It seems that everyday you can read about a different innovation lab or incubator being set up in a large organisation. Driving this trend to develop innovation capabilities is the fact that the competitive environment is increasingly challenging for large organisations who are under pressure to do more than just compete with the similar peer companies in their verticals.

They know they need to set themselves up for the years ahead in increasingly dynamic, competitive climates where no incumbent market leader seems solidly immune to external disruption.

The rationale for these innovation labs and incubators is clear; but the catch is that success rates vary wildly varied from company to company. While there is cultural and PR value in simply having an innovation lab, the point is not just to achieve column inches.

Keeping on top of the latest technologies

Innovation labs are a way for many companies to rapidly ignite declining pipelines, foster a culture more conducive to innovation, and also attract talent and future innovation leaders. They’re also a way to ensure the company is keeping pace with rapid and often unpredictable changes playing out in real time all around them.

Technology is often at the heart of these changes. It is little wonder that 38% of the world’s top 200 companies have established innovation labs, and most of them are explicitly or implicitly focused on harnessing technology.

It's important to create an innovation lab for the right reasons

Impacting the organisation

But for many businesses, there is also a realisation that these labs need to catalyse not just shiny new products, but a shinier new company — which manifests as impact on company processes, approaches, and culture.

In an era when attention spans continue to get shorter and there is more willingness to experiment with new products and services, companies who once could hold a leadership position for years without trying very hard are now challenged to keep pace with escalating consumer expectations in better, more personalised, and more efficient ways.

Engagement between a company and a customer has changed from a simple matter of messaging and purchase to a more fluid and context-specific set of thin and transient connective threads. This is why many labs aim their explorations of technology at creating new totally forms of customer engagement.

Expectations bleed from one experience to the next

Across industries, there are new consumer expectations around speed, responsiveness, and personalisation. Uber is certainly a poster child for this dynamic. In the years since Uber’s launch, it has leapt out from ride sharing to shape the future of how physical things are delivered on-demand.

Uber’s success has inspired other innovators to mobilise their own moral equivalents in other verticals, and spawned the term “Uberfication” as a strategic encapsulation of the transformations they’re unleashing.

This cross-fertilisation of expectations via thoroughly unrelated businesses seems to be playing out with unprecedented frequency and velocity. The result is a consumer whose expectations are not necessarily being driven by your direct competition.

Uber is leading the way in the innovation stakes

Framing the fundamentals: Tips for building a successful innovation lab

Identify the problem the lab is there to solve

Don’t mistake a symptom for a problem. Perceived problems can sometimes be a symptom of something else that’s broken — be it a flawed growth strategy, talent problem, or technology gap. Ensure the lab is designed to solve a core problem.

Define the metrics

What’s measured matters. Is the primary focus of the lab on driving strategy, revenue, adding capability, or attracting talent? Ensure there is clarity on the goals and metrics.

Prioritise socialisation

The lab needs runway to explore and develop ideas without hordes of company stakeholders looking in. But working in isolation can reduce the odds of incubated ideas successfully re-entering the business.

Motivate your talent

Designing the careers of the talent in the lab is as important as the working process, because without world-class talent, you’ll never have a world-class lab. A key piece of this is defining performance metrics and incentive schemes for lab staff. The incentive scheme is critical to nurturing an entrepreneurial culture within the lab.

Don’t let the making overrun the thinking

Find the balance between developing the right strategy and building. The rush to start prototyping can divert attention away from big, unanswered questions around the strategic and commercial value of an idea.

Bring in the right partners

Great labs run lean. They may not need a certain skill set full-time, but knowing when to bring in specialised help in key moments will ensure more effective problem solving while containing the head count in the lab.

An innovation lab can help push a company into new territories, reassure stakeholders, and entice consumers. But the way a lab is structured, funded, and run is critical to ensuring that it is able to deliver innovations that the organisation can adopt, while also meeting and foreseeing consumer demands.