While there’s PR value and cultural topspin in simply having an incubator, the point is to ensure you get more powerful pipelines and attractive ROI on all the resources you pour in. Here’s a short, sharp set of killer questions to help stir up meaningful, profitable change.
Nine Killer Questions That Will Make Or Break Your Innovation Lab…
Everywhere you look these days, there’s an announcement about another Fortune 500 company launching some form of innovation lab, hub, or incubator (I’ll pick ‘lab’ as a universal proxy here).
The rallying cries embedded in these announcements have a common ring to them. “We need to be nimbler.” “We need braver ideas.” “We need more disruptive thinking.” The impetus behind it all is an interesting mix of bona fide necessity and a host of less rational factors.
The establishment of an innovation lab is rarely a first move For a CEO, the ability to have a more rapid response to market disruption and a robust innovation pipeline are essential. Launching an incubator delivers a message and a mechanism to get that pipeline pumping. But the establishment of an innovation lab is rarely a first move. It’s often what comes next, after attempts to raise performance by changing processes and players have failed to move the needle. The opening of an incubator is also a sign that a realization has taken hold that relying solely on M&A to buy innovation is unattractive, unsustainable, or both.
Another rational driver is the irresistible promise of Lean Startup. In the wake of Six Sigma squeezing the fat out of every corner of the company, the tenets of Lean Startup evoke visions of huge innovations arising from paltry investments with minimal initial risk. What CEO could ever say no to that?
As for the less rational forces, one of them could be described as startup envy. The contrast between breakout, disruptive startups plucking billions in value out of thin air and mature businesses limping along with sluggish organic growth rates, creates a craving for a piece of that startup trajectory.
Also in the mix is a splash of competitive paranoia (If my rivals have one, I need one too!), a spritz of internal PR (Hey you Millennial recruits, we’re not the stuffy monolith you thought we were!) and a stitch of trendiness (Phil, are you telling me your company doesn’t have an incubator? That’s so last year!).
There’s just one catch. The quiet truth is that the success rates of these incubators are wildly varied from company to company.
While there’s PR value and cultural topspin in simply having one, the point is to ensure you get more powerful pipelines and attractive ROI on all the resources you’ve poured in.
So if you’re about to make the incubator plunge, or if you’ve already done it but are facing challenges, how can you ensure your incubator delivers big, durable value?
The Nine Killer Questions
From my extensive experience with labs at varying levels of maturity, there’s a short, sharp set of killer questions that make all the difference between the incubators that just stir up a little buzz, and those that stir up meaningful, profitable change.
1. What Problem Is My Innovation Lab Really Trying To Solve?
This seems so obvious that it’s implicit, right? Yet many big companies jump into incubator mode without a clean, clear answer to this. Often they’re rallying behind a broad statement like “we need bigger, braver ideas.” Or they’re mistaking a symptom for a problem. Contrary to popular opinion, “my pipelines are barren” isn’t actually a problem; it’s a symptom of something else that’s broken – be it a flawed growth strategy, a talent problem, a technology gap, lack of a process for shepherding ideas, or other structural issues.
In many organizations, closer inspection reveals the real problem is the development of ideas that are great for only the consumer OR the business , but rarely great for both. Solving for both is a prerequisite to in-market success. Unless it’s specifically designed to solve a core problem, adding an innovation lab is unlikely to fix the underlying issue. Without clarity on the real underlying problem, the outputs of the incubator will fall victim to the same issues that bogged down other innovation efforts that came before.
2. What’s The Relationship Between The Lab And The Company’s Growth Strategy?
Like the first question, this one is dead obvious, too. But without a clear answer, you risk the hub going off and doing an amazing job exploring the landscape and finding interesting opportunities – only to have them burn up upon attempting to re-enter the business, because they’re merely “interesting,” rather than strategically important initiatives. Without this connection, incubators can default to a marginalized role where “fascinating little things happen that our real business can’t do.” If the company’s growth strategy requires the scaling up of big new ventures, the lab should be conceived and designed to get there. Clear connection to the growth strategy is your lab’s best friend.
3. What’s The Carve-Out Defining Where The Lab Plays Vs Other Teams Responsible For Creating The Future?
Clear “where to play” decisions are critical for the success of any unit of the business. But unlike other business units, the lab has no built-in center of gravity; it needs to define one relative to those of the other business units. Defining the carve-out for where the lab plays ensures that the lab is able to roll out innovations effectively. The lab shouldn’t merely duplicate the efforts of mature business units , but must create unique incremental value that will ultimately be scaled up.
Some companies manage this carve-out on time horizons, others on categories, business models, or types of innovation (incremental vs adjacent vs breakthrough). There are a number of watch-outs here for lab leaders. I’ve seen cases where labs are pushed to work at the remote fringes by division heads, who don’t want the incubator meddling in their business or competing with their own innovators, with little intention of acting on anything the lab comes back with.
