Should Your Business Launch an Innovation Center?

“Evolve or die” is the message for modern organizations. Technology and society are evolving rapidly, requiring companies to change their business models to keep up or be left behind. According to a report from Capgemini Consulting and Altimeter, 52% of the Fortune 500 have been merged, acquired, or gone bankrupt since 2000.

“So if you’re waiting around, saying, 'I’m going to think about digital business', you’re going to be in trouble, because digital Darwinism is unkind to those who wait,” Ray Wang, author of the book, Disrupting Digital Business, told Harvard Business Review.

The Capgemini/Altimeter report gives proof of that, citing Nokia, Blackberry, and Kodak as just a few of the high-profile companies that have been “disrupted, decimated, or reduced to shadows of their former selves.”

So what can companies do to avoid this? Innovation is the key.

The Growth of Innovation Centers

A recent Harris Poll survey of top business leaders found that 65% felt increased pressure to innovate. However, innovation can be challenging and slow – especially for R&D teams at large, traditional companies. This has led many ambitious organizations to take a new course of action: launching innovation centers for the express purpose of accelerating digital innovations. There are very recent examples of this with both Under Armour and Johns Hopkins launching their own innovation centers.

What are innovation centers? The Capgemini/Altimeter report defines them as “physical spaces and/or teams set up by organizations in global tech hubs, with the goal of leveraging the ecosystem of startups, venture capitalists, accelerators, vendors, and academic institutions that these hubs provide.”

A main objective of innovation centers, says the report, is to accelerate digital innovation by rethinking the customer experience, improving operational efficiency, and testing new business models through the use of digital technologies such as big data, the Internet of Things, social media, mobile, and 3D printing, among others. Innovation centers also help organizations stay on top of the latest developments and technologies in the market.

Mark Brodeur, Global Head of Digital Marketing Innovation at Nestlé explained the mission of his company’s innovation centers. “We really needed to better understand how consumer behavior was changing as a result of technology, so that our brands were able to stay ahead of the curve versus playing catch-up.”

The 4 types of Innovation Centers

So who besides Nestlé is using innovation centers? Manufacturing companies, particularly in the high-tech sector, are the biggest users at present. Telecom companies have also invested significantly in innovation centers in the wake of the digital revolution. And the automotive, consumer products, and financial services sectors are lagging behind but catching up.

Organizations across all industries are getting on board. BMW has set up a “Future Lab” in Mountain View, Calif., with the goal of developing cutting-edge digital products and services. In the works now are virtual-reality goggles that will help drivers park in tricky spots.

Medical technology company Medtronic has opened a center in Singapore to design, test, and scale new business models for emerging markets in Asia. CVS Health, one of the biggest drugstore chains in the U.S., has opened a Digital Innovation Lab in Boston to connect with start-ups developing healthcare-related products and services that will drive the company’s future growth.

Innovation centers fall into four broad categories, according to Capgemini/Altimeter’s research. They are: in-house innovation labs, university residences, community anchors, and innovation outposts. Each model differs in terms of goals and investment required.

Walmart Labs, an in-house innovation center, serves as an innovation engine, with hundreds of staff performing everything from inception to prototyping.

The university residence model sets up centers on campus to drive innovation through academic researchers. An example is the Volkswagen Automotive Innovation Lab (VAIL) at Stanford University’s School of Engineering.

Community anchor innovation centers actively identify mentors and provide opportunities for startups to work with the company to test new products on customers. Allianz Digital Labs invites startups to run proof-of-concept pilots with the possibility of eventual licensing, development, and large-scale commercialization in such areas as big data, social media, and mobile.

Innovation outposts are small teams based in technology hubs like Silicon Valley. This allows large companies to be involved in the tech community without a significant investment upfront. Renault-Nissan and Nestlé are examples of companies that started with Silicon Valley innovation outposts before expanding into other forms of innovation centers.

What Can Innovation Centers Do For You?

We’ve looked at why organizations need to consider establishing innovation centers, as well as several models for how to do it. Now let’s delve deeper into what exactly these centers can do for your company.

First and foremost, innovation centers provide a rich source of ideas. By virtue of their locations and relationships with startups, venture capitalists, researchers, and other industry stakeholders within the community, innovation centers can make your company the epicenter of new ideas and trends in your space.

Innovation centers also provide a way to take the entrepreneurial risks necessary for innovation, while shielding the larger parent company from that risk. As AT&T’s Ruth Yomtoubian said in the Capgemini/Altimeter report, “Our innovation center lets us take on risks that the rest of the organization may be unwilling to take on.”

Because they combine startup culture with brand strength, innovation centers within large organizations can also help attract top talent. And, they can drive employee engagement by getting people excited about new ideas and technologies, even in industries that are slow to change.

From a bigger-picture perspective, innovation centers can help promote a culture of creativity that extends into the larger organization – the only way that innovation can truly flourish within a company.

You Don’t Have to Go it Alone

Organizations are realizing that they cannot solve everything by themselves. When their purpose is clearly defined and with the right support and partnerships, innovation centers can be the answer to many of the digital business challenges facing modern companies today. The Canton Group understands that not every organization has the necessary resources to establish their own innovation center today but as an agency that is dedicated to digital transformation we help organizations use technology to help redefine business outcomes. The Canton Group is positioned to be a very valuable technology partner that can help your organization move quickly on new ideas whether it be rapidly creating a prototype, developing software to streamline the business or using digital innovation to enhance the customer experience.

Contact us to find out more about how The Canton Group can help you position your organization as an epicenter of ideas and innovation in your industry.