Why Do Innovation Labs Fail?

The majority of companies are seeking to be innovative – to the extent that Innovation Labs are set up with the sole purpose of generating new ideas. These set-ups can fall under many different names — accelerators, business incubators, R&D hubs. Incubating spaces are safe places for new ideas and experiments. In fact, over half of financial services firms have begun their own dedicated innovative programs. 

Any good Innovation Program needs a few key things

• A clear long term innovation goal, which can be broken down into shorter time frame goals.
• This innovation goal should align nicely with the goal of the company. Without alignment, this is when innovation becomes an excess. 
• A definitive method to measure the progress of the innovation. Is this innovation going in the right direction – and how can we measure it?

However there is evidence that a lot of the growing number of Innovation Programs are failing to keep their promises. Without these outlines, an Innovation Lab can be somewhat a white elephant. Let’s unpack a few of the reasons why Innovation Labs can fail to achieve success for the company.

1. Innovation Programs don’t have a clear objective and success factors defined

There is often a problem that these initiatives have no clear goals, or the sufficient metrics to track their success. Without the ability to manage metrics, any new Innovation lab is doomed to fail. The fact of the matter is that the innovative process needs more than enthusiasm and a shiny new office to actually work. 

It is true that innovation operates within a slightly different sphere to strict commerce. And as such, needs to be viewed through a slightly different financial lens. Labs need financial support and the time to nurture and tinker with ideas. However, no matter how great a leash you allow the Innovation Lab, there does need to be some form of return in the long run. 

And these returns need to be outlined in advance and be tracked over time… 

2. Innovation Programs don’t have long term goals defined, broken down into clear quarterly goals

From an executive point of view, Innovation Labs begin to lose their value if they fail to make contributions to the bottom line over time. This is perpetuated by the fact that many labs are set up and run without ever having clear metrics put in place from the start. 

There is the argument that projects to stimulate innovation are hard to define in terms of clear benefits. Perhaps they hint at reforming company culture, or are possible generators of future profit in some way. But these things are difficult to quantify within the parameters that Innovation Programs operate. However these are conceptual obstacles that have to be overcome if a lab is to be run successfully within a commercial organisation. And it is not an impossible leap. Metrics can be proposed.

Specifying particular metrics for an Innovation Center has multiple functions. Firstly, it serves to define precisely what is at stake. This applies to the lab operators as well as the decision makers within the company. Secondly, it can help to reiterate the benefits of having an Innovation Center in the first place. A financial return on investment is a very tangible metric that can help develop a lab. Moreover, a return on intelligence – new knowledge and insight – is another exciting metric to keep in mind, though perhaps less tangible.

No matter the form that these metrics take, it is essential that the means of measuring progress allow for the progress itself to be configured in the right direction…

3. Innovation Programs goals are not aligned to company goals

Creative spaces are often associated with isolated gangs of innovators working independently of any large organisation. This stereotype has some layers of truth to it. And separation can be important to successful innovation. This is especially true in enormous companies where the cogs of bureaucracy can ensnare and strangle new ideas to death.

But actually, separation isn’t necessary for creation; and being part of a company is seldom a problem on its own. What creates issues is that the freshly-inaugurated Innovation Center doesn’t possess a clear strategy that’s aligned with the company’s. Or even worse, it doesn’t really have one at all. It’s casting a wide and ineffective creative net, so to speak.

There is a danger that innovation teams within businesses can actually become more of a disruption that a service. The term “innovation theatre” is often bandied around – used to describe the perceived circus of labs with no common strategy in place. Some labs are opened up simply as tick-boxing exercises to demonstrate an innovative streak, yet are closed down just as quickly. 

Why are these labs such ineffective flashes in the pan? Labs are locked back up either because they are generating ideas that bear no resemblance to anything like what a customer needs, or simply because these ideas are never seen through to completion. 

4. Innovation Programs lack KPIs

Innovation projects are rarely spoken about in the language of KPIs. This is the language that commercial projects are discussed and planned in. Decision makers should firstly consider the long term implications of opening an Innovation Center. Weighing up these implications, they should assess to what extent it would prove an addition or a disruption to the business. And with this in mind, work to put in measures that will ensure new ideas are generated and executed within the companies forecasted growth. 

Considerations should include:

• Vision of clear goals for the lab. Both intrapreneurs and company leaders can use this vision to comprehend what they are working towards. Understanding the key question, what is the purpose of this innovation? Framing innovation in language of KPI, such as “from/to” statements, is a good way of aligning innovation with commercial growth.
• Working alongside growth. Once an idea has been assessed as beneficial for the company, where will the additional support come from in order to keep the idea growing? If a particular innovation is predicted as disruptive, perhaps it can be developed further in separation of the main organization? There are options to place innovations in accelerators, or incubators that will help them progress into the concept that they have the potential to be. 
• Handling personnel. Within any Innovation Lab there are plenty of people working hard on new concepts. At this base level, innovators are proposing and testing ideas in unknown territory. At the other end of the process are the end-users of these ideas. These are the customers; and it is their problems that these new ideas will potentially help. It is the job of company decision makers to ensure a clear and close line of communication between the customers (and their needs) and the innovators (who’s successful initiatives will solve those needs). 

Services delivered by ENO8 help empower companies to design and develop innovative, impactful digital products. Our partners realize real business returns from new technology initiatives because we arm them with our proprietary innovation process and a best-in-class, experienced team. Through working with us, our clients move faster, reduce their risk, and increase the impact of bringing new digital products to life. 

We understand innovation. We believe innovation initiatives should be measured in outcomes that deliver value. We help companies uncover disruptive opportunities, inspire ideas, and actualize big thinking.