Why Innovation Labs fail

Special infrastructures for innovation are trending, but often don’t tap their full potential. Four barriers and solutions:

Digital Lab, Innovation Hub, Innovation Campus, Incubator, Accelerator ... The terms are numerous. The enthusiasm is great. This summer, a study was published by the Capital magazine measuring the success of German innovation laboratories. The study is in its third year. It shows an undeniable relevance of innovation hubs. Every year the number of listed hubs is growing. I’ll get to what is listed in a second.

The study measures success in three stages:

A) Finding innovation - is about the ability to identify innovative ideas

B) Developing innovation - is about the ability to turn ideas into strong projects

C) Scaling innovation - is about establishing a business and growing new markets

There are “winners” in each category. But the numbers also show, that most hubs are far from economic success.

Now, only companies with a total score of at least 3.0 (scoring from 1 to 5 with 5.0 as the highest and 3.0 as an average) appear in the top list. Out of 50 participants there are 33 at least average in category A (finding innovation), 26 hubs appear in category B (developing innovation), but only 15 participants make it in the top list of category C (scaling innovation).

This means: 50 companies have an innovation lab, which they consider successful enough to participate in the study * with the goal to be positively recognized by the business savvy public. But only 15 of them ultimately have proven infrastructures that produce scaling business models.

* In general, the Capital study gives a very helpful overview of the innovation lab landscape, but the survey method has a big weakness. When participants apply themselves, the result is biased. A lot of unsuccessful laboratories stay completely under the radar.

Imagine all the laboratories that know beforehand, that they are not working well enough to get away with an average score of 3.0 and therefore do not participate. Personally, I think I know some of them ;)

Simply put, the German landscape for innovation infrastructures is growing, but most of them are far less successful than they could and should be.

And that's mostly because of one of four factors:

Success / Failure Factor 1: Capacities

One of the key factors in setting up digital / innovation laboratories is human capacity - or often capacity shortages.

This has to do with how labs come to life. Most infrastructures for innovation are launched by strong individuals who have a passion for the topic and invest private time because they believe in the power of that particular infrastructure. Often those types get their co-workers excited easily - which unfortunately are not the deciders of seven-digit budgets. Most German CEOs, CFOs, executives however (quite understandably) don’t go all in for novelties. As a result, usually not a whole new team is hired from the beginning, while the existing workforce cannot sufficiently leave their day-to-day business to be that team. But setting up an innovation lab requires many different jobs right from the beginning: a project owner, a strategist, a politician/ campaigner, often an agile coach and a lean startup expert, a recruiter and a program manager. One person can have multiple roles here, but not all of them.

There are two approaches to this dilemma:

Either, the leader earns his/her task force with early "lab campaigning“. Part of that campaign should be comparing workforce costs and opportunity costs with costs related to delays and "staying behind" in the market. Or, the manager builds an initial task force with external, agile service providers, which can later (once the system is up and running) be exchanged by employees. The advantage of external experts is that they already comprise that range of needed know-how and unbiased perspective, which allows a speedy setup and solid groundwork.

By groundwork I mean

- the Lab goals and KPI definition

- the concept design and the integration with existing structures

- a stakeholder management strategy

- the business model and business case with numbers

- the basics for measuring success and learning loops for sustainable growth

This is my cue for the next variable. Capacity bottlenecks often lead to neglecting a decisive step at the beginning: Goal and strategy definition.

Success / Failure Factor 2: Goal Definition and measuring success

Goal definition is so very obvious, but it is indeed one of the points in the creation of innovation/ digital hubs, which is regularly neglected. And that is easy to explain. Human capacity shortages plus time pressure often results in a ?let’s just get started". So you build a new, creative floor and think about the first workshops and a funding concept for external startups. And a year later you wonder, why nothing substantial has come about.

To ensure innovation in an innovation lab you need:

- a simple, clear long-term goal and vision

- a classification how lab goals meet the company goals

- a distinction between HR targets and growth targets

- the deduction of KPIs, by which the lab’s results can be measured and improved

Let's assume the initial phase of a laboratory is primarily about training and the personal development of employees. These skills are quantifiable! It’s a matter of defining them and developing a procedure to measure success and implement changes, if the goals are not met.

Example: After a known incubator switched to personal growth as a goal, it developed new procedures for employees (not startups) and finally became successful after three years. However, I would argue, with a more focused goal definition, this iteration would have been unnecessary in the first place.

