An innovation lab is a type of research and development environment where the three types of renewal — improvement, innovation, and invention — are often seen together.
Large enterprises have R&D laboratories that focus on inventions: things that are totally new in the world. An improvement means making something better that is already implemented.
On the other hand, innovation is about realizing a new product, process, market, or business model that could create added value for the customers and/or employees. “New”, as in, new to the organization.
Recently, innovation labs have been popping up across various industries like insurance, financial services, and hospitality. In fact, there are countless articles online about the launching of new innovation labs.
Unfortunately, you will not find much information about whether those labs were successful or not. A simple explanation for that is that only a few of those innovation labs were able to really contribute something to the business.
So why do innovation labs fail?
Before anything else, it is important to draw the differences between an innovation lab and a business as they both share many reasons for failure.
Keep in mind that a lab usually has…
Way too high costs
No business sponsor
No clear responsibilities
No inclusion of first-hand wishes and demands from end-users
A drive to push innovation (tech/trends) instead of pull, which focuses on end-users
With that, here are the ten reasons why innovation labs fail:
1. Ignoring the Return on Investment (ROI)
It is vital for an innovation lab to consider its return on investment. At the very least, ROI should be brought to the table and used as an index that could help the innovation lab show the importance of its projects.
Unfortunately, this is usually not the case. Instead, it is common for innovation labs to assume that they “do not need to think about their ROI” and that they must get the funding they need for their favorite projects.
Ignoring the ROI of the innovation lab can end up with that lab completely ignoring the value they could have brought to the company. When ROI is brought to the table, the innovation lab shows an alignment with the company’s cause.
This fosters trust, which leads to getting additional funding for future projects.
2. Failure to Track Progress
A leader named Thomas Monson once said:
“When performance is measured, performance improves. When performance is measured and reported, the rate of improvement accelerates.”
That said, without setting targets or key performance indicators, the innovation lab has nothing to aim for. Without indicators, there is no way to measure and optimize the process, which is a common sight in most innovation labs that fail.
Naturally, since an innovation lab is different from a business, the indicators could be non-traditional ones that suit the purpose and projects of the lab. For example, some of the indicators could be about how many experiments were run for that certain project.
3. No Clear Stage-Gate Process
Stage-Gate, or Phase-Gate, is one of the many innovation funnels that organizations use. It is also the most used method for evaluating the business value of an innovation project in the innovation lifecycle.
As the name suggests, this funnel has different gates. Between each gate, there must be an assessment to determine whether or not it is worth proceeding to the next stage.
Unfortunately, many innovation labs do not have a clear process for the stages. This includes what to evaluate before the project could proceed to the next stage, which is vital for efficiently using this type of funnel.
4. Excluding Other Potential Sources of Ideas
If innovation is an engine, then ideas are its fuel. As a matter of fact, you simply can’t do any innovation without ideas. This is why idea generation is the lifeblood of organizations, vital to competitiveness and survival.
However, innovation labs that failed, lack diverse thinking for finding solutions. Most rely upon ideas that sprung up from their own ranks. When it comes to idea generation, it is important to have as many ideas from sources that are as diverse as possible to gain insights from different perspectives.
It is also worth looking at the principle of open innovation, which is about believing that there are other sources out there for excellent ideas outside of the team. This will net you insights from communities with cultures and backgrounds that are completely different than your team.
5. Working With the Wrong Team
The success of the innovation lab largely depends on the team behind it. One thing to remember is that the focus for innovation success should not only be about the solution but also about how well it integrates with the business.
That is why the team and its governance are important. It certainly helps if the team is not from within the organization, or at least does not have big responsibilities that will tie them down.
The one leading the team must also have a proven track record in managing innovation projects. It must also be someone who has no full-time role in the organization, as the work of managing the innovation lab team is already full-time work on its own.
6. Too Focused on the Technology
There are a lot of dimensions regarding this problem. Many innovation labs get so focused on the technology that they end up in something called “analysis paralysis”, a condition when you overthink something too much that you end up getting delayed.
This cascades into a lot of cause-and-effect scenarios. For one, there is a possibility that any goal date set would be pushed further. The result is that funding will have to be stretched to accommodate more days spent on the project.
In addition, focusing on mastering a certain technology, rather than actually completing the product, may seem like a more interesting display of progress. Unfortunately, there could be unforeseen problems that could end up with the innovation lab changing technology, which will then extend the project completion date again.
7. Lack of Vision and Objectives
One reason why they fail is that there is often a lack of clear vision and objectives prior to setting up the lab. That is why before everything else, there must be a clear theme or problem that the innovation lab has to focus on.
Although ideas are vital to innovation, they must be paired with a problem or a challenge that can help steer the ideas.
This will then correlate with some of the things mentioned earlier. For example, when there is a clear objective, there will be indicators accompanying it that would help measure how the lab is doing in terms of progress.
8. A Plan Without Stepping Stones
Some innovation labs fail because they bet on a “single big project” in hopes that it could turn their lab around and gain success in the eyes of its stakeholders. Unfortunately, betting on a single big project is like betting on horse racing.
To avoid this, having little stepping stones that would instead bring you consistent wins is what’s important. In fact, failing a little can even be helpful at times since it would help steer the lab’s innovation projects forward.
Don’t wait for a big win. Aside from betting on a big project that may not turn out to how you expected it, most organizations don’t have enough patience to wait for it to happen. They may think that the lab is irrelevant and may stop funding it.
9. Poor Project Management
Innovation projects run on a schedule and those that fall behind schedule may cause stakeholders to withdraw support.
There are a lot of reasons why project management may seem like a challenge. It may be that the innovation lab is waiting for the right technology to appear. Or, the lab may need more resources than what it currently has in hand.
The problem with this is that waiting out and dragging the project further costs a lot. Running an innovation lab is already costly. Poor project management will make it look like the lab is bleeding money without actually doing anything.
10. Unfounded Expectations
A problem that is not often discussed is how some companies expect innovation labs to turn the tides around. For example, there are some who hire out a team of bright people, rent out an office, and expect that innovation will suddenly come pouring in.
Some of the innovation labs are not necessarily failing, at least not right away. Unfortunately, most people see it that way as they rather expect a “big thing” to happen. However, some of those expectations may not be that profound.
That is why it is important as well for the stakeholders to manage their expectations. Some of them throw in large sums of money for shiny new objects (like a new office, more team members, etc.) and end up sinking with the costs without having the results they expected.
Learn From the Failures of Others
As the saying goes:
“Failure is a lesson learned. Success is a lesson applied.”
Now that you know why other innovation labs fail, it is important that you keep in mind those reasons. The reasons why they failed are not unavoidable. Rather, if you know them in advance, you have more chances of avoiding them in the future.
Next steps: Running or leading an innovation lab is a challenge on its own. Fortunately, Accept Mission can help you with this. We offer consultancy services and can help you with your innovation program, innovation strategy, training, and software implementation.