Innovation labs versus corporate startup engagement [Guide]
Innovation labs have become a popular way for corporations to manage innovation effort.
The concept is simple enough -- come up with an idea, get the approval to green-light the project, hire some smart people to build it, engage with experts and take it to market.
According to CBInsights, companies like Unilever, Cisco, Huawei and several others have launched new innovation labs just in the past quarter, while others like IBM (1966) have been around for over half a century.
Bridging the gap between today's core business and tomorrow's new offerings, innovation labs often implement creative techniques and a thought-provoking environment in order to foster ideas.
At their core, many labs promote many of the same methodologies seen in the world of entrepreneurship in hopes of capturing the same lightning in a bottle seen in silicon valley and other startup hubs.
But can it be done?
A startup mindset
As a few examples, the CVS innovation center is:
"focused on creating new digital health solutions. Operating like a startup and adhering to concepts like an accelerated idea-to-market schedule and a fast-paced testing and implementation process, their projects include simple things like mobile phone pharmacy reminders and complex ones like apps that turn those phones into remote diagnostic tools."
"internal lab brings together product strategists, developers, and project managers to build innovative new products, relying on a lean startup mindset".
Walmart’s innovation lab is:
"designed to help them stay competitive in the increasingly online and mobile world. Workers are even organized into “mini-startups,” each with their own projects.
MetLife’s LumenLab is a sprawling facility located in Singapore, where:
"innovation experts from a variety of fields, many with startup experience, focus on developing new customer-driven products and solutions. Their goal is to “rewrite the role of insurance in people’s lives.”
McKinsey Digital Labs uses:
"modern fast-paced, startup-style methodologies like Design Thinking, concept sprints, DevOps, and more to deliver innovative results for their clients based on their specific needs."
Cardinal’s Fuse Innovation Center is:
"patient-focused and operates on a startup mentality geared towards creating innovations on an accelerated timescale, then rigorously testing them".
So what's the problem?
You may have already noticed a central theme building in the descriptors above:
Everyone wants to be like a startup.
The offices are centrally designed workplaces to replicate a similar environment. The tired, fundamental methodologies like "lean" and "design thinking" are brought in for fresh air.
Things are put on rails and promote buzzwords like fast-paced, rapid-prototyping and minimum viable product.
Employees are invited to think like founders and become intrapreneurs or builders. However, this myth exists in a world free of the deep, necessary hunger to sink or swim.
Because of this, innovation labs pose a serious problem whenever they try to build the startup theme park without having an understanding as to exactly why the rides operate so well.
The fourth-wall breaks down whenever the factor of risk comes into play -- startups are not truly a startup without risk.
Startups are not truly a startup without risk.
From spending the money in their own bank accounts to opportunity costs of attempting something inherently volatile, founders exist in a constant state of unknowns, conjecture, and variables.
What's more, a corporate environment is inherently one of risk aversion.
In fact, one could argue the only business ecosystem where attempting something and being okay with the very likely possibility of failure is in the startup sector.
True innovations come from the understanding of accepting both risk and failure and consistently iterating until both components no longer exist.
But this isn't an opinion piece.
Innovation risk is a well known phenomenon. Accenture writes,
Some, of course, would argue that responsible risk management necessitates a cautious approach to innovation. Only startups, they say, can afford to court the risk of failure. Global companies are complex entities, held together by a web of controls. Loosening those controls to give innovation teams free rein could incur unacceptable risks and costs, not only for the company but for its various stakeholders as well.
...as a result, promising ideas are often smothered. And while many of the innovation initiatives that do gain approval are low risk, they offer only low returns—incremental improvements that usually do little more than maintain market share.
The motivation mindset is paradoxically different.
Unless corporate employees need this <thing> they're working on to make it because they have put their entire career on the line -- it's not the same.
Unless the dollars are coming from your own bank account every month -- it's not the same.
Unless employees skip important things in their lives to make even the slightest ounce of progress -- it's not the same.
Unless they in the trenches, every day, trying to learn how to stay up to date on the latest trends or networking to the next possible opportunity because it could make or break the entire project -- it's not the same.
So it's high time the corporate world puts a stop to wanting to be like startups, trying to replicate their ways and even more importantly -- posing like them.
Now it's an opinion piece.
This is exactly what Steve Blank meant when he coined the term "innovation theater", or more directly; building hype in what you're about to eat and wondering why the food didn't taste as good as it smelled.
Mark Kuznicki writes about three signals to innovation theatre:
But there is hope!
Corporations can and will bottle that oh-so-precious startup flavor in a jar, but it has to be through engaging with real startups and not trying to put on the founder costume when they drive into work.
In a previous post, we wrote that innovation is a simple formula:
Innovation = Invention + Business Model + Customer Value
The core of this formula exists to shine a light on of two lesser-known corporate myths: one, the invention must come from someone internally and two, the business model and customer value won't be there without it.
