Why innovation labs fail and how to make them succeed

Think hard about what you want your innovation lab to do -- if you don't, you may end up with a hipster money pit.
Written by Mark Samuels, Contributor
Team working on project together

Innovation labs: a great source of new ideas, products, and businesses -- or just a waste or money?

Image: iStock

An increasing number of blue-chip firms are using so-called innovation labs to generate new ideas. Such creative workshops are seen as a great way to encourage new thinking, without putting the core operations of the business at risk.

Retailer John Lewis recently launched the third iteration of its successful JLAB programme, which aims to produce services that change the way consumers shop. Standard Chartered, meanwhile, has announced the opening of a lab in Singapore to explore the use of emerging finance technologies.

The creation of labs can be an expensive process. While workers can learn through failure, no business is keen to pour money into a black hole with no return. So why do labs fail and how you can make them succeed?

Avoiding building a trendy money pit

Former CIO turned digital advisor Ian Cohen likes the concept of well-resourced labs but he says such workshops can sometimes be costly flops. The reason labs fail, he says, is often related to tissue rejection. "People left in the core business can become very frustrated," he says.

"They see this cool new lab, free from traditional corporate constraints, which is being paid for by the core business that they're helping to run. If CIOs are not careful, the lab actually creates schisms. The result can be the type of misalignment that the management team has tried hard to avoid."

Cohen advises senior executives to think very carefully about how they will use a lab and how they will bring new ideas back into the host business. "The best CIOs are already engaged in this debate and see themselves as the ones who can help ensure that tissue rejection does not take place," he says.

"They act as the antibiotic -- they can be the bridge that makes sure that the spin-out produces tangible benefits, both for the lab and the core business. Sophisticated CIOs understand how to embed, adopt, and exploit new ideas."

One such IT leader is Brad Dowden, CIO at recruitment specialist Airswift, who agrees that labs need to be well resourced and well run if the business is to avoid the creation of a trendy money pit. "You need to say to people that you'll support them with enough capital to give them a fighting chance," he says.

"Make sure that the people working on the project are only dedicated to the lab. In short, you need to ring-fence the project. Your lab needs to be fully seconded and you must secure the right funding and people."

The good news, says Dowden, is that CIOs who get their approach right can generate great results. "It's crucial to focus from the outset on what you are trying to achieve," he says. "Answer a question -- you can't just stick people in a room and expect them to come up with something."

Dowden says strong direction is crucial for success. With strong leadership, people in the lab can go through the processes, consider hundreds of potential ways of answering the question, and generate serious recommendations.

"From there, you can create a prototype that you can take to the board and show that its investment in the lab is creating a positive outcome, such as a potential increase in profits or a new way of doing business," he says.

Generating the best possible outcomes from innovation

Some businesses are already generating encouraging results from an investment in labs. Mark Ridley, director of technology at Reed.co.uk, helped the online recruitment firm create a cross-company approach to innovation known as Monday Labs. He has strong feelings on both why labs fail and how organisations can take advantage of experimentation.

"Labs for the sake of innovation are completely wrong," he says. "Firms should not create a separate innovation strategy. There should just be a business strategy, which includes your aims and objectives for innovation."

The firm's Monday Labs gave a small number of people within Reed.co.uk an opportunity to work on the ideas they generated with little or no risk. Individuals were seconded to the startups from the main business. "Our lab was set up to be a place where our people could take an idea and be given room to work on it uninterrupted for a few months," says Ridley.

Each of the startups created through Monday Labs included five key archetype personas: hustler, hacker, creative, designer, and visionary. These cross-startup roles covered key activities, such as management, sales, and development. Ridley says the lab approach proved that small teams could be very effective.

"We'd forgotten just how powerful the right four or five people in a room can be," he says. The collaborative effort created three spinoff businesses. Two of the startups have since returned to stealth mode, but one of the spinoffs -- Reed Commercial -- is standing on its own two feet.

"We learned an awful lot through the process, particularly in regards to how you have to be commercial in your outlook from the very beginning," says Ridley. "We had great ideas and we executed them very well. But finding individuals and organisations that will pay for your innovations can be very difficult."

Reed Commercial, however, proved an instant success. While the original concept and site was created in a day, the business is now an established arm of the main business. The startup helps entrepreneurial individuals across the UK to take advantage of franchise systems. Reed Commercial provides thought leadership and helps people establish their own business.

"Institutionally we've learnt a lot but the individuals involved in the projects have learnt a great deal, too. People love the opportunity to try something different. You can take the chaos and energy that comes from working as a part of a small business and re-inject that back into the main company," says Ridley.

"Innovation is often about being in the right place at the right time. And if you have the opportunity to capitalise on that opening, then you really should go for it. You can create something special."

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