Innovation Labs: Establishing a Model that Works (Part 2)
By Surabhi Reddy and Casey LeJeune

 

This is part 1 in a 2-part series on What Makes – or Breaks – a Successful Innovation Lab. Previously in Part 1, we introduced innovation labs and discussed some of the factors that can drive them to failure. Now, we’ll jump into what can be done to ensure their success.

 

Developing a cooperative, positive relationship between an innovation lab and the main organization is a hallmark of successful programs. By fostering a close, collaborative relationship between the innovation lab and main organization, it is more likely that the lab will adopt strategically-aligned projects that they can commercialize in a smooth fashion. Mark Ridley, a tech executive whose company has launched their own lab, remarked “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.”2

A research study of six innovation labs of well-established companies found that those that started small and grew organically were more likely to be successful.1 In this manner, the core group of innovators could maintain a close relationship with the main organization. In Part 1, we described how the failure of certain innovation centers was based on their overt focus on idea generation – with disregard for how to incubate and accelerate these ideas into something more concrete. This is where the expertise of the main organization comes in to play and ties bright ideas into development and production. This is a critical and often-overlooked resource available to innovation labs that start-ups (operating alone) may not have access to.

Collaboration between the main organization and innovation lab has the added benefit of allowing creativity to diffuse throughout the entire company. Through staff exchanges and creativity training programs, core employees learn from the culture of the innovation lab and build relationships. Researchers mention that this allows for the exploration of “less tangible benefits of maintaining an innovation hub, such as learning, inspiration, contribution to the creation of a culture of innovation, cross-fertilization of ideas, [and] motivation.”1


In Part 1, we described how the failure of certain innovation centers was based on their overt focus on idea generation – with disregard for how to incubate and accelerate these ideas into something more concrete.


Case Study 1: Capital One Labs
Capital One Labs, founded in 2011, acts as the company’s experimental technology incubator and accelerator. The innovation lab is widely regarded as successful through its development of a mobile banking platform and commitment to consumer research.3 The lab has spawned development, testing, and widespread use of mobile banking apps and features like SureSwipe (a secure, quick method to verify access to accounts) and Rewardly (a platform for users to cash in their rewards points).4 Capital One Labs work sites resemble those of start-ups: with bright, open areas, located in high-profile urban locations, and offering a dedicated café space for events like Hack-a-thons and speaker series. Yet, it was likely their corporate strategy that ensured their success amongst equally innovative competitors.
Capital One Labs heavily collaborates with the main organization – from the ground-level employee up through executive management. Mainstream personnel are transferred into the lab sites, to learn new technologies and experience the creative atmosphere. Labs personnel are transferred to the mainstream offices, where they work to implement new technologies and learn about development and implementation of ideas.3 Executives from different branches regularly meet to share knowledge and plan strategy. This structure allows experiments from the Capital One Labs to move into the core banking company in a short period of time. Additionally, it has developed a culture where creativity and talent can diffuse throughout the organization. Skip Potter, Capital One’s Vice President of Engineering says “Rob (i.e. Rob Alexander, CIO of Capital One), myself, and our COO meet monthly. When you have that level of commitment at a senior level going, ‘I want to see what is going well, I want to see what you are delivering,’ that’s pretty awesome.”4 Clearly, Capital One takes an innovative approach to the industry.

 

Taking the Right Steps Towards Success
Successful innovation requires tying strategic efforts to both short and long term goals, as companies like Procter & Gamble and Apple have demonstrated. According to Harvard Business Review, for an innovation lab to meet this goal, it must probe unmet needs to define its innovation ‘buckets,’ or niche areas to dedicate resources towards.5 This can be accomplished by meeting with a handful of executives, conducting consumer research, looking at new-growth efforts within the organization, and/or looking at competitive ideation. For tech companies, VentureBeat recommends the use of ‘technology connectors’ to help identify potential modes of disruption and better understand the demographics of their target groups.6 Assembling a team of stakeholders – entrepreneurs, academics, and investors – should be the first step that any innovation lab takes towards meeting its goals.


