The Best $300,000 Teehan+Lax Ever Spent

Strategic side projects drive innovation at companies. These don’t necessarily have to be at giant companies like Google, or small scrappy startups like Buffer. It could work for medium-sized service-based businesses. Although Teehan+Lax has been gone for nearly a year at the time of writing, their Labs division was a strategic side project that we’d be foolish to overlook.

Teehan+Lax president and co-founder Jon Lax explains the value of Teehan+Lax Labs to Creative Bloq:

“It has one main value “exploring the creative uses of technology” and a second value of “sharing knowledge and reducing complexity”. Both of these values are internally [targeted], meaning we do these things for ourselves not directly for clients.”

Labs had a core team, and was augmented by staff. Lax says, “By creating a core set of resources that weren’t tied to client work, we knew Lab work would happen year round. I gave the company a goal, that’s tied to their bonus, that they must spend a minimum of five days working in the Lab over a year.”

37Signals and Basecamp were inspirations for Teehan+Lax Labs. Lax observes, “Basecamp got the resources (capital and human) it needed because it fueled the incumbent services business of 37Signals. It was able to take root because it wasn’t disruptive but highly complimentary.” Labs would also fuel Teehan+Lax’s incumbent services, by making their team and services better.

Why did Teehan+Lax Labs exist?

1. To Help Them Produce Better Work

The only reason why Teehan+Lax received a ton of PR, client work, and other perks from Labs, is because Labs was focused on its employees.

We’d originally started off this piece thinking that Labs’ primary audience was prospective clients. After all, clients were the ones who provided ROI for each of Labs’ products, right?

And it might be with any other services company. But Lax says to Businessology (35:00) , “Profit is a byproduct of doing great work. Not a goal into itself.”

He says again to Creative Bloq, “The job of our lab is to make us smarter as a company, not earn direct revenue. From the beginning I went to the partners and said, ‘This is what Labs is going to cost this year. This is a cost of doing business. We will recoup it in other ways.’”

Although Labs did end up generating significant ROI in the form of clients and press coverage, it’s primary goal was to improve the work that Teehan+Lax did. This meant not only ingraining hacker culture into the company, but also contributing to the team’s intelligence.

Teehan+Lax Labs actually started because they wanted to retain one of their team members. Jon Lax says in an interview with Creative Bloq, “In November of 2010 Peter Nitsch came into my office with a proposal, actually it was more of a threat. He had been approached by another agency to establish a future technology group. While it was an interesting opportunity he said he would prefer if he could do something like this at Teehan+Lax.”

From the get go, Labs boosted employee morale through engagement. Lax explains, “[The Labs projects] encourage everyone in the company to walk in and play with the experiments, ask questions and understand how it works. I believe this is a competitive advantage for us.”

2. Attract Client Work

Teehan+Lax was a UI/UX services company. Their business model was dramatically different from Google (which made Primer) and Buffer (which made Pablo), both of which are product companies. Teehan+Lax made money working with clients (each of whom could spend at least $750,000 throughout the year). Keeping clients happy and growing the client base would be keys to growing the company.

According to Teehan+Lax Labs’ Twitter, their mission was, “Exploring the creative uses of technology in the digital channel and framing technical possibilities for the agency, clients, and wider community.”

Teehan+Lax Labs’ secondary audience would be prospective clients. They provide direct ROI on Teehan+Lax’s investment in Labs (Teehan+Lax spent approximately $300,000 per year on Labs).

First and foremost, Labs helps by getting prospective clients’ attention. Rather than selling clients in pitches and formal meetings, the products in Labs proves to prospective clients that Teehan+Lax is still well ahead of the innovation curve. At the very least, Labs’ products serve as good conversation starters. One of Labs’ products actually helped Teehan+Lax get Google as a client (32:10).

There’s also something to be said about existing clients. Teehan+Lax’s reputation as a company blossomed with each of these strategic side projects. That gave existing clients more pride in working with a services company like Teehan+Lax, and also could encouraged clients to share links either internally, or with their own networks. (“Check out this cool thing made by the shop we hired, I can’t wait to see what they make for us!”)

Labs became a vital differentiator in an age where services companies have grown harder to distinguish between. Imagine if companies thought to themselves, “We don’t want a new design. We want a Teehan+Lax design.”

What opportunities did Labs create for Teehan+Lax?

As Lax emphasizes (29:53), Labs’s purpose was to make Teehan+Lax better internally. It was not meant to come up with new products to sell to clients or customers.

For example, a few weeks after Node.js launched, Labs built an experiment with it. It showed the team the potential of this new technology and what it might be able to provide. Lax says, “Node quickly became a valuable tool for client work.”

Labs definitely provided insights into new technology and potential implementations or experiments. Lax says to Creative Bloq, “We defined that as a culture of curiosity and making things. The Lab has run hack days here where everyone built Arduino projects. They have a physical workspace where you will see staff tearing down Kindles or soldering boards for experiments.”

Also not to be overlooked is its influence on culture. With each additional hire, it becomes more important to deliberately build the company’s culture and develop it as the company grows.

Of course, not every Labs project succeeded. Some didn’t even see the light of day. Others that got published would need maintenance resources, which Teehan+Lax couldn’t provide. This happened with Imgspark, which was launched, debated about, and then killed off.

Strategic side projects minimize this type of zombie risk (when a project is not alive, but not dead either), meaning that they don’t require much maintenance after launching. Even if they do, the company should plan for whether to support it or not, and communicate that commitment (or lack thereof) as part of its promise to potential users. Perhaps if Imgspark were set up to be community-driven and supported, it could still be alive today.

How did they connect with their audiences and acquire users for their strategic side project?

Although not all of Labs’ side projects succeeded, many of them provided an opportunity to secure press coverage. Given how Teehan+Lax was a medium-sized company, they got a pretty remarkable amount of coverage. Their video for Hyperlapse for Google Street View got over 2.7 million views. It was covered by publications like The New York Times, TechCrunch, and The Verge.

This kind of coverage opened the door for many unexpected opportunities. Naturally, some of it was client work. However, many of them also didn’t fit Teehan+Lax’s business model. Lax says, “One of our experiments (TVI) was picked up by Engadget, PSFK and Creative Applications. This is great PR for the Lab and Teehan+Lax but led to a series of requests to buy or license the technology. TVI was a two-week experiment and not a product, it wasn’t something that was market ready. The Lab was designed to not work on client projects so accepting one of these requests would mean the Lab would turn into a client group or a product group, both would take them off their mandate.”

In this podcast (21:30), Lax talks about his interest in getting 30% of revenue out of non fee-based work. If they’d moved forward with this, Labs’ side projects would have helped immensely. Based on data, inquiries, and press coverage, they’d have enough validation to understand which side projects merited creating a dedicated product group and which might not.

Labs very much operated on the principle, “Do things, tell people.”

The power of empowering your team

Although Teehan+Lax is no longer around, there is still much to learn from its journey. Its Labs initiative is just one of many lessons. Their unique way of thinking and strategic approach created a competitive advantage, generated PR and awareness, and retained key staff.

Labs shows how much research, thought, and deliberate thinking goes into a well-thought out strategic side project. You need to think just as much — and build on Teehan+Lax’s knowledge — before you can afford to build an effective Labs division today.

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Jason Li is a self-taught designer from Toronto, Canada. He currently works as a UI/UX Designer for Thanx in San Francisco. You can see more of his work here.

Herbert Lui works with businesses to tell compelling stories at his marketing agency, Wonder Shuttle. He was previously a staff writer for Lifehacker, and his work has appeared in TIME, The Huffington Post, and Fast Company. He writes a newsletter that explores media, information, and marketing.