In the first article, we explored:

  • Why Pharma needs to start effectively innovating some components of their current business model or generate new one
  • Why it was necessary to construct an innovation lab that is built on a solid framework
  • Why embedding an innovation lab within a company, if done properly, can reshape a business and enable pharma to adapt to current trends, maintain a competitive advantage and invest the healthcare playing field

We identified that to address challenges caused by disruption, Pharma must diversify their innovation capabilities and tools to progress from classical R&D and transform their entire business model portfolio. We believe that “out of the box thinking” enabled by a structured innovation lab can enhance and build upon the skills already possessed by an organisation to deliver upon the need to transform current business models and influence business performance.

In this second article of a three-part series, we will define exactly:

  1. What is an innovation lab and its ambition?
  2. What are the objectives and the core activities performed by the lab to reach the desired outcomes?

What is an innovation lab in Pharma?

An innovation lab can be defined as a space of liberty/creativity within the established organisation, aiming at discovering, incubating and accelerating innovation to serve organization strategic intent.

An innovation lab is an almost default framework for collaboration (the structure of which will be discussed in depth in Part III of this series). It is a concept that can take the form of an actual event or events or a physical structure. For the most part, innovation labs are an amalgamation of variety of activities that are already used to foster innovation in various ways. These can include: think tanks to analyse future trends, start-up accelerators which invest in start-ups and give them access to company resources in order to accelerate their development, projects incubators that welcome intra-entrepreneurs inside a company giving them access to resources in order to transform from within a company…

Ambitions of a lab

The ambition to foster innovation within a company is not uncommon and many already host various events or have built internal teams.

Example: Merck Innovation Lab

The Merck Innovation Lab hosts hackathons whereby, they leverage fellow students and experts to explore unique solutions for specific problems and allow students to expand their network and win prizes. This lab also promotes practices such as Open Campaign which is a dynamic flexible ideation approach that accelerates internal ideas to innovation projects within a short time frame and Innospire which is an initiative that encourages employees to submit and further develop their ideas for new products or business opportunities.

Underlying each of these initiatives, practices and concepts is the common ambition of fostering innovation to cause transformational or incremental change of an organisation, process, or culture. If designed appropriately and smartly, innovation labs can do just this by utilising parts from each of the above-mentioned concepts and practices.

Innovation labs all have a common ambition of fostering innovation to bring about transformational or incremental change. Whilst they are all created with the goal of transforming parts of, or the entirety of a business, the specific objectives can vary significantly and must align with what’s important for the organisation, otherwise they are destined for failure.

Objectives vary significantly and range from transforming a company’s core business, driving business excellence through cost optimisation and risk reduction, and launching new business models.

Objectives of a lab

Whilst the primary outcome of any innovation lab is quite often ultimately to create new revenue streams or bolster existing ones by improving productivity or speed, there are many more to consider.

Innovation labs can be created to:

  • Accelerate innovation and deliver specific business outcomes related to innovation,
  • Incubate new company culture and new ways of working e.g. patient centric, data driven and tech-enabled,
  • Stimulate ideation and design thinking with the objective of  finding new out of the box solutions to challenges from across the business

Whatever the objective of the lab and whether it is a physical or virtual space or more of a concept, innovation labs offer a space for exploration with ideation and creativity, incubation with and once the desired outcomes have been defined, can provide companies with a practical capability to deliver business relevant outcomes.

Key activities of an innovation lab

The key activities of a functioning lab can be segmented into 3 phases, discovery, incubation and acceleration with external orientation (See Figure 1 ). At any point in time, the primary focus of the lab will be that of one of these core phases. Multiple activities can occur simultaneously, but there will always be a primary focus where most of the labs’ energy and resources are focused.

Figure 1: Innovation lab core activities

1. Discovery

This is the initial phase of an innovation lab. It involves scanning the landscape for any emerging trends, identifying relevant opportunities, and detecting surfacing threats from competitors or new technologies. The discovery phase can practically be executed in several ways and if done effectively will ensure that the lab does not pursue irrelevant hype.

Information can be sourced through primary and secondary research including web surveys, in deep interviews, online sources, analyst reports etc. and should be used to collect ideas that are of interest to the lab and the business. Information identified in the discovery phase needs to be organized and categorized to facilitate digestion. Information should then be prioritized and reviewed through the lens of the lab and the business. The goal of the discovery phase is to provide to decision makers a range of options and opportunities that could be address and pursued.

Check out our article about the importance of Insights Management for pharma in a changing world

2. Incubation

As Figure 1 depicts, the incubation period of an innovation lab is the second phase during its life cycle. In this phase, the primary goal of the lab is beginning to turn ideas into experimentation.  A risky or several risky concepts identified earlier in the discovery phase are selected, refined, and further developed into a prototype offering that can be tested and launched to generate iterative learning curves.

During this phase the progress of the lab must be continually assessed, and the viability, feasibility and desirability of the prototype must be evaluated against the strategic objectives of the lab. Doing this will ensure that whatever the lab is developing will result in business impact. Having these check and balances in place again ensures that the lab is not simply doing “invention” for the sake of innovation. The goal of the incubation phase is to take out of the box concepts and develop them into something real to validate value creation, delivery and capture.

3. Acceleration

The above is often easier said than done. The success of a lab is the ability to effectively communicate with the mother organization and the ability to interface with internal and external stakeholders. The acceleration phase of an innovation lab aims to do just this.

To transform an idea into a concrete concept which delivers impact for a business, it is important for the lab to prepare the mother organization for the output of the lab. This means, conducting extensive stakeholder management, and for each stakeholder determining what role they will need to play in developing the offering. Businesses should create communication channels to articulate the impact the innovation will have on the business in terms of processes, culture etc, and they should develop communication channels that are responsible for advertising and promoting the innovation to external stakeholders.


The life cycle of an innovation lab should be a continuously iterative journey to renew its capabilities to organization strategic challenges. To be effective, labs must be agile in their approach to delivery, reacting to shifts in trends and proactive in responding to any potential threats. Labs though need to have the optimal balance between separation with level of freedom from the mother organization to  facilitate innovation and link with ensure transition within organization to ensure scale up, but still be close enough and aligned with the organization’s strategic business objectives to deliver value impact.


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