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What Is An Innovation Lab?

Incredibly popular, but often misunderstood, we take a look

10Feb

The digital age has brought with it many good things, but has also created many challenges, particularly for those large corporations that have operated in their industries for years and have long established processes and ways of working. These entrenched companies have proven themselves particularly susceptible to technological disruption, with 52% of the firms that made up the Fortune 500 in the year 2000 now gone because they failed to make the digital shift. Technological advances are constantly disrupting all industries, ripping apart traditional power structures and rendering old ways of working obsolete.

In order to overcome this, firms need to be on top of the new technologies that could have an impact on their industries, and which one will offer them an edge over their competitors. The best will be ahead of the curve, innovating with entirely new ideas that improve every facet of their operations. One of the best ways of achieving this is through the creation of innovation labs, a place in the company to spearhead new ideas and new product development.

Large companies build innovation labs fundamentally to recreate the atmosphere of a startup. They create an atmosphere in which risk taking is encouraged, and everything is geared towards spurring creativity and nurturing new ideas, helping to develop technologies and business strategies, and recruiting tech talent.

A recent study by Capgemini Consulting, entitled the Innovation Game, found that 38% of the world’s top 200 companies have set up innovation centers. They are particularly strong in the manufacturing and telecom sectors. The most popular locations are Silicon Valley (53), London (10), Paris (9) and Singapore (7).

While innovation labs are traditionally associated with tech companies, they are being embraced by companies across all industries, basing themselves particularly around San Francisco in particular, in an effort to pick up some of the startup spirit that has been the driver behind the latest technology boom. Retailers such as Target Corp, Walgreens and real-estate giant Westfield, for example, are among dozens of large corporations to have built labs in the San Francisco Bay Area in recent years.

The Walmart Labs operation is particularly notable. Its lab builds and tests online and mobile technologies. The retail giant has acquired 14 startups in the past 3 years, employing a similar attitude to Google that seems to say if there’s someone who can do something better than you, don’t flounder around trying to compete, simply buy them. Their success has been tremendous, with the internal search engine that was developed by Walmart Labs said to have driven a 20% increase in online sales conversions for Walmart.

Google’s Google[x] Lab is also an excellent example of an innovation lab. It is world renowned for being one of the driving forces behind Google’s attempt to stay at the cutting edge of innovation. Google hires in engineers and scientists specially to take charge of their ‘moonshot’ efforts - creative and experimental projects that do not necessarily aim to lead to commercial products, but will certainly move the company forward through innovation. The company’s infamous self-driving car and Google Glass are just two of the ideas to have been born of the lab.

Some question whether there are better options. Hayagreeva Rao, a professor at Stanford University’s Graduate School of Business, for one, has asked whether these ‘innovation labs, most of which are just a few years old, will come to represent substantial changes in the way sprawling corporate giants launch new products’. He suggests in its place a startup accelerator, where executives take six weeks off from business as usual to work on a single project, recreating the energy and pace of a startup and carrying it forward into other projects. The success of innovation labs is hard to argue with though, and it likely that they will be around for some time to come.

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