Are Innovation Labs Actually Effective?

Innovation labs are 'in' - but do they actually work?

5Mar

Innovation labs are all the rage right now. These take the form of specialized offices dedicated exclusively to innovation, idea-generation and free-thinking, with the most innovation-centric culture possible - complete with coffee machines, foosball tables, blackboards and, of course, beanbags (because how could you possibly innovate without being on a beanbag?). Their task? Think outside the box. Throw ideas around. Be as innovative as possible.

Many of the world's largest companies have developed some form of innovation lab in the hopes that this will help them crack the next 'big thing' and stay on the cutting edge of technology and strategy. They have been so popular in the last few years that between March and October 2016, 10 innovation labs were opening per month. Yet, according to Technative, the vast majority are predicted to fail. While a lot companies are rushing to set them up in the pursuit of pure innovation, many of the ones who bucked the trend, such as Ogilvy, have had to shut down to save on costs. Clearly they haven't generated the revenue the companies anticipated they would.

Needless to say, many people are therefore unconvinced by they effectiveness of these labs. Scott Kirsner, Editor and Co-Founder of Innovation Leader, questioned, in an interview with Forbes, "Are we simply putting on ‘tech company’ clothes and trying to look more like a startup? With no real strategy, no plan for what to do inside the lab on a daily basis, and no strong ties to the business units, we see a lot of these labs lasting for two or three years. Then the shine wears off, and everyone realizes that nothing came out of it."

Innovation labs are enormously successful for some companies. Google, for example, has opened them in offices all over the world. And you'd be hard pressed to argue that the multinational colossus is not innovative. These companies keen to set them up have clearly heard that the innovation lab model works, so are trying it out themselves. But the reality is it may not be the one-size-fits all solution it has sometimes been touted as.

Ahead of our R & D Innovation Summit, we spoke with Tom Culver, Senior Innovation Advisor at RTI International about how organisations can innovate effectively. He stated that "companies sometimes assume that if they keep searching they'll find some magical innovation process that somebody else used that's going to be perfect for them. Of course, no such thing exists. You have to create those."

Parul Kaul-Green, Head of Innovation at AXA, spoke with us in an interview about the benefits of innovation labs, especially for large companies and in financial services. But she warns that "one of the biggest traps is treating innovation as a programme rather than a continuous activity of experimentation, validation, iteration, and industrialisation. The problem with a programme-based approach is that it is seen as a fad by other 'traditional' functions and subject to cuts post efficiency reviews. This also creates negative emotions in the employee base, with resentment against the 'cool kids' in innovation."

More often than not, these innovation labs are outposts, isolated from the rest of the company. There tends to be a lack of integration with the core company as a result, which comes with a whole range of issues. Innovation labs are supposed to have a radically different culture to the company as a whole, but, as Kaul-Green highlights, this can breed resentment among the rest of the staff who are used to doing things a certain way, as well as negative feeling towards to assumed 'coolness' of the position. This distance also means they may lack the same mentality as the company as a whole, so the innovation they generate is potentially at odds with the core organization.

Innovation labs in themselves are not a bad idea, otherwise they would never have come into being and stuck in the first place. But it is of critical importance that they are aligned with the core company so they can be at their most effective. It may be worth considering other, less insular options to increase innovation that may be more holistic, such as embarking on an open innovation programme instead.

Hear Kaul-Green's presentation and follow the debate at our Chief Innovation Officer summit in London, April 25 & 26.

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