“The capital came not just from the accelerator fund but also its partners,” says Mike Batista, CEO and Founder of Quantified Care. “This is important because the innovation program introduced us to enterprise and other business relationships that could lead to tangible opportunities.”


The organization must also establish a framework to shepherd innovative projects in the right direction. This involves identifying ‘zombie’ projects that are shuffling forward and using company resources without direction or finding similar projects that can be consolidated.5 Too often an innovative center will act as an idea factory that continuously pumps out projects but without the proper direction or pipeline to see these ideas into fruition. The execution of these two steps (i.e. assembling a team and shepherding projects) can make the difference between unsuccessful and successful innovation labs.


Jordan Epstein and Matt Maurer, Co-founders at Stroll Health say: “Lab programs should take into account the different stages of a startup and create an innovation hub that provides lots of options and opportunities that spans those stages.”


Lastly, four factors have been identified as contributing to the decline of new accelerators in digital health. Examining these factors reveals 4 things an innovation lab must do to stay competitive:

  • Better understand the demographics of their target groups in order to tailor their services, and successfully marketing their activities
  • Diversify their benefits, and make it clear for start-ups what they can expect should they apply
  • Raise the level of awareness for their program in order to get the best start-ups
  • Find a niche in the market

“Accelerators or innovation hubs should absolutely be industry focused – this is critical for business development, mentorship as well as programming content – in order to provide maximum value to startups,” states Alex Zoller, Head of Product at TruClinic.


Case Study 2: athenahealth
athenahealth, a healthcare technology company that focuses on cloud-based solutions, uses their MDP (More Disruption Please) accelerator as an innovation lab to “bring together entrepreneurs, investors, clinicians and industry experts who share our vision of disrupting the status quo in healthcare.”8 athenahealth’s Marketplace features a list of potential partners in cloud-based healthcare that providers and investors can consider in their team-building process. The development phase of athenahealth focuses on identifying start-ups in their early phases that demonstrate high-potential. To shepherd these projects in the right direction, the company provides seed capital, client exposure, access to experts, and tailored programming. These resources have helped start-ups like Arsenal Health, which uses modeling to predict late or no-show medical appointments, and Hale, which allows providers to remotely follow-up with patients, to gain exposure to providers and develop their product into something successful. athenahealth has demonstrated two key features that predicate success in innovation – team assembly and providing direction to projects – to bring growth to early-stage innovative projects and allow them to enter and disrupt our healthcare system.

 

There still remains considerable difficulty in identifying what makes an innovation lab successful. Innovation centers have emerged in all different sectors – from automobile to banking to healthcare to telecommunications – and it is yet unclear how differences in these industries influence their success (or failure). Furthermore, the pressure from start-ups and competitors to radically innovate differs from company to company. While some innovation labs are focused on internal skunk-works, others inject innovation from external sources like start-ups – making it difficult to compare these labs side-by-side. We haven’t had enough time to evaluate the outcomes of many of today’s modern innovation labs. Still, companies can use many of the guidelines presented here to gain a competitive edge in the innovation arms race.

 

 

1J. O’Hare, P. K. Hansen, N. Turner and E. Dekoninck. Innovation Hubs: Why Do These Innovation Superstars Often Die Young? International Design Conferance. 2008.
2Mark Samuels. Why innovation labs fail and how to make them succeed. ZDNet. 2016.
3Bernard Golden. How to make innovation labs work for you. Hewlett Packard Enterprise Insights. 2016.
4Jennifer Elias. Why Capital One Labs is Banking on Experimentation. Fast Company. 2014.
5Scott Anthony, David S. Duncan, and Pontus M.A. Siren. Build an Innovation Engine in 90 Days. Harvard Business Review. 2014.
6Evangelos Simoudis and Steve Blank. How to build a corporate innovation lab that works. VentureBeat. 2015.
7AT&T Foundry.
8Athenahealth MDP Accelerator.
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