Top 5 Missteps of Innovation Labs

Innovation Strategy

A successful corporate innovation lab, incubator, or accelerator depends upon three things: people, people, and people. That’s what I learned by speaking with the heads of innovation labs at 12 Fortune 500 corporations over the course of eight weeks. These market leaders came from a range of industries: healthcare, apparel, construction materials, chemicals, high-tech, food & beverage, hospitality, insurance, logistics, and retail. We heard about the challenges and successes of their different experiences, but despite their different industries and companies, they had a few things in common.

I asked, “Looking back, what would you have done differently as an innovation leader?”

Here are the top 5 corporate innovation missteps, where expectations did not meet with reality:

  1. Putting Process First: People should come before the process
  2. Prioritizing New Fresh Thinkers: Outsiders lacked the advantages of insiders
  3. Judging Ideas Too Early: Ideas were judged before they were tested in the market
  4. Gates Limit Progress: Guardrails gave more freedom and less bureaucracy
  5. Overemphasizing Portfolio Management: Portfolio management kept venture champions at arm’s length

And now in further detail...

Misstep 1: Putting Process First

Each of the firms spent a lot of time getting the new process in place before building a team. Designing the process was worth it, but it created expectations on the part of the organization. Eventually, they found they had too few people to operate the lab/incubator/accelerator process, and those people had a learning curve once they started. This led to unmet expectations for speed of delivery.

In their words: “The incubator design and the senior executive support got people excited, but it was realistically three years before we had an experienced team in place to create real business results. We had to go slow early on so we could go fast later.”

Recommendation: First, build a team that can operate your innovation process and level set expectations for ramp-up time before promising outcomes.

Misstep 2: Prioritizing New, Fresh Thinkers

The desire to be more entrepreneurial was universal, so most firms went looking for outside talent that had startup and incubator experience. The problem was that these fresh thinkers is that they knew nothing about the corporation and thus had a steep learning curve. The firms that relied on attracting intrapreneurial insiders had better results because of their internal networks.

In their words: “When I hire somebody from the business, I tell them, ‘I’m hiring you for your network. And you have to keep building it while you’re here.’”

Recommendation: Recruit intrapreneurs or internal hires in your company with strong networks.

Misstep 3: Judging Ideas Too Early

Pivoting, or a willingness to change course based on our learnings, is not in the DNA of many large organizations. Without a belief in pivots, there is a strong propensity by executive sponsors to judge ideas early, before they have a chance to be tested in the market. We heard from our innovation leaders that these senior executives had to learn to trust the messy, iterative incubation process and make decisions based on what customers tell us. Focusing on meeting customer needs was important, not necessarily the success or failure of the specific ideas. You can kill an idea, but you can’t kill a customer problem except by iterating on it until you find a solution.

In their words: “We refer to early concepts as solution hypotheses. That’s how we reinforce the notion that these are merely hypotheses and are subject to change.”

Recommendation: Focus on customer needs instead of the success (and failures) of ideas or concepts.

Misstep 4: Gates Limit Progress

Most of the firms we spoke with had strong stage-gate models for incremental improvement. As a result, the executive sponsors wanted stage-gates for their innovation projects. This slow decision-making process conflicted with the need for the rapid in-market experiments. These market leaders found success with guardrails, instead of gates. They set up pre-approved boundaries and let the project teams run experiments without waiting for permission.

In their words: “If you don’t trust your teams, then sure, you need governance meetings. But breakthroughs require a steady pace of test-and-adjust — you’re not going to govern your way to success.”

Recommendation: Set guardrails instead of gates to help project teams get to answers faster instead of impeding their progress.

Misstep 5: Overemphasizing Portfolio Management

Executive leadership teams take comfort in the idea that the innovation lab will benefit from the portfolio principle; they can tolerate some failed projects as long as they have diversity. Unfortunately, many interviewees found that managing the portfolio often took more time than supporting the individual ventures. Every growth board member had ideas for fixing the portfolio mix, whereas few offered to directly help the ventures. The emphasis should have been flipped 180-degrees, so executives felt accountable to the ventures themselves.

In their words: “At our firm, we can be quick to poke holes and slow to patch them. The mind-set shift by our executives toward being problem-solvers was crucial, and it took two full years.”

Recommendation: Require board members or advisors to be champions for specific ventures rather than hands-off portfolio managers.

What You Can Do

So, what can you do to support your innovation group?

Innovation isn’t easy, and building your innovation system in a large organization is sometimes even tougher. Finding the right people, changing mindsets, and getting your leadership to be involved in the innovation process will help make that challenge easier.

When it comes down to it, here are our top 5 recommendations for setting your next corporate venture up for success:

  1. First, build a team that can operate your innovation process and set expectations for ramp-up time before promising outcomes
  2. Recruit intrapreneurs or internal hires in your company with strong networks
  3. Focus on customer needs instead of the success (and failures) of ideas or concepts
  4. Set guardrails instead of gates to help project teams get to answers faster instead of impeding their progress.
  5. Require board members or advisors to be champions for specific ventures rather than hands-off portfolio managers

And if you haven’t yet, check out our free Corporate Innovation Playbook that combines all of these insights from Fortune 500 companies as well as offense and defense checklists to help your corporate innovation group navigate the waters ahead.

Author

Tim Ogilvie

Partner
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