that an enterprise like our own can provide.”

Being Comfortable is Dangerous

Once large companies have defined, reliable revenue streams, they can be reluctant to go back to the test-and-learn phase. Whether it’s risk aversion or fatigue, failing to build up and out from established revenue streams can be detrimental to your long game. Technological, financial, political, and many other external elements force new adaptations. The market will always be fluid. So regardless of any natural desire to be play it safe or rest on historical laurels, businesses must dive into the unknown deeper than ever to promote sustainability.

Innovation labs are well-positioned to break the logjam of habit and risk-aversion. They develop new perspectives, processes, and products, keeping a company agile and future-focused. Additionally, these labs prioritize long-term thinking, because they are not structured for short term production quotas or seasonal revenue cycles.

Associated Risks of Redirection are Real

Not all innovation lab efforts deliver actionable solutions or efficiencies. After four years, Nordstrom is tabling its innovation lab and re-distributing resources across various departments. Recognizing the value of the braintrust, Nordstrom looks to bring tech innovation throughout the company. While the lab structure failed, the concept and recognition of value remains.

Similarly, Ogilvy & Mather Group UK dissolved Ogilvy Labs and reorganized. Often, companies that shutter their labs don’t offer many details behind their decision, but, chances are, the ROI was falling short, or the goals weren’t properly set in the first place. If not planned or managed correctly, innovation labs can fulfill the stereotype, which, in the words of ZDNet, is digging “hipster money pits.”

Creative Time & Space

Any creative knows that great ideas and solutions don’t flow when you twist the knob on the faucet. Even concepts rooted in hard data don’t happen without exploration–and the right environment. Creative research, concepting, and experimentation requires room to breathe — which means that the goals for these labs can’t, at least initially, be tied to short-term company KPIs (namely, revenue). As a result, many innovation labs function on a more flexible basis, requiring upfront investment, perspective, and patience.

Encouraging free-thinking through physical environments doesn’t mean throwing some bean bag chairs in a white-washed room with plenty of natural light (while everyone else is in cubes, under fluorescent lighting). Former CIO-turned Digital Advisor Ian Cohen, interviewed by ZDNet, notes that innovation labs can create bad blood by making those “left out” feel envious and neglected. This problem is especially bad if the innovation team’s space and expectations are perceived as special treatment and perks.

The solution to this imbalance is to use the lab as a foundation to make incremental workplace changes, company-wide. Applying aspects of innovation culture on a more universal level serves as a source of excitement and motivation for all employees.

Innovation Initiatives Need Application, & Proximity

A sense of purpose and utility cannot possibly be driven home enough for innovation efforts of ANY kind. Engaging in tech for tech’s sake is a dangerous, expensive–and often fruitless–endeavor. Brainstorming has a short shelf-life. Designing and/or building a viable, actionable solution is what resonates internally, and within the greater market. Even the coolest applications of digital transformation must deliver measurable business results that align with your company’s mission.

Mark Ridley, director of technology at online recruiting company Reed.co.uk, comments, “Labs for the sake of innovation are completely wrong. Firms should not create a separate innovation strategy. There should just be a business strategy, which includes your aims and objectives for innovation.” He explains that their labs capitalized on this strategy in creating a successful spin-off called Reed Commercial, which helps aspiring entrepreneurs find franchise opportunities.

Coca Cola, on the other side of the spectrum, is discontinuing its Founders Program, which funded global startups with no connection to the company’s products. Coca Cola viewed this program as a revenue generator, and simply played the part of a venture capitalist. The lack of alignment with more specific company goals proved detrimental.

Distinguish Labs Without Isolation

Most innovation labs function best in a separate workspace, but they can’t be a Galapagos cell of employees. This team has to have easy access to stakeholders and other internal parties who execute on their ideas. Along with geographic separation, productivity depends on not becoming a visitor destination.

As Hackernoon warns, innovation labs must guard against becoming “museums.” Visitors take time and energy to host, and they distract creative workers who need to stay focused. Interaction is encouraged, but an intriguing environment should not transform a lab into an event space. The design should center around the mission of those working there, not for the passive viewer experience.

It Isn’t Always About Creating Something New

New product and service offerings aren’t the only application for these resources. Operations and customer experience delivery must also evolve over time. Dedicating innovation labs to internal efficiencies, or unearthing new opportunities within an existing customer base is often a quicker, more easily-translated, win.

A few examples,

• Home Depot’s lab, called Orange Works, developed a smart pallet stacker that works like Tetris, maximizing the space in their warehouse.
• The small lab team at Home Depot explored using computer vision to improve inventory tracking.
• Sephora’s lab focuses entirely on customer experience, and was the source of the store’s Color IQ feature, which helps shoppers find the best colors for their skin.

Thinkers, Makers, Communicators, and Ambassadors

Innovation experts range in skill sets: user experience, product design, development, relevant technological know-how — in anything from artificial intelligence, mixed reality, connected solutions, 5G capability, and more. In addition to “the makers”, this team needs top-notch communicators and people deeply knowledgeable about the organizational structure and brand.

As a team, they need to answer:

What is reasonable and advisable technologically?

What makes sense for the company to actively pursue?

What is the marketplace and user demand?

Simon Caspersen, co-founder of IKEA’s Space10 lab says, “You are put together with some other incredible people that don’t necessarily share your background or expertise…otherwise people often work in silos.” The AR app “IKEA place” is a successful product coming out of their inclusive innovation group.

Partnership Approaches

Partnerships with innovation labs isn’t a “seen it once, seen it all” situation. It’s as variable as working with any type of business–despite being within a business. And these partnerships, from support and staff augmentation to full end-to-end digital efforts, also vary in structure, access, and capabilities. Positioning the partnership accordingly is critical to the workflow and delivery.

Home Depot’s lab, for example, is strategically located on the campus of the Georgia Institute of Technology. This allows students to participate in its creative, usability, and research efforts. This proximity to young talent also allows the company to have first pick for interns and new hires.

Symantec takes a different approach though a network of global partnerships with research facilities and government agencies. Innovation partners are available from the private sector as well: teams who can come into a corporation and open up fresh perspectives on products and processes.

The Verdict: Do Something.

Getting ahead is keeping up. Despite specific case studies and instances showing innovation lab success or failure, the over-arching transformative philosophy fueling these efforts is a good one to adopt. Whether your company wants to build an in-house tech trust, combine forces with an external partner, or completely outsource your innovation efforts to an agency/consultancy, the important take-away is that you are making moves to compliment and flow alongside emerging technology, markets, and user demands.

Originally published on Mutual Mobile, “Innovation Labs: Boon or Bust?”