In the previous article we defined what is meant by an innovation lab, what the objectives and ambition of a lab can look like and what the outcomes of one can be. We concluded that whatever the objective of a lab, and regardless as to whether it is a physical or virtual space or more of a concept, innovation labs offer specific capabilities as discovery, incubation including experimentation and acceleration, and can provide companies with a practical, resources and time boxing capability to deliver valuable relevant outcomes.
Constructing, the functioning and the execution of outcomes of an innovation lab can be segmented into 5 phases (See Figure 1). The success of each phase is determined by the success of the previous phase in the life cycle and by the level of excellence in terms of framework design and alignment with the company’s strategic challenges. A project of innovation lab design could be considered as a part of the transformation journey as well as a future capability to support perpetual transformation.
Figure 1: Our journey to design and build innovation lab
However, prior to beginning lab construction, it is essential that companies ask themselves the question “Should a lab be built and is it the right action for the business?” One of the reasons some innovation labs fail is due to the inability to create tangible results. Instead, they measure success based on the interest of their projects.
A company should progress with the development of a lab if confident in the performance metrics that will be used to measure the success of the lab. It is also important to take into consideration that innovation for the sake of innovation is unlikely to guarantee results that can be applied to your business. Bearing this in mind, it is essential that the activities associated with each of the 5 steps of an innovation labs’ life cycle are taken into consideration.
Prior to deciding upon the specificities of the lab framework, it is essential to first define the ambitions and scope of a lab and establish clear strategic business objectives and clear metrics for measuring success. Ensuring the ambition and framework of a lab retains a connection to the “mother organisation” is also critical and in doing so will ensure that the lab delivers tangible benefits for the business.
The second article in this three pieces serie goes into detail describing the various ambitions and objectives that can be mandated, and includes illustrations like transforming a company’s core business, developing new customer segments by reshaping their brand image, driving business excellence through cost optimisation and risk reduction and launching new business models.
For each of these examples, the overall ambition of the lab is the same and aims to foster innovation and bring about transformational or incremental change to a business or business unit. When defining the strategic business goals of a lab, it is important that the goals are developed in a collaborative manner with the relevant stakeholders. It is likely to be an iterative process but by ensuring that the correct stakeholders are included in the design of the lab from the get-go will significantly increase the likelihood of the lab being able to deliver tangible benefits for the business or business unit.
Each innovation lab must be unique regarding the following framework as depicted in Figure 2. When designing the framework, each of the above components should be considered and sitting behind many of the components are important business decisions that must be made by the “mother organization”.
Figure 2: Key components to operate a winning innovation lab
The financials of an innovation lab must be defined prior to launch or undertaking any further activities. The lab sponsor must believe in the ambition and strategic objectives of the lab. The business models of labs can vary, and there is no one size that fits all. Depending on the lab and the strategic objectives, different financing models could exist. For example, the lab may be sponsored from a specific business unit or come could come from a central global budget.
Defining who oversees day to day operations and operational governance is key. We recommend assigning an overall lab director or forming a steering committee that oversees and decides on the general working of the lab. The responsibility of both the lab director or steering committee must also be to keep the focus of the lab and ensure that it delivers impact to the overall business. The steering committee should include representatives from the business, or even the board. We also recommend assigning a lab lead. The role and responsibility of the lab lead are far more practical, and the expectation of the lab lead will be to make decisions on individual ideas and manage/oversee individual projects once underway.
Given the ambition of innovation labs is to foster innovation and bring about transformational or incremental change, it is very important to have a diverse range of individuals to foster an environment and culture that lends itself to innovation, ideation and out of the box thinking. Team members, as well as having the necessary level of skill, must also have a passion for the area of interest / business challenge under review.
The combination of required skills, cognitive diversity and passion will enable teams to undertake the innovation process and ideate and develop ideas. Excellent communication skills are also necessary for those working in an innovation lab, not only the ability to articulate and develop ideas in a team, but also as the lab matures to communicate with the steering committee, sponsors and potential investors.
The key activities of a functioning lab can be segmented into 3 phases, discovery, incubation and acceleration (See Figure 3). 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. For more information on each of these activities refer to our second article.
Figure 3: Innovation lab core activities
Another component that must be carefully considered when constructing an innovation lab is the positioning of the innovation lab within the wider ecosystem and how the lab interfaces with external stakeholders. One feature that must not be overlooked and is critical for the success is the ability of the lab to engage, collaborate and partner effectively with external stakeholders:
In many cases it is also essential that an innovation lab has the capability to partner with external stakeholders when moving into the acceleration and scale up phase. Often external stakeholders, including, start up, incubators, investors, distributors, manufacturers etc. are essential in the accelerating and scaling up of a labs’ offerings.
The resources and tools made available to a lab should be fit for purpose and facilitate the overall ambition and strategic business objectives of the lab. For instance, if the purpose of the lab is largely for educational purposes, then the lab must be designed in such a way that there is space to facilitate this and the appropriate educational resources made available.
Regardless of the purpose of the lab, whether it is a hackathon, incubator, accelerator or academic partnership center, it is essential that the appropriate tools and resources are made available and that all resources that are made available satisfy a need. Again, innovation for the sake of innovation and making resources available for the sake of making resources available will be detrimental and is unlikely to guarantee results that can be applied to your business.
These processes and tools must be supported by a new skill set to understand ecosystems, design new business models, build MVP, and manage radical innovative projects in an open ecosystem.
Figure 4: Boost academy, leverage your skills to outperform
Innovation labs are successfully implemented when their objectives, tactics for meeting those objectives and metrics of measurements are crystal clear. Being able to track and monitor the progress of an innovation lab effectively is critical to its’ success and ensures continued alignment of the lab with the “mother organization”. The success of the lab can be measured using a variety of indicators and where the appropriateness of the indicator is dependent on the phase of the life cycle the lab is at.
At every phase, it is important to have metrics in place to track and assess the performance of the lab as otherwise without they are destined to fail. Using specific metrics serve at least two purposes by firstly defining what is at stake for lab innovators as well as company leaders; and are also there to remind people that the benefits of innovation range from the very tangible (financial return on investment) to the less tangible but perhaps more valuable (return on intelligence in the form of new knowledge and insight).
Once the acceleration phase of the innovation lab is complete and the lab has a concrete offering to bring to market, the focus of the lab and the mother organization should be on scaling up the offering. This can be achieved by leveraging capabilities of the core business, using already established channels to market, manufacture and distribute the new offering to new customers.