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Innovation&: Innovationlab

Updated: Oct 11, 2023


Title: The Benefits and Challenges of Innovation Labs

Innovationlab: What is their actual value, or are they simply "physical indoor playgrounds" disconnected from real-world customer problems?

Innovation labs have become a popular instrument for companies to foster new ideas and innovations beyond traditional incremental innovation methods (R&D, acquisitions, M&A, etc.). They are part of a well-planned innovation strategy to build a diversified innovation portfolio and allocate available resources effectively. Especially in industries closely tied to innovation, a corporate innovation lab within a company or in collaboration with vertical and horizontal partners can be highly beneficial. Operating as open innovation and development centers, innovation labs offer a secure and collaborative space to explore new ideas, complemented by expertise from different domains (suppliers, customers, partners), and test them in the market.

However, many companies view innovation labs merely as "trendy departments" to put their label on external value creations without generating substantial value beyond facilitation and methodology. Even worse, some innovation labs are nothing more than creatively designed spaces. The fundamental question is: What is the role of an innovation lab within the context of the overall innovation strategy? Is it just an "indoor playground" crafted by expensive interior designers? Therefore, it is essential for companies, besides employing collaborative methods (co-innovation, co-creation, collaboration), to create their own added value, ensuring seamless integration of innovations back into the organization. This way, they can maximize the returns on their investments in innovation labs. Moonshot projects or departments, resembling research projects, might be exceptions to this rule.

"There are no facts inside your building, so get the heck outside."
Steve Blank

To derive more benefits from an innovation lab, companies need to ensure that the innovation process within the lab is effective. In essence, observing customers in their natural environments should be carried out, and creative spaces should be utilized for discussing and refining activities within the problem space and developing prototypes during the solution phase. However, these activities must also create intrinsic value for the company in the medium term. The rest of the organization should be empowered with insights, and most importantly, the solutions should be adaptable with additional value. Relying solely on third-party solutions offers limited benefits, except for potential future partnerships (Smart M&A) or pure innovation theater. Therefore, companies must ensure that the innovation lab is well-connected with the rest of the organization and supported by the right resources and expertise to sustainably develop innovative ideas.

A lack of entrepreneurship and innovation experience in the innovation labs can lead to unsuccessful innovations that do not create value. A critical question to ask is whether the responsible individuals would drive the innovation forward if they had to invest their personal resources (intra-/entrepreneurship: money, time, security, etc.) and participate in the successes (stocks, options, bonuses, etc.). Hence, it is vital for companies to structure an innovation lab that aligns with existing corporate structures, drives innovation projects with an entrepreneurial approach and commercial responsibility, and ensures integration with the company itself.

An innovation lab should also serve as a place where companies can foster a culture of experimentation and trial and error. This should involve individuals who are motivated by their own interest and not compelled to participate (pull principle) and are willing to relinquish their previous responsibilities or recruit new talent. Consequently, building an innovation lab that enables such a cultural shift is of utmost importance. Involving the right resources and industry expertise is just as crucial as engaging the right external partners and domain knowledge to generate maximum value.

Only in this way can an innovation lab be more than just a label on external products or services, and it can genuinely help the investing company create new, tangible value.


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