Building a successful business innovation lab balances creative freedom with quality management processes and analytics to generate ideas that improve a business’ future prospects. McKinsey reports that 84% of executives consider innovation an essential part of their future success. 80% believe their business model is at risk without it. And only 6% are satisfied with their current innovation performance.

Why do we need innovation labs to make innovation happen? Because there are many barriers to innovation within established organizations. In the 2015 BCG Innovation Survey, 32% of companies said selecting the right ideas to follow through on was a challenge. 25% said a lack of coordination was holding them back, and 22% said there simply weren’t enough good ideas.

With the right processes in place to succeed, an innovation lab can address all these challenges and improve the bottom line. Here are some strategies and insights to consider as you approach building an innovation lab.

What is an Innovation Lab?

A simple innovation lab definition is a unit or department at a business that is responsible for coming up with ideas that compliment or improve the parent company. As distinct entities within a company, innovation labs are a place where novel ideas can be expressed and grow. Innovation lab ideas should be rigorously examined and we recommend a lean startup framework to determine if the concepts are viable, desirable, and feasible. In this way, ideas for everything from new product or service lines to spin-out companies can be vetted and improved to ensure the best-quality innovations are the ones that earn time and investment from the business. Innovation lab types could be a digital innovation lab, product innovation lab, a disruptive service lab, or even a culture innovation lab.

How Do You Structure an Innovation Lab?

Innovation labs could  be structured according to Lean Six Sigma processes. This collaborative approach has been honed over the last 50 years to help teams reduce process defects and waste while also providing a framework for continuous improvement to existing products. However, this approach can also be limited, because it does not address the notion of disruptive innovation. Sometimes, it isn’t existing products and services that need to be streamlined and improved, but the entire business model itself. When the old model won’t serve, old processes won’t either. 

Many companies might think the innovation lab should be a creative free-for-all where all ideas are given equal weight and examination. But a flexible process is just as important to innovation as curiosity. The Lean Canvas and other lightweight tools are designed to reinvent business models themselves quickly and effectively. 

Innovation labs aren’t just a place to come up with new ideas. They’re a place to learn how those ideas will gain traction with consumers and help you win out against the competition. 

Why Do Innovation Labs Fail?

Innovation labs fail due to lack of metrics to measure success, lack of alignment with the parent business, and a lack of balance on the team within the innovation lab. Let’s examine each of these reasons in depth.

  • Lack of Success Metrics: When the success of the innovation lab isn’t measured, it’s being set up to fail from the start. The executives investing in the innovation lab expect to see improvements in the bottom line of the business. However, revenue is often a trailing indicator of success in new products and services. By the time profits are manifesting, the innovation is getting stale. Traction with customers must also be measured in real-time. Plus, how is learning from failure going to be supported and encouraged, or even measured as success in its own right? These are some of the questions that should be answered in advance, and the resulting metrics tracked over time to ensure the lab is succeeding. 
  • Lack of Alignment with the Business: Defining success metrics is part of the process of aligning the innovation lab with the larger business, but the process doesn’t end there. It must also be determined how the best ideas will leave the lab and become part of the larger business. Is the goal to create innovations that are integrated with the existing business, or become their own spin-outs or departments? Additionally, the alignment with individual employees working in the lab must be considered. How will intrapreneurs be supported by colleagues outside the lab, if at all? How will they form and sustain relationships with prospective end-users and customers? These considerations will minimize friction between the business and the innovation lab as time goes on and ideas grow.
  • Lack of Balance on the Team: Lastly, an innovation lab requires a diverse team to succeed. This means a mix of industry experts, business experts, and innovators from inside and outside your organization. Internal stakeholders like long-term employees know the corporate structure and company values, while external innovators bring the fresh perspective and eagerness that ignite the spark. Working together, a well-balanced team will fan the flames. Without a balance of diverse perspectives, they will go down in flames instead.

NEXT Studios’ Innovation Lab Business Model Can Help You Succeed

NEXT Studios is seasoned at helping intrapreneurs leverage the advantages at their company to disrupt their respective industries. We can help you not only recognize the game-changing ideas that are already on the table, but also implement processes that help serially deliver incredible innovations. Whatever the goals of your innovation lab, we are here to support you in creating lasting competitive advantages. Contact us to ask questions and discuss what’s NEXT.

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