Innovation labs: Are they actually useful?
After releasing his book ‘Innovation Lab Excellence: Digital Transformation from Within,’ fintech and innovation consultant Richard Turrin shares some industry insights on creating successful innovation labs.
Some institutions have launched fantastic innovation labs but have failed to launch successful innovations. Why do you think this is?
This is a chronic problem with innovation labs and is something insiders commonly call ‘innovation theater’ – where companies make a big show of innovation but are far less successful at producing results. These companies tend to get headlines for a series of breathtaking innovations that make competitors green with envy. But closer examination often reveals that their innovations are only skin-deep. These institutions make little headway in the implementation of the solutions that are flowing out of their innovation ecosystems.
Innovation has real value, but it is often used by management as a potent tool to increase the perceived value of the company. This is why many companies inflate their latest achievements; it is a demonstration that they are poised for the future. Innovation pays, not just in the tangible new tech, but in terms of the opinion of the outside world. This is why ‘innovation theater’ is so prevalent.
What are the most common mistakes that cause innovation labs to fail?
The single largest issue causing innovation labs to fail is that they are invisible to the business units they seek to transform. The two sides don’t meet around the coffee machine, don’t attend common staff meetings, and are often housed far apart. Is it any wonder that they don’t produce stunning innovation?
Secluding an innovation team (usually with the aim of intensifying their focus) has a counterproductive effect; they become so isolated that they barely understand the demanding business needs of the companies they serve. They are apart, alone, and frankly out of touch. I never cease to be amazed, when talking to employees at a bank, how few know the name of the innovation lab head or what they are up to. Nothing speaks louder to me of a failing innovation program than the deafening silence of being unknown and unused by the business.
Which financial institutions are really succeeding with their innovation lab? What sets them apart from the rest?
Great innovation labs share a few things that might be considered a common denominator. One of these is a good connection to the business units they serve.
Great labs all tend to truly excel at being the greatest implementers of technology in their company. Implementation means making technology work for their company by getting fully functioning digital assets up and running on their systems. These labs break internal records for how fast they can evaluate, apply, configure, purchase, and adopt new tech. They know their system requirements and work with third-party vendors to test and evaluate how new technology can solve their business problems. This alone is a significant undertaking and will take time for a new lab team to achieve. By doing this these labs bring more innovation into their companies faster and cheaper.
What top tips would you offer banks looking to build an efficient innovation lab?
Innovation is about people not technology. At first this may seem counter-intuitive, but your innovation lab’s main task is not about bringing in new technology; it’s about breaking down the barriers your employees and clients have built up against using it.
Bear in mind that we are talking about two distinct constituencies. If your innovation lab isn’t focused on their fellow colleagues as well as customers, they’re failing in their primary mission; making your people receptive to new technology and the changes it brings.
What is the best way to measure the success of an innovation lab?
There is no clear answer to this. No two companies will have the same measurement system, which means a prescriptive solution isn’t useful. Measuring a lab’s contributions largely depends on the aims of the management. These are expressed broadly in the mission statement of the lab, and ideally, more specifically at the start of every new project. Meeting these goals should be the primary metric of success, and its measurement will be an iterative process that is adjusted and improved over the course of the lab operations.
Not all traditional innovation metrics will map with your lab’s remit, for example the number of patents gained, the budget of the lab relative to sales, and percentage of sales attributable to a new product. Of course, these are solid metrics, but traditional financial metrics only reveal part of the picture of the state of innovation in a company. A lab’s enterprise goes above and beyond these baseline measures and those achievements which are less tangible achievements should be acknowledged. This may be at odds with how you evaluate the rest of your business, but it is important to remember that the lab is in a unique position to impact the company’s future. Much of its work won’t fit neatly within standard measures.