Innovation Lab: Everything You Need To Know And More

Innovation labs are often seen as the key to unlocking new ideas and technologies. 

However, many of these labs fail, and the reason isn't always about the lack of groundbreaking ideas or the money to invest in their implementation. Instead, it's about why those innovation labs were set up in the first place. 

What many companies ignore is that an innovation lab established for the wrong reasons is doomed to fail. Unless you create your innovation lab for the purpose of genuine innovation and problem-solving rather than as an elaborate PR stunt and because "everyone else is doing it," it's unlikely to deliver meaningful and sustainable results.

So, besides the mandatory hoodies and Foosball tables, what makes up a successful innovation lab? What are the benefits, and how are they best managed?

We’ll answer these questions in this article.

What Is an Innovation Lab?

An innovation lab is a physical space where a team works full-time on creating and developing novel ideas. Some innovation labs can come in the form of events, such as hackathons, which take place in dedicated spaces. 

Unlike innovation programs, which are internal and don't require a physical space, innovation labs bring together internal and external teams from various backgrounds, such as startups, industry experts, and universities, in one physical space. In some cases, innovation labs can also be exclusively internal

While innovation labs are integral to a company's growth strategy, they're often separate from the core of the business. This strategic separation allows the lab to operate with a degree of autonomy and flexibility crucial for genuine innovation. 

By being detached from the day-to-day operations, innovation labs can take bigger risks and explore more radical ideas without the constraints of the procedures present in the core business.

What types of companies need an innovation lab?

Research by Capgemini found that 38% of the leading 200 companies have already set up innovation centers. But innovation labs aren’t only for big companies. Although setting up an innovation hub is a significant investment, even smaller businesses can have one.

The key to creating a successful innovation hub is not the company's size but the presence of a supportive culture, a dedicated budget, a genuine interest from upper-level management, and tolerance for risk and uncertainty.

The Benefits of an Innovation Lab For Your Organization

Companies actively using innovation labs typically experience higher revenue growth and increased customer satisfaction. 

Here are some of the main benefits of an innovation lab for your company. 

An innovation lab helps to come up with new innovative ideas

The obvious benefit of an innovation lab is continuous innovation. 

By bringing together people from different backgrounds and creating a team that is dedicated to the creation of innovative ideas full-time, companies can benefit from a continuous innovation process rather than punctual, sporadic efforts. 

This ensures a steady stream of ideas, which keeps the company agile and responsive to market changes.

An innovation lab creates a network of knowledge

Innovation labs provide an opportunity for true innovation by bringing together people who wouldn’t collaborate on ideas under normal circumstances. 

Being somewhat separate from the main business, they facilitate interactions among people from different departments and external partners, such as startups, universities, and other companies. 

This allows for the creation of a melting pot of perspectives, which enhances the brainstorming process and leads to truly groundbreaking ideas that wouldn’t otherwise come to life.  

Example of a successful innovation lab that creates a network of knowledge: Autodesk

Autodesk turned San Francisco's Pier 9 into an innovation lab that enables both employees and people from the outside to design various unusual things. Autodesk's innovation lab is known for projects like the Ember 3D printer, which printed a detailed 3D model of the entire Bay Area of San Francisco. 

But the lab isn't intended to show products. Rather, it's a place where Autodesk tests and improves its software by inviting people from different fields, like aerospace and robotics, to explore the software in unique ways and improve it.

An innovation lab is great for branding

Many companies are jumping on the innovation lab bandwagon because they recognize the importance of being perceived as an innovative company. 

Indeed, innovation centers can enhance the company’s image by showing the public that they are actively seeking future-proof solutions. 

An innovation lab signals the value of innovation to employees 

While innovation labs show the public that the company is innovative, they also have a big impact on the internal culture of the company. 

An innovation lab shows the employees that the company cares about ideas, which inevitably leads to building a culture of internal feedback within the organization. 

It signals the value of innovation to employees, who then start to feel free to suggest ideas themselves and share their honest feedback.

An innovation lab enables rapid progress

Ideas are great, but unless the company acts upon them, they bring no real value. Since they work as a dedicated space for people to create and work on ideas, innovation labs test and validate ideas against the public and the market realities. 

This leads to the practical implementation of concepts, turning ideas into tangible products or services. 

This rapid commercialization of ideas is especially important in crucial in today's fast-paced market, where companies must do whatever they can to stay ahead of the curve and meet changing customer and market demands.

An innovation lab helps attract & keep new talent

As they grow and look towards the future, companies seek to attract talent with modern, future-proof digital skills. But many times, these talented, digital-savvy people simply don’t want to work for a business that isn’t up to par with innovation. 

For instance, Google once created a Google Garage to provide Googlers with a space to collaborate on different projects and ideas. Thanks to this initiative, Google could hold on to really bright minds who would have left or created their own companies otherwise, seeking a way to innovate on their own.

An innovation lab helps develop in-house competencies

Innovation labs help build in-house expertise by bringing together people with various backgrounds and skill sets in one place. This collaborative and innovation-focused environment encourages continuous learning and broadens the horizons of their in-house team.

By producing this exchange of ideas, knowledge, and information