According to a recent Innovation Management post, Are Corporate Innovation Centers Too Big To Fail?, the number of such centers or labs across the globe jumped from 301 to 456 over the course of the 15 months ending October 2016. This 60 percent-plus increase reflects efforts by companies across all sectors, including financial services, to take on technology disruption as a source of advantage.
Boards and the C-suite see labs adding value because they:
- Drive understanding and alignment of their businesses to changing customer and market needs,
- Attract people with expertise who are entirely different from the talent running day-to-day operations. These people can spot trends far in advance and connect the execution dots to commercial opportunity, and
- Accelerate all types of innovation—business model, product, brand, experience and process among others—to attack the revenue anemia and margin compression that afflicts pre-digital companies.
An innovation lab can provide a source of high potential revenue streams that may not otherwise be realized. But it can also be just theater. Let’s assume all labs are established with good intentions and high expectations. Those that don’t yield results run into a common set of failures—all avoidable with strategy and execution commitments within executives’ control:
- Innovation is treated like a project or activity. It is deemed essential, yet isn't integral to the strategic plan projections. Worse, innovation gets booked as an expense line item for a year or two, with a vague future dependent upon how everything else goes. I empathize with the CEO’s decision to assume no upside on revenue as a way to manage the high risk of failure associated with disruptive innovation. However, this decision creates unintended consequences that start with undermining accountability for results. This may destine the lab may to deliver a self-fulfilling prophecy—one that either fails to produce results or measure the results pilots generate.
- Innovation is placed in a protective-but-isolating bubble. It is smart to protect new ideas from the natural instincts of a mature organization. Yet once placed inside a bubble—e.g., physical location or reporting relationship—makes the lab feel even more foreign to everyone else. This reduces the chance of ever being able to integrate and thus accelerate scale; leverage the organization's reusable infrastructure; access the client base; or tap into existing brand equity.
- Top-of-house leadership lacks skills and/or courage. If the CEO or business unit head lack skin in the game, or do not hold all direct reports accountable for the lab’s success, innovation efforts cannot take off. Perhaps the CEO has checked the box for the board by creating an innovation lab—and then allows a budget cycle or two to pass because they assume this allows time enough to produce results. Or perhaps, this is such a new game that through nobody’s fault, a lack of expertise exists on how to drive a successful lab effort; new roles are created and hiring mistakes made.
- The lab is expected to find the silver-bullet answer to a poorly defined problem. “It's a technology problem.” Or: “We need partners.” Or: “We need to move everyone to Silicon Valley.” And so on. Survey results reviewed in Digital Dynasties: The Rise of Innovation Empires Worldwide reveal that “partnering with ecosystem” is the core operating objective. Yet towards what end? What marketplace problems does the lab hope to solve? There is often not an answer grounded in an understanding of the unmet needs of large enough segments where the lab can point its energy.
- Enabling capabilities and governance get insufficient attention. Gaps in many, many areas require as much attention—or perhaps more—than hatching the innovation concepts themselves. These include:
• Data access
To execute innovation for commercial impact, one critical demand must be met: At every level of the organization, those involved get dirt under their nails. Ideas get lots of focus. But the reality is that the hard work lies in the unglamorous details needed to navigate bureaucracy; reform status quo procedure to allow for speed and agility; and motivate the whole organization to support change.
- Talent criteria to succeed are demanding and make the right people hard to find. Succeeding as a team member of an innovation lab takes a complex set of personal, leadership and functional abilities, as well as skill. Identifying the right profile is tough and finding people who match the spec even tougher. Conflicts between the politics of consensus may prove a part of continued funding, along with the lab’s inherent challenge to the status quo.
- The culture built on past greatness can stop an innovation lab in its tracks. The right construct for an innovation lab must achieve a tough balancing act: to fit alongside the corporate culture, challenge it, and leverage it all at the same time.
The most persistent failure point I have seen is failure to recognize and connect the dots between the desire to innovate and the mechanics of execution and follow through. One of the biggest wins can be to break innovation execution down into small, manageable steps that produce signals along the way—including progress markers when you hit important milestones, get pilots to market and see impact, enable capabilities to deliver, or mobilize resources against a defined set of market needs.
With the changes that persist across financial services innovation labs, the accelerators and incubators show impact across this sector. We look forward to recognizing those whose achievements that lead industry transformation through the BAI Global Innovation Awards.
A judge for the 2017 BAI Global Innovation Awards, Amy Radin is the founder of The Daily Innovator LLC. Based in the New York City area, Radin moves ideas from napkin backs to market success, working with executives to create and transform businesses for growth. She is also an adviser and consultant, seed stage investor and keynote speaker.