In the hive of disruptive, real-time, test-and-learn, change-agent buzzwords, one is catching the attention of top marketers everywhere: innovation labs — or centers, hubs or (less frequently) incubators.
The centers of excellence vary in form from think-tanks to leverage existing technology (such as IBM’s Watson artificial intelligence platform) in real-world applications to mentoring pools to nurture startups that can help transform the consumer experience (such as Unilever’s Foundry) or combinations of both such as Wal-Mart Labs, which not only has studied ways to transform retail, but has acquired a fleet of tech startups to help the process along.
Some large companies have multiple labs dedicated to different aspects of their operations and many have open-source tools and programs to mentor startups to collaborate.
A recent study by Cap Gemini showed the innovation center concept has spread widely and gone global in the last three years. The number of innovation labs worldwide has grown to 456 in late 2016, from 301 in 2015; 88 alone opened between March and October of 2016, according to the study.
While manufacturing industries in the U.S. — tech companies, in particular — remain the largest core of lab participants, innovation centers are spreading in all kinds of industries and is increasingly popular in Asia. India is now home to one in each ten new labs opened while Silicon Valley’s share of labs worldwide has dropped to 14 percent from 18 percent a year ago. Companies in all segments are now applying the concept, including financial services, consumer products and automotive marketers.
But like every growth spurt, the evolution of labs is not without growing pains. Some observers question whether setting innovation apart detracts from the whole company by skimming the best talent and resources and isolating innovation. They produce applications that hat don’t connect to the purpose of the organization, say experts.
“A lot of them are very shiny objects that don’t scale. They’re not ready for prime time,” said Jon Bond, chief tomorrist at innovation consultants Tomorro LLC. “The criteria for what is the end purpose is not very clear. There’s a lot of stuff that’s cool and doesn’t have any impact.”
Avoiding shiny-object syndrome is the first priority to succeed, said Bond: “You’ve got to know: If it works, what am I going to do with it?” he said. “Little shiny objects that go ‘whoop, whoop’ and pop in an out of existence are totally a waste of time and don’t have potential to move the needle. Doing it for learning is not enough.”
Technology tools such as virtual reality and augmented reality get all the attention due to the cool factor, but leveraging more unsexy applications of existing data would be a better use of the lab’s efforts, said Bond.
“People like to see AR and VR because it’s fun, so they get a disproportionate share of the attention,” said Bond. “Something that’s data (driven) that has no physical form gets underleveraged because it’s not cool and fun. But it could have more impact than anything else.”
To be successful, a lab needs to focus on problem-solving, not shiny objects, and be ready to roll out with the solutions it finds, he said. He noted one good example is Netflix’s testing engine, which is very effective at adding user experience features to its platform.
“I would say ‘Here are the 100 top marketing problems we need to solve. Make sure everyone in the company, everyone in the world, knows that when they have a problem they go first and see if we already have an answer to it,’ “ said Bond. “It’s not about the drill, it’s about making a hole.”
During the recent AdTech: New York conference, panelists from AT&T, AOL and others agreed that innovation labs can spur the developments that would remain untapped, but they also agreed that showing ROI is a priority and recruiting talent is a challenge.
It’s important to understand what’s are the lab’s functions and set up metrics against this, so members have talking points for stakeholders to show they are delivering against them and “making sure the pocketbook stays open,” said Scott Susskind, CTO of innovation consultants SciFutures. Michael Hyman, SVP Innovation at AOL said he spends over 50 percent of his time on ROI conversations.
AT&T is in the process of building a new lab and staff is spending a lot of effort to show how it is being used and how technology changes people’s lives, said Andy Maskin, director of AT&T’s AdWorks’ lab.
“We’re happy to have anyone internal or external come in, because we have a story to tell,” he said. “I’ll tell that story to anybody.”
The story can vary widely from one lab to another, say marketers. Success can depend on running a program that doesn’t just create innovations, but relevant ones, and not at the expense of the business. The lab should not become the equivalent of the cool kids’ table in school, which draws away the best talent and resources and demoralizes the rest of the staff.
IBM encourages client groups to create their own design lab structures to address their customers’ user experiences, said Sharon Driscoll, VP marketing industries and client segments. It has even opened a number of Watson-related resources to encourage development of more real-world applications.
“It’s not the cool kids. Everybody can play,” said Driscoll. “We’ve done this to teach everybody agile methods and design lab solutions.”
To avoid turfing people out, companies should try moving people around the innovation groups, said Todd Kaiser, senior director of the Association of National Advertisers. Bring representatives of each discipline — sales, marketing, etc. — into groups with members of various levels of seniority, he said.
“You don’t want to keep it the same group all the time, because that’s the cool kids’ table,” he said. “Bring in the junior employee along with the more senior one once in a while. It’s a matter of rotating and giving people a chance.”