According to a recent Innovation Management post, Are Corporate Innovation Centers Too Big To Fail?, the number of such centers or labs across the globe jumped from 301 to 456 over the course of the 15 months ending October 2016. This 60%+ increase reflects legacy enterprise efforts to deal with inescapable disruption.
Boards and the c-suite see labs adding value by:
- Driving understanding and alignment of their businesses to changing customer and market needs,
- Attracting people with expertise who are entirely different from the talent running day-to-day operations. These are the kinds of people who can spot trends far in advance, and connect the execution dots to commercial opportunity, and
- Accelerating innovation of all types – business model, product, brand, experience, and process among others – attacking the revenue anemia and margin compression that afflicts pre-digital companies.
One segment of innovation labs is just theater. There is another segment spawning high potential revenue streams that would not have come about otherwise. But too many are established with good intentions and high expectations, yet run into a common set of failure points. These are all avoidable with strategy and execution commitments that are within executives’ control:
- Innovation is treated like a project or activity. It is deemed essential, yet isn’t integral to the strategic plan projections. Worse, innovation is booked as an expense line for a year or two, with a vague future dependent upon how everything else is going. I empathize with the CEO’s decision to assume no upside on revenue as a way of managing the high risk of failure associated in particular with disruptive innovation. However, this decision creates unintended consequences, starting with undermining accountability for results. The lab may be destined to deliver a self-fulfilling prophecy – either not getting results or not being able to measure the results that pilots generate.
- Innovation is placed in a protective but isolating bubble. It is smart to protect new ideas from the natural instincts of a mature organization. The problem becomes that being placed inside a bubble – e.g., physical location or reporting relationship — makes the lab feel even more foreign to everyone else. The result is a reduced chance of ever being integrated to accelerate scale, leverage the organization’s reusable infrastructure, access the client base, or tap into existing brand equity.
- Top of house leadership lacks skills and/or courage. At the end of the day, if the CEO or business unit head do not have skin in the game, or do not actively hold all directs accountable for the lab’s success, innovation efforts cannot take off. Perhaps the CEO has checked the box for the board by creating an innovation lab, and then allows a budget cycle or two to pass assuming this is enough time to produce results. Or this is such a new game that through nobody’s fault, there is a lack of expertise on how to drive a successful lab effort. New roles are created and hiring mistakes are made.
- The lab is expected to find the silver bullet answer to a poorly defined problem. ‘It’s a technology problem.’ Or, ‘we need partners.’ Or, ‘we need to move everyone to Silicon Valley.’ And so on. Survey results reviewed in Digital Dynasties: The Rise of Innovation Empires Worldwide reveal that “partnering with ecosystem” is the core operating objective. Towards what end? What marketplace problems is the lab trying to solve? There is often not an answer grounded in an understanding of the unmet needs of large enough segments towards which the lab can point its energy.
- Enabling capabilities and governance get insufficient attention. Gaps in infrastructure, data access, process, policies, metrics, goals and communications require as much or perhaps more attention than coming up with the innovation concepts themselves. Executing innovation to achieve commercial impact demands that those involved get dirt under their nails at every level of the organization. Ideas get lots of focus. Reality is the hard work is in the unglamorous details of navigating bureaucracy, reforming status quo procedure to allow for speed and agility, and motivating the organization as a whole to support change.
- Talent criteria to succeed are demanding, making people hard to find. Succeeding as a team member of an innovation lab takes a complex set of personal, leadership and functional abilities and skill. Identifying the right profile is tough, and then finding the people who match the spec is even tougher. There are conflicts between the politics of consensus that may be part of continued funding, and the lab’s inherent challenge to the status quo.
- The culture built on past greatness can stop an innovation lab in its tracks. The right construct for an innovation lab must achieve a tough balancing act: fitting alongside the corporate culture, challenging it, and leveraging it, all at the same time.
The most persistent failure point I have seen is to recognize and connect the dots between the desire to innovate and the mechanics of execution and follow through. That is why one of the biggest wins can be to break innovation execution down into small manageable steps that produce signals along the way, including progress markers such as hitting important milestones, getting a pilot to market and seeing impact, enabling capabilities to deliver, or mobilizing resources against a defined set of market needs.