With “innovation” as the byword for business growth, many traditional companies are leaning into the concept of an innovation lab. They’re opening entire offshoots of their companies that are entirely dedicated to the pursuit of new ideas, products, and services. Enterprise companies across all industries, including Walmart, Citibank, H&M, and Starbucks, have opened innovation labs to help them fast-track new products, understand market trends, and develop solutions for customers.
As the juggernauts of industry do, other companies follow suit. According to a survey by the Boston Consulting Group (BCG), 75 percent of companies that self-described as strong innovators partnered with incubators in 2018—up from 59 percent in 2015. Here is more about how to define innovation labs, and how they work.
What is an innovation lab?
Innovation labs—also known as hubs, incubators, or accelerators—are business units that employ the methods of agile startups, with the goal of devising novel ideas that can either disrupt or complement the overall company. Creative processes like brainstorming and design thinking can drive ideation and the development of new innovations.
Innovation labs function in many different ways. They can operate completely separately from the parent company, or be set up internally and staffed with existing employees. They can also refer to programs set up for internal employees to ideate. Some, such as WeWork Labs, are third parties that partner with companies who want to be strategically connected to startups or want to host programs for employees.
Companies can also leverage the knowledge of cutting-edge experts in the field, such as academics. Eighty-one percent of companies, according to BCG, partnered with academics, and 83 percent partnered with other companies, up from 60 percent and 65 percent, respectively, in 2015.
What do innovation labs do?
An innovation lab is tasked with coming up with new ideas, executing them, and iterating until the idea is fully executed or integrated into the business. Those who work in the lab draw from cross-functional expertise and collaborate to create products and services, often for the parent company. The innovation lab may also conduct market research, or keep abreast of potential disruptors in the field. Often, it does a mixture of both. A bank may use its innovation lab to create a smartphone app that makes it easier for consumers to manage their money. A telecom company might use its lab to create and test out different types of customer service technology.
The entity is usually separated from the parent company in some way, because that’s the best way to think outside the company’s business-as-usual four walls. In order to come up with novel solutions, companies recognize they must break out of the typical, potentially bureaucratic ways of doing things. The mere fact of having innovation lab employees sit in a different space than those working at the core business has been shown to promote new ideas.
Why are innovation labs important?
They also signal to employees and potential employees that a company is committed to changing for the future. That helps attract and retain talent, particularly from the younger workforce who increasingly want to work for forward-thinking, fast-paced companies.
Innovation in business is important because it makes it more likely for companies to grow, increase revenue, and be protected from competition and disruption. It’s a lofty goal that is difficult to execute, particularly for large companies that may have done business the same way for many years. Innovation labs offer an opportunity to inject a fresh outlook into an organization—a big reason for their recent proliferation.
Two examples of successful innovation labs
Solaris Labs, Liberty Mutual, Boston
Liberty Mutual opened their innovation hub, Solaris Labs, in a WeWork in Boston. The mission of the lab is to build and test new products based on customer research and emerging trends. It does this by operating like a startup, partnering with universities on relevant research, sponsoring accelerators that incubate startups, and engaging with startups in the Boston region.
Being in a space that’s physically separate from Liberty Mutual’s headquarters in Boston is invaluable in jump-starting novel ideas, according to Adam L’Italien, Liberty Mutual’s director of innovation.
“Moving out of the corporate office empowered us to think and work differently,’’ L’Italien told the Boston Globe.
Part of the allure of stationing the lab in a WeWork was to access the collaborative, fast-paced energy of the space. It signals to employees and potential employees who may associate the Liberty Mutual brand with a traditional workplace that this particular unit is a fast-paced, forward-thinking organization.
“We’ve become a talent feeder for the rest of the company,” L’Italien told The Atlantic. “We’re able to show people we do things that are less obvious when you think about Liberty and insurance products.”
SC Ventures, Standard Chartered Bank, Hong Kong
When Standard Chartered Bank decided to open its innovation lab, SC Ventures, the bank knew they needed a bright, open space to cater to the innovation, creativity, and collaboration they wanted the lab to foster. The Hong Kong–based company partnered with WeWork to renovate the ninth floor of the Standard Chartered Tower into a completely new space called the eXellerator Lab.
After a complete overhaul, the lab features many kinds of meeting rooms, flexible classrooms, and a large open space to accommodate various events and workshops. The lab also employs design elements specific to the locality and brand, including wallpaper inspired by Hong Kong tram tickets and high rises, and the bank colors in works of art on the wall. “Our brand-new space in Hong Kong was developed to provide a completely different environment,” said Alex Manson, global head of SC Ventures. “It lets us bring ideas, skills, and importantly, individuals, clients, fintech entrepreneurs, and colleagues from the bank together to enable innovation.”
The lab has become a vibrant community where clients and industry partners can gather, one that is already contributing to the bank’s core business. Ideas out of the eXellerator Lab have helped the bank revamp their call centers, develop a web chatbot, and relaunch their mobile app.
Mistakes to avoid when opening an innovation lab
Innovation labs, when lacking clear goals or road maps, sometimes fall prey to what is known as the “innovation theater.” This occurs when companies decide to open an innovation lab in order to market the fact they have one, without taking the time to outline specific goals that would make it successful.
Before launching a lab, companies should ask:
- What’s the overall goal of the lab? To raise revenue? Research potential disruptors? To partner with or to acquire related startups? Or to create new products and services?
- What will be its relationship to the parent company?
- Who will make up the staff of the lab? Who will serve as the program manager?
- What are the three main challenges the lab is trying to solve for?
- How will the output be measured and judged?
- How will ideas generated be integrated into the broader company?
- How much will a lab cost?
- Do we have the expertise to create daily programming to run the lab? If not, who should we partner with to deliver on programming?
One thing to remember is that not all innovation in business has to involve coming up with a novel, moonshot idea. Oftentimes innovation happens when a company seeks to improve a current business process.
With actionable goals and inspiring office spaces, innovation labs are better set up for success. Their proliferation in recent years means that they’re quickly becoming an indispensable part of businesses of all sizes.
This article was originally published on October 11, 2019, and has been updated throughout by the editors.
Noushka Green is a senior business development manager at WeWork Labs, which connects the world’s largest enterprises with a global community of startups. She has more than seven years of experience in enterprise sales and partnerships. Prior to WeWork, Green worked at Merrill Lynch in private wealth management, helping individuals and family offices with estate planning, retirement planning, and investment strategy.