Our approach to goal definition:

In a well-prepared ?goal and strategy day“ we (as an external lab catalyst and innovation expert team) play the role of the Advocatus Diaboli. We contrast different goals and target group perspectives, discuss hurdles and pitfalls, create scenarios and lead to a commitment to one. With a tool named “Goals Canvas”, we also make sure to have that in simple, clear language in the end. I can only urge you to invest that day or two. It’s worth it!

Success / Failure Factor 3: Politics

One you have your goals, team and strategy, you should get into what we call the "communication phase". It begins right after the first steps of setting the stage and should be of importance well into running the lab. If you don’t neglect it. Too often, stakeholder management is confused with investor relations. But actually every manager and every ?regular“ employee ambassador can help or hinder an innovation hub. You have to think about and manage a complexity of interests.

Conflicts of interest can be:

- An education-oriented lab can intervene with the tasks of HR.

- A growth-oriented lab can be a competition to M&A projects.

- A special space and process for innovation can convey an "elite character" and fuel envy.

- Innovation in product teams and lab projects can compete with each other.

- Involving workers in lab projects can mean extra work.

...

The reason why we call this step "communication phase" is because it is primarily a communication task, which should be done before the actual running of labs. The best examples of lab politicians listen to all opinion leaders at an early stage.

Further approaches to the politics of setting up a lab:

An innovation infrastructure, like any other novelty, needs an engaging narrative. I recommend a story connecting the lab goals with the company goals and the personal goals of the opinion leaders. What does every stakeholder, what does each individual employee get out of the lab? What purpose could we all agree too? How can one participate and profit? It’s also a good idea to think about an incentive system. With the right levers, a lab can grow into an ecosystem of innovators and advocates.

Success / Failure Factor 4: Mentoring

But what about economic success? How do you succeed at the (possibly) highest goal? Growth-oriented innovation hubs should quickly turn ideas into concepts, then business cases and then prototypes, that should be tested early.

If a company doesn’t want to grow out of an expert ivory tower, which is a major political threat, lab ?inhabitants“ usually need help with learning and implementing the Lean Startup method. This is where mentors come into play. But, often they only appear in short sessions. Accelerators in particular are prone to celebrity mentors, who have little time, cost a whole lot of money and tell success stories that don’t apply to most cases. In contrast, intrapreneurship programs often bring in in-house mentors with more a fitting expertise, but still little time to truly coach lab-teams in their day-to-day routines. As a result, you’ll find highly motivated mentees, that don’t know how to turn their ideas into successful business models.

Two approaches to better mentoring:

I may represent an unpopular opinion here, but: Cut the celebrities! You need operational mentors, who stay close to the team. Where do they come from? Option 1: Recruit startup founders from smaller successful businesses for each ?batch“. They can be part of work sessions, performance meetings and trouble-shooting for the same money as rarely seen celebrity mentors. Option 2: You train internal future mentors on the job by external Lean Startup professionals. Here you have a higher, but singular investment for only one or two ?batches“ and a very healthy ecosystem afterwards.

Why do I speak of batches, by the way?

We recommend innovation/ digital hubs to think in closed cycles -  no matter wether it’s an accelerator or a simple set of innovation workshops in their own space. Only with fixed cycles you can properly measure and optimize your efforts.

Executive summary:

Most German innovation / digital laboratories don’t tap their full potential, as shown by the figures of this summer’s Capital study and the experiences of my innovation consultancy, which, among other things, accompanies and accelerates the creation of such hubs. This has to do with to four factors:

1.    Due to human capacity bottlenecks, without external help, the creation of innovation labs is often sluggish, while on the contrary, the strategy groundwork is often rushed.

2.    One example is a sloppy or non-existing goal definition, which can (probably will) result in an ineffective infrastructure and method.

3.    The politics of winning all stakeholders and opinion leaders is key to make or break a successful innovation ecosystem. You should to think of all ?What’s in it for me“ perspectives, connect the dots and do some campaigning.

4.    It’s not easy for lab teams (which are not Lean Startup experts) to transform ideas into actual innovations. Mentors have a crucial role, that is not being a motivational speaker. A good lab mentor helps in the day-to-day work until the proof of concept and investment pitch.

If you don’t have your complete team for the challenges yet, get some external lab experts and enjoy the sparring. You’re on the right track. Together we can build truly sustainable innovation infrastructures!

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This article was originally published in German in our Medium publication X-O stories. English is new. Please share your opinion: Should I write more in my native tongue or in English for ?everyone“?