Google’s recent restructuring under Alphabet helps clarify the once-blurry lines between their core search business and the company’s braver, forward looking experiments. It frees the lab to pursue bets like the self-driving car, unencumbered by questions of what that has to do with the core business.
4. Who Is The Lab’s Primary Customer?
Saying “the lab works for the company” or “we work for the customers” is true but unhelpful. The question of whom the lab should treat as its primary internal customer is a critical one. Is it the CEO? Is it the CMO who is tasked with pushing the company’s brands into new whitespaces? Is it the Chief Growth Officer tasked with getting the company into new lines of business? Or is it the heads of the business units, who may have the ultimate say in what incubated ventures get scaled or go off to that purgatory of “interesting little ideas”?
5. What Are The Lab’s Measurable Goals And Deliverables?
What’s measured matters, clarity on goals and metrics is mission critical Is the primary focus on driving strategy, growing revenue, adding capability, attracting talent, delivering learning, or other? Is success defined, for instance, as defining new whitespaces, getting to proof-of-concept within pre-defined whitespaces, or getting gestated ideas embedded in divisional pipelines? What’s measured matters. Clarity on goals and metrics is mission critical, as is separating stretch goals from minimum required delivery and the corollary of defining the required project flow, based on assumptions about success rates of the projects running through the lab.
6. What Socialization Methods Are Essential To Impact?
If you keep opening the oven to see if the muffins are cooked, they never actually cook. The lab needs enough free runway to explore and develop fledgling ideas without hordes of company stakeholders looking in. However, working in isolation can reduce the odds of incubated ideas successfully re-entering the business. Successful labs make smart choices about when to socialize, what to socialize, with whom, and how often. It’s so important that it should be thought of as part of the design of the lab and its cadence of work.
Marriott recently launched a global food and beverage incubator, CANVAS, which has led to the launch of over a dozen live, in-market restaurant and bar pop-ups around the world. While local entrepreneurs and hotels run them, the learnings are shared across the organization in order to help Marriott improve globally.
7. For The Talent In The Lab, Is It An Outpost Or A Durable Career Path?
A lab is a relatively low-risk bet for a big company. The cost is easily contained and tracked, and the worst thing that can come of it is nothing. But for the talent working in it, the risks are quite high. While the people most drawn to innovation will naturally have higher risk tolerance, the career risk of leaping from a comfortable operating role into the fluid work patterns of an innovation lab is significant. This is particularly true with newly established labs with lean resources, little track record, and no clear sightline to permanence.
Without world-class talent, you’ll never have a world-class lab. So are you selling potential members of the team a posting or a path with a long-term career trajectory? A key piece of this is the tricky art of defining performance metrics and incentive schemes for lab staff. Labs need to feel and be entrepreneurial in nature. Entrepreneurialism is powered by having skin in the game. The incentive scheme you put in place is critical to having that entrepreneurial culture and behavior take root.
8. When Do I Need To Think, And When Do I Need To Build?
A great feature set or a sexy UX on a bad idea is just a more enjoyable bad idea The most successful labs are the ones that temper the temptation and rush to build right away. They devote time to developing the strategy and ensure they’re building the right thing. There are landmines on either side of this divide. Agile development models rightly urge us that too much navel gazing fosters inertia. But at the other extreme, the rush to build can divert attention away from big, hard unanswered questions around the strategic and commercial value of an idea.
A great feature set or a sexy UX on a bad idea is just a more enjoyable bad idea. In the right moments, prototyping brings transformational learning to the surface, upping the odds of project success. But in the wrong moments, it’s only good for the companies paid to do the prototyping.
9. How Do I Choose The Right Partner?
The skill sets of external partners are widely varied, ranging from analytically based strategy firms, to methodologically driven design firms, branding agencies, research firms, and digital shops that build things. Open innovation specialists may fall in the mix, too. Making things more confusing for lab heads looking for partners, many firms are trying to stretch their offers more broadly. Management consultancies are trying to bolt creativity onto traditionally analytical skills. Brand firms are rebranding themselves as innovation firms. And development shops are trying to migrate upstream, attempting a leap from execution into the complex strategic and conceptual questions at the blank-page, fuzzy front end of innovation.
What I hear from the lab leaders is that while many of these firms may be living in Beta – evolving value propositions and hiring new skill sets – their DNA is what it is. Firms that built their reputations on analytics will always have that bias. Product designers will always have bias toward product over strategy. In choosing partners, be clear about where you are in the journey and which capabilities matter most in that stage.
And The Answer Is?
The right answers to these questions for any given company tend to be highly situational – a function of multiple factors including its baseline innovation performance, the nature of what it does well, the various pockets of innovation resources across the organization, and the degrees of change playing out in its industry.
The ideal charter and design of an innovation lab, even in two direct competitors, may be wildly different based on these other factors.
But, the first step towards getting maximum impact out of the lab is to obsess over these questions, then drive clarity around them. With those answers in place, your odds of success take a big turn for the better.