Every company needs to have an Applied Innovation and Labs Organization

In the Age of Digital, transforming and reinventing our companies every so often will be par for the course. From this point forward, it won't happen every 5-10 years, it may need to happen every 2 years and for some companies it may need to be every 6 months. Innovation, R&D, New Technology or whatever is called within your company or industry - these functions are so critical in this era that I am convinced that every company should have an Applied Innovation and Labs Organization.

Innovation is not the function of only one department - Everyone within the company has the responsibility to Innovate - However, what I am recommending is that we need a core dedicated function whose sole purpose in life is to investigate and determine feasibility of new technologies and apply those learnings and concepts into building tangible solutions that can help the company stay ahead of the curve. This should not be exclusive to only the multi-billion dollar conglomerate, every company needs it.

The reality is if you are not doing this, someone else sure is and they'll be happy to eat your lunch and put you out of business at some point.

If you are company of at least $100M or greater in revenue, having this type of organization should be mandatory. It frankly doesn't matter where it lives or who it reports into. We can have a healthy debate about this in a separate article.

PwC did a study in 2015, in which it found that a healthy cross industry ratio of funding for R&D should be around 5% of revenue. So if you are a $100M company, you should be spending on R&D and Innovation about $5M per year. The purpose of this funding is not to go add another 5-10 features into your core product, is not to go and solve a budgetary issue of somebody in the IT or Marketing department and is not to make up for a deficit when you need to scrounge up money.

I have seen many examples of companies where words such as R&D, Innovation and New Technology are nothing but mythical aspirations. Until recently, perhaps these firms may have been able to get away with not focusing any funding on these areas, but this is no longer the case. Invest in Innovation (whatever that means in your industry) or risk getting disrupted and eventually going out of business. If you are not investing in innovation, somebody else is.

Unfortunately, many corporations still think of innovation and R&D as the "Department of Crazy Ideas" and have in their mind the stereotype of R&D people wearing white lab-coats doing "no real work' -but just thinking. Well, all jokes aside - those corporations need to quickly shift their thinking and embrace what may seem obvious to many, but it's obvious that is NOT obvious to most companies.

I recommend that the key criteria to focus on, when building these Innovation, R&D or Labs organizations is in the word APPLIED. There is a subtle but yet, a big difference between Innovation and Applied Innovation. However, that subtlety is what will pay off for those who invest in the latter. It's probably easier to describe what I envision to be the core principles which should guide an Applied Innovation Organization.

A successful Applied Innovation/R&D/Labs organization should live by 7 key principles:

• Multi-Disciplinary Business and Technology Team (no, this is not just a bunch of scientists)
• Design Thinking as its Core Ideation Tool (this will help everyone think outside the big box)
• Focus on developing superb User Experiences (this is a requirement not a nice to have)
• An Agile Culture focused on Speed (this is the second most important, the future belongs to the fast ones)
• Relentless Pursuit of early "Customer" Validation (yes, you actually need to talk to real customers in person)
• Focus on creating the right sales pitch and a good sales story (Imagine you need to be in front of a tough VC to get funding for the idea)
• Fearless against the Reality of Failure (fail fast, don't be afraid of criticism and failure and don't look back)
• Focus on Producing something Tangible (the most important one)

These 7 principles may be different than what most companies' R&D or Labs functions focus on, but to be able to move at the necessary speed of this new digital era, then we must embrace these principles and live by them - regardless of what the rest of the organization may think.

The focus of the Applied Innovation function should be to: "Deliver in the fastest possible time a minimum tangible product with a superb UI which can be tested effectively with real consumers without fearing failure."

Now, many of you may say - but this is what I do everyday when I am developing software for a living and you are absolutely correct. However, there are two differences with that - One is, that most companies actually don't have a dedicated organization which does this with the sole emphasis of Innovation and the Second one is that many of those organizations which have these groups somehow forget to embrace these principles wholeheartedly and they often face the perennial "Innovation Valley of Death" - great ideas dying early, bad ideas making it because of political reasons and then failing, enormous amount of time spent on analysis and not on creation, at the first risk of failure people retrench, etc.

I would strongly recommend that those companies that don't have a formal organization focused on Applied R&D, Innovation or Labs that this is the time to create one and ensure to follow the guiding principles stated above - don't wait until it's too late. The pace of technology disruption accelerates exponentially and this is not a luxury or discretionary capability anymore, it's a requirement to stay in business.

#Innovation

#AppliedInnovation

#DigitalLabs

#AppliedR&D

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About the Author: Alejandro Mainetto is a Senior Partner with Globant and he has more than 20+ years of experience in designing and building Digital & Technology Strategy and Solutions across many industries. At Globant, he helps transform industries and works with many leading corporations in driving digital transformation and market disruption. For more information feel free to reach out to him at: [email protected]