How Innovation Labs Must Evolve

With the rise of entrepreneurial activity after The Great Recession, Innovation Labs became all the rage in corporate environments. Corporates wanted in on the energy, if not the spirit. The word “innovation” became a popular buzzword that meant so many different things to different people, that it almost lost all meaning. Is innovation marked by # of patents or # of squirt guns?

A decade and one massive pandemic later, many of these labs are long gone. The remaining corporate innovation teams are left wondering what their roles are. These teams always hoped and believed innovation meant bringing new massive growth opportunities to their businesses. However, innovation labs and teams were never (or at least rarely) going to create breakthroughs or disruptive innovations. It was a myth perpetuated by popular books, canvases, academia, and consultants. It’s not clear, however, that’s what the rest of the business believed.

The future of successful innovation labs is NOT to take on the responsibility of invention or figuring out new business models that will disrupt their industry. Rather, it is to become a “center of excellence” for supporting an “innovation mindset” throughout the organization.

Perhaps, they were underfunded for a reason. As digital transformation gathers real momentum, it’s worth asking: why didn’t innovation labs lead the way in digitizing their organizations? This was a failure on the labs’ part. It exemplifies their misalignment with their organization’s needs and priorities. These teams now have an opportunity to take a new look at what they should be doing.

The Proper Role of Innovation Labs (and teams)

Many innovation labs played an important role in demonstrating an entrepreneurial way of working. They used an innovation mindset that included adopting exploration skills, tools, and resources the rest of the organization could benefit from. Many helped identify future opportunities, built minimum viable products, and supported internal projects that led to new revenue. Their success came from supporting and being supported, by the core business.

This, of course, flies in the face of Clayton Christensen’s Innovator’s Dilemma, the misapplication of Horizon Planning, and the mythology of the ambidextrous organization. The problem of investing in new growth is still an issue inside corporations. However, there’s no evidence supporting the idea that non-technical companies, which are not inventing technology, need to do breakthroughs or disruptive innovation. The “disruptive innovation” era is over.

Labs must take care of the needs of the core business. Eventually, the new organization evolves from within, not through cannibalization.

Innovation teams need to double down on this. The complexity of the world, the whims of customers, and the endless disruptions (the big quit, inflation, recession, etc) all result in continuous uncertainty. The exploration expertise brought by innovation teams is designed to overcome such uncertainty. A customer-needs focus, rapid experimentation, and evidence-informed decision-making are required. By doing these things, the core business can hit its numbers, increase efficiency, and build the foundations for future growth.

The future of successful innovation labs is NOT to take on the responsibility of invention or figuring out new business models that will disrupt their industry. Rather, it is to become a “center of excellence” for exploration behavior, proselytizing, coaching, and otherwise supporting an “innovation mindset” throughout the organization. In my book, Disruption Proof, I describe 4 phases an organization might experience as they take on this people-centric view of digital transformation.

4 Phases to Creating an Innovation Mindset Center of Excellence (CoE)

Kickstart Phase

In the initial phase, a key element is to form a community of like-minded people who realize that a massive change in working is underway and are committed to exploring that inevitability. This might be done through some combination of in-person or virtual hangouts, internal newsletters, and exploration events. The focus should be on exploring different ways to drive near-term impact for the organization and developing a culture of empathy and experimentation. Run informal competitions or workshops, much like hackathons, that instead of building products or prototypes, build exploration skills.

Acceleration Phase

In the acceleration stage, the CoE begins forming a more formal foundation of support within the organization. They develop an expert viewpoint on the various innovation frameworks. They offer teaching and coaching in addition to actually doing some of the exploration work for core business initiatives. They seek out funding and commitment from leaders to act both as internal investors on growth boards and as a steering committee for the CoE itself. This bridge-building is important for silo-busting and making the innovation team more approachable.

Scaling Phase

The 3rd phase — scaling — has two parts; push and pull. The push involves the team continuing to integrate themselves into core business uncertainty. The team demonstrates how exploration increases the efficiency of execution and shines a light on successes. The CoE internally brands their work, removing “innovation” from the description, unless referring to mindset.

The pull is when momentum overtakes the need to push the mindset. The core business wants more. Back office functions establish new systems and scaffold them to protect the exploration work. There is a metamorphosis that ultimately promotes the transformation of the organization.

Enduring Phase

The final — enduring — phase is where a company has truly evolved into a resilient, aware, and dynamic organization. How to deal with disruption, complexity, and uncertainty is baked into the culture. Leadership changes, but the new way of working endures. Governance reinforces it, the corporate ladder rewards it, and human resources hires for it. The result is an organization that maintains its strength based on its DNA, secret sauce, competitive differentiation or what have you, yet remains flexible enough to weather the storms. It’s aware of new information coming from the environment, the economy, and across the world. It is able to make changes based on this new information.

Developing the Center of Excellence is a Journey

To be clear, these phases represent a significant journey for an organization. It does not happen overnight, nor is it likely to be as linear as laid out. Ironically, however, the success of innovation teams ultimately means that they do eventually get to work in the more distant future. To get there, however, these labs must take care of the needs of the core business. Eventually, the new organization evolves from within, not through cannibalization.

BRANT COOPER, The New York Times bestselling author of The Lean Entrepreneur and Disruption Proof and CEO and founder of Moves the Needle, is a trusted adviser to startups and large enterprises around the world. With more than 25 years of expertise in changing industrial age mindset into digital age opportunity, he blends agile, human-centered design, and lean methodologies to ignite entrepreneurial action from the front lines to the C-suite.

As enterprises adopt digital transformation, they’re finding the need for new roles and responsibilities. Check out this space or follow me on LinkedIn for the upcoming webinar, The Rise of Product Management.