Recipe for innovation lab success, valid across the firm?

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In a recent article in HBR, Simone Bhan Ahuja summarizes his experiences with corporate innovation labs:

https://hbr.org/2019/07/why-innovation-labs-fail-and-how-to-ensure-yours-doesnt

First a short TLDR of Simones article: Up to 90% of innovation labs fail to deliver on their promise (up to 90%, one expert says)

Pitfalls for innovation labs according to Simone:

  1. Lack of alignment with the business. Address by:
    • Vision (Create one by using from-to statements “We want to go from placing big innovation bets to trying many small experiments and rapid prototyping,”)
    • Growth (When an idea is validated and needs to go outside the lab, what happens?)
    • People (How do you support intrapreneurs. How do you facilitate close customer interaction)
  2. Lack of metrics to track success
    • By specifying some type of return the innovation effort should delivered you achieve two things: It defines what’s at stake for stakeholders, and remind people of the benefits of the innovation efforts, from tangible to less tangible
  3. Lack of balance on the team (getting the mix right is key)
    • Can’t have all old guard employees
    • Can’t have all external entrepreneurs

End conclusion:

innovation labs can be extremely useful as

  1. Resource providers for intrapreneurs, i.e they know how and where to get resources.
  2. Becoming seeds for innovation across the company when the organization interacts with the lab and intrapreneurs

How does this relate to strengthening innovation in general in your company?

What Simone is saying ties in strongly to other results from innovation management. Results that we at Innovation360 base our methodologies on. Much of what Simone has found is in fact true when trying to create a more innovative corporation in general, not only for innovation labs.

The pitfalls mentioned are very much a danger to general innovation efforts in companies. At Innovation360 we see a number of ways to tackle these pitfalls to avoid them. Not only for your innovation lab but for your company as a whole. By understanding possible pitfalls for your innovation efforts and how to create capabilities and processes to support it, you have a better chance of innovation success.

 

Lack of Alignment with the business -> Adressed by A coherent innovation strategy.

Being coherent means aligning the innovation efforts  with the corporate strategy and with identified strong combinations of internal capabilities. The strategy should also spell out where to play and how the company has a chance to win in the identified space ( through the aforementioned combination of capabilities). Coherency assures that innovation activities are aligned with the activities in the business at large

Example: In one of my previous engagements I was working for a company that had carried out a major initiative for innovation where they had created an off site innovation lab. This innovation lab got to do more or less what it felt like.  As long as it was innovative it would be ok. Once the corporate sponsor for the lab left the company all but one of the projects were immediately canceled. The one remaining project was canceled shortly after. It was clear that the company needed a new direction for innovation activity. With a redefined strategy for where to play, new initiatives were found that played to the company’s strength. Some of those initiatives are going strong today, creating new revenue streams for the company.

 

Lack of Alignment with the business -> Adressed by An operational model for innovation

The model should describe landing strips for innovations within the organization.  It should also describe how innovation work connects to the different parts of the organization i.e the connectivity. Furthermore the model should describe if innovation should be distributed, centralized or a satellite (i.e occur throughout the organization or have certain parts of innovation occur in a centralized organization such as an R&D organization or in a satellite such as an innovation lab). The model also needs to define access to capital, competence and markets for the innovation efforts. The way these aspects are handled and chosen are crucial to how an effort can progress. Hence they cannot be ambiguous choices.

Example: In the same aforementioned company, we had a number of interesting innovation initiatives. Some of these initiatives required customer feedback to figure out if they were more than paper products. However, it was impossible to get access to customer engineers to try to figure this out. Not because of the customers organization, but due to our organization. Controlling the interface to the customer might be required for standard product improvements and sales interaction. When it comes to innovation at an early stage it can be a killer. In this case we had to focus on innovations where early feedback from existing customers was not crucial, which ment focus on new markets (i.e new customers) or radical improvements in cost or performance that were more or less completely internal innovations.

 

Lack of alignment with the business -> Adressed by Creating an innovation narrative.

By creating a comprehensive communication effort around the innovation effort, the organization can easily understand the why, what and how of innovation for the company. The narrative can contain parts of the strategy as well as examples of wins and failures to keep the whole company in the loop. Creating a narrative is important over time depending on the chosen operational model, since the organization will likely be constantly reminded of why innovation must occur despite short time pressures

Example: One of our clients has a very strong focus on P&L and has a distributed business model with a large number of profit centers. In this company, the innovation is considered a cost center that is sponsored by the individual P&L units. When there is a lack of understanding from the units on why they should sponsor innovation the struggle is always immense. Especially so when the business unit is not making its numbers and could slash innovation costs to make them. A narrative that explains why innovation is necessary is a good first step to escape some of this pressure. By explaining why and what comes out, business units can understand the benefit to the whole corporation. It is not the whole solution since incentives are still slightly misaligned, but without understanding the why the instinct will always be to cut and postpone innovation work

 

Lack of metrics-> Adressed by A management system that contains a process and a governance structure

A management system should make sure that the innovation efforts are aligned with strategy. It also makes sure that activities and execution is being carried out in an efficient way. A suitable governance model and innovation process makes sure that alignment and efficiency is achieved . The management system should also manage projects in a balanced portfolio. This ensures that innovation that strengthen the current business as well as radical new innovations are taken care of. The amount of resources spent in different categories of innovation is up to the company to decide. Depending on the market the company plays in it might be prudent to spend a lot on radical innovation. A natural part of the management system once it is in place is to have a number of KPIs that are suitable for the goals of the company with respect to innovation

Example: Setting up KPIs on a strategic, tactical and operational level is considered best practice by innovation 360. We have a number of clients that are using InnovationIQ as a strategic KPI to track innovation capability over time. This way the company can ensure that its organization is competitive when it comes to innovation and is able to grow capability over time.

 

Finally: the people.

When working with innovation the type of people involved should reflect which phase of the innovation process you are in since one and the same person is not necessarily comfortable in all innovation phases. What is needed could be a mix of internal old guard and new external experience. However, the type of personality, experience and competence also factor in to a large degree. At the end of the day the people and how they work together will always make or brake your innovation work. Processes and initiatives are always support for their work.

Do you have examples of when any of the initiatives mentioned was missing in your organization? We would be happy to learn of how you handled the situation and what the outcome was? Did the organization understand that it had to change?

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