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Innovation Labs: over-rated PR stunts or a good return on investment?

Charlie Rowat from Market Gravity explains how innovation labs may be ‘all the rage’ in the race for digital disruption but making sure they fit with your business is the key to their success

Many of the world’s largest companies now have some form of “innovation lab” yet it is estimated that many of them will ultimately fail.

Companies set up innovation labs for all sorts of reasons including to garner PR coverage, to instil a culture change or simply because their competitors just launched one. But ultimately end consumers don’t care about working practices or how businesses create new products and services; they just care that they solve their problems or bring them the innovations they need.

So why do so many innovation labs fail? Often innovation labs, using unfamiliar methods and techniques, operating under a new way of working often find themselves at odds with their parent company, and can quickly make the core business feel uncomfortable.

The truth is, the labs that work and have a long, successful life are those that are designed to respond to critical business challenges. You’ll need to think carefully about the needs and dynamics of your company; it’s not enough to just drag and drop Google’s Innovation lab framework, put a budget behind it and hope for the best. If the culture in the lab is too starkly different from your core business, the lab team will have to cross a huge chasm in order to have an impact and deliver value.

When considering an innovation lab, companies need to look at the following aspects to guarantee success – purpose, objectives, method, leadership, output, lab-business fit and flexibility:

Purpose

Purpose is what will keep your team motivated focused as they tackle tough, ambiguous problems nobody else has solved previously. It’s important that an innovation team has a very narrow focus.  At American film studio, Twentieth Century Fox, there is a technology lab, which focuses on home entertainment as well as a separate innovation team within the IT division. Narrowing the purpose of your lab gives it clarity, for the team and for the wider organisation.

Objectives

Setting clear objectives will steer your team and help the core business understand why the lab exists. The key is to understand the context of the problem you are trying to tackle and a clear picture of success. This also helps the team achieve tangible results and helps those not involved in the lab understand it.

Method

At Market Gravity, we believe in anthropology over technology – speaking to customers, discovering the problems they have and creating solutions to help them will always get better results. You can get input quickly from those you’re looking to attract. Tools like Toluna, VoxPopMe and usertesting.com are a great place to start.  Adding a strong researcher to your team will further improve your chances of success – after all nothing beats in-depth interviews that are located in the context of the problem you’re trying to frame.

Leadership

The bigger the scale of the problem you’re trying to solve, the more freedom your lab will need. The ‘Lab Lead’ must be able to navigate both the ‘startup’ world, handling the ambiguity and uncertainty of the innovation process, and create your lab a path through the corporate environment.  The Lab Lead should report directly to your CEO or CMO with the backing of the person in charge of the company’s vision, and should be empowered to make decisions that get the team closer to their objective.

Output

Once you are close to an output, you need to have a plan to scale it without losing momentum. At this stage you many need to bring in skills from the core business, or you can establish early on that the team will also be responsible for scaling and launching the new product. If you do take the venture out to the core business, it’s important to communicate the insights that led to the idea and ensure they are fully on board with the project.

Interestingly, Homeserve Labs turned the lab into the product team. They came up with the idea, then organised the lab around it. The lab acts like a start up and focuses on scale now.

Lab-business fit

Startups fail when they don’t achieve product-market fit before their funding runs out. Labs fail when they don’t achieve lab-business fit. This is achieved when the innovation lab and the parent business have found the right balance between freedom and process, between technology and anthropology, between ticking the box and getting results.

Flexibility

Whether you’re setting up a new lab, seeking to improve the performance of your current setup or looking to better integrate with your parent company, its important for labs to re-invent themselves regularly.

Market Gravity has designed a blueprint for a successful innovation lab to help large organisations define their current position in the marketplace and establish effective teams that can create innovative products and services to meet consumer demands and to overcome common problems.  See case study example below:

CASE STUDY – Studio B – the result of experiential innovation labs

Clydesdale and Yorkshire Banks worked with Market Gravity to create the UK’s first design-driven banking innovation lab. Located on Kensington High Street, London, Studio B invites members of the public, squads of next generation innovators and talented young designers to come in and test, trial and provide feedback on new technology, develop new products and ideas and share insights on their banking behaviors.

The lab encourages visitors to take part in short sprints to apply their perspective to challenges to create solutions to customer problems and work with and design technology to meet the needs of the next generation of banking customers.  The lab space is both inspiring and functional, it is as much a factory, as it is a showroom, designed to deliver not just to imagine. It will explore voice recognition, artificial intelligence, virtual reality, Internet of Things, blockchain and other innovations set to disrupt the banking sector even further.

Helen Page, Group Innovation and Marketing Director from Clydesdale and Yorkshire Banks says: “Studio B is our way of reaching out to identify challenges within banking and to draw out creative and innovative ideas for solutions.

Banking is moving at a fast pace with the development of new tech and our aim is to stay ahead of the game and create concepts and services to prepare us for the future. Innovation development usually takes place behind closed doors and customers only see the finished product once it’s live.

“We’re flipping this on its head and are actually inviting the public to work with us on ideas for new ways of working and, through this, we’re aiming to understand our customers even deeper and create products to suit today’s, and tomorrow’s, changing lifestyles.”

Market Gravity is a proposition design consultancy. It helps the world’s leading companies create and launch innovative products and services, fusing together customer insight, commercial rigour and design experience.