Ideas are cheap and new information is the most valuable commodity on earth.
Ideas are cheap and new innovation is the most valuable commodity on earth.
For these reasons, and the ones listed here below, innovation labs will never outperform startups.
So why should corporations be working with startups instead?
Because they're always late to the game
By the time the corporation decides that they're going to run something through the innovation lab, someone is already working on it, and they're miles ahead.
Consider this -- the motivation to build something new generally comes from an insights trigger, right?
For corporations, and the people who work there, these insight triggers come from a few different sources.
Things like ...
BUT, by the time that information reaches the right person and they do even further diligence on the subject matter, it's already too late.
A startup founder has been hard at work on it for months.
Chances are, a startup was the person that influenced the insight trigger in the first place.
Because founders know what they're doing
Whereas innovation managers at corporations have to approach things from a generalist type of perspective, startup founders eat, live and breathe their subject matter.
Everything that they consume, whether it be the newest podcast, the latest trends or a killer news article, is translated into how it can make a difference to the project they're working on.
More importantly, the founders generally have a degree of expertise in the field they're working on -- from the students that are fresh out of the dorm room, to the industry veteran that has decided to go out on their own, the knowledge base is in their favor.
That's not to say a corporation couldn't simply hire the person they believe to be the best fit for the job, in fact, they do it all the time -- but that process takes even longer.
(And it has risk. Remember we talked about risk, right?)
Because startups don't have red tape
When the manager of an innovation lab is hit with the insights trigger, which provokes the initial green light on a new project, it generally initializes a series of events.
First, further research, because covering your ass and not looking like someone who shoots from the hip is important (at a corporation).
Depending on how many consultants or outsiders are brought in, this process could take months by itself.
Red tape is an idiom that refers to excessive regulation or rigid conformity to formal rules that is considered redundant or bureaucratic and hinders or prevents action or decision-making. It is usually applied to governments, corporations, and other large organizations.
Put together a convincing slide deck using the research.
Get time on someone's calendar.
Pitch to the appropriate people.
Get the funds for the project (maybe).
Aaaand now several more months have passed, even more if it's during a holiday season, graduation season, memorial day etc..
Hiring the right person to lead this new initiative and ensuring they're not only equipped with subject matter expertise but also direct industry knowledge, depending on the corporation.
Did you know the average interview process at a corporation takes 28 days -- even longer for executives and managers. (And that has doubled since just 6 years ago).
THEN, that person is going to hire a team to do the work and around it goes once, twice, ten times more.
Last, add HR, a full serving of legal, two cups of supply-chain, vendor selection, diversity initiatives and TPS reports until we're all having a lot of time-consuming fun.
Because startups are only working on one project
Yep. Just one.
Their entire focus is this solitary <thing> which is directly attached to all of their hopes, dreams and whatever other tertiary elements they've put on the line to make this work.
Not only that, the hours don't end at 5 pm on a Friday. They're just getting started.
If a train leaves San Francisco headed for New York and runs for 8 hours a day, 5 days a week... and another, faster moving train goes 12 hours a day 7 days a week... you get the idea.
Because startups have their own team and equipment
While engaging with startups has many cost saving benefits, one of the most overlooked is the people, their salaries and their equipment.
Corporations are paying market-rate salaries to everyone working within their innovation labs.
And dental. And 401k. And __ternity leave.
Even the innovation lab itself comes at a huge expense, having been designed to replicate the look and feel of a startup environment.
Man... isn't this place so swag guys? Guys? Yolo?
Corporations are wise to try and tap into the "startup way" of doing things -- because they know that's where innovation is.
The smartest move of them all, however, is simply going to directly the well itself and seeing if there is an opportunity for collaboration.
In sum, this is what a corporate executive sees when they look at their startup-styled innovation lab:
And this is what a startup sees when they look at the same thing:
You may also enjoy:
The 10 Ways Corporations Can Engage With Startups
Corporate CEOs Have Failed to Engage With Startups
About the Author: Anthony W. Richardson is the Founder Gearbox.AI. In his prior life, he was a hired gun for venture capitalists, an author, a speaker, an entrepreneur and an advisor to global accelerators with a focus on growth, finance, and scale.
About Gearbox: Gearbox.AI provides the leading corporate-startup engagement solutions designed to help innovation leaders, corporate development professionals, and strategic partnership executives master the art and science identifying and aligning with what's next. Through a unique combination of a corporate membership community, AI-driven software, and cutting-edge expertise, Gearbox is focused on helping corporations keep pace in an ever-changing digital world and providing startups with new avenues for growth. The result for modern innovators is unprecedented agility, risk management, and superior results. Headquartered in St. Louis, MO with offices in Denver, Chicago, and Los Angeles, Gearbox serves as a pivotal partner to Fortune 500 corporations and a champion to innovative startups.
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