Five Reasons Your Boss Was Right To Shut Down Your Innovation Lab

Innovation labs are all the rage these days. Most companies have one, are thinking about creating one or have had employees pushing management to start one. There are several innovation labs being launched monthly to great media fanfare. To name a few examples from last month (August 2016); Paypal launched a fintech innovation lab in Singapore; NCR launched an innovation lab in Georgia, USA; event company LiveBuzz launched an innovation lab; and Dell Services launched an innovation lab for SAP HANA.

There is also another trend that is starting to happen more and more; and this one is to much less media fanfare. Several companies are quietly shutting down their innovation labs. Over the last year, I have spoken to a couple of innovation managers who were angry that their company had decided to close down the innovation labs they were running. These managers clearly felt that the leadership in their companies were MBA types that “don’t get innovation.”

But when I have drilled down into the work the so-called innovation labs were actually doing day-to-day, I have discovered that it is actually the innovation managers that “don’t get innovation”. It turns out your boss was right to shut down your lab and here are five reasons why:

1. It Wasn’t Really An Innovation Lab

Most people working innovation labs tend to conflate innovation with creativity. Creativity might be an important part of innovation, but ‘coming up with cool ideas’ is not sufficient for innovation to succeed. Innovation is the combination of creative ideas with sustainably profitable business models. If you have one part and not the other you don’t have innovation. A lot of innovation labs are well designed to spark the creative juices of the people who work there. However, very few labs are designed to search and find profitable business models for the ideas being generated. Creativity Labs may be. R&D Labs may be. Innovation Labs… not really!

2. Lack Of Strategic Alignment

A lot of innovation labs that get shut down are often working on projects that are not aligned to the parent company’s strategic goals. The labs are often set up without a clear remit and over the years they shift from project to project without ever really figuring out how they are meant to make a contribution to the company. This lack of strategic alignment also creates orphans; great new products with a good business models that whither on the vine because no managers in the company are willing to take the product to scale.

3. Lack of Focus

Without strategic alignment, you then get a lack of focus. Letting ‘a thousand flowers bloom’ is not good for your garden, and it’s definitely not good for an innovation lab. There is a myth within innovation lab circles that ‘there is no such thing as a bad idea’. Yes, there is. Bad ideas are those that don’t help companies achieve their strategic goals. It may not be a bad idea overall, but it is a bad idea for your company. Innovation labs need to have a strategic focus. This helps with developing knowledge and expertise; and stops innovators jumping from unconnected idea to unconnected idea.

4. It’s Mostly Innovation Theatre

Pool tables, bean bags, pianos, ping-pong tables, post-it notes, business model canvases, copies of The Lean Startup book, walls painted back to back with IdeaPaint, posters with Steve Jobs quotes. Then there is the jargon: minimum viable products, pivots, experiments, iterations, customer development, design thinking… blah blah blah. Most innovation labs are trying to channel their inner Silicon Valley. Throw in the chef and the innovation types with jeans and t-shirts and you have found Google GOOGL +0.28%’s secret sauce to innovation. This is innovation theatre. It looks like IDEO, but it is not IDEO. There is a reason behind all the visible things we see great innovators do. There is an innovation method and practice. The visible things we see are just expressions of this practice. The job of innovation managers is not imitate the visible but to understand and implement innovation practices.

5. Show Me The Money

Most labs that get closed have made zero contribution to company revenues in the last three years. Ask the innovation managers what they have been doing, they will reel off a bunch of activity and vanity metrics; events hosted, press mentions, experiments run, number of customer conversations, number of hackathons and minimum viable products launched. Number of validated business models? Zero. Number of validated business models taken to scale? Zero. At the beginning of the innovation lab, activity metrics are important. But after three to five years, innovation labs have to demonstrate impact. And the key impact metric is revenue.

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So as much as I love and respect my innovation lab colleagues, and some are doing really great work; I think we need to start looking in the mirror a little bit. What is the point of an innovation lab, if it’s not to innovate? What is to innovate, if it is not to build great new products with profitable business models? If you find yourself fumbling around for an answer to these questions, then your boss was right to shut down your innovation lab.

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This article was first published at Forbes where I am regular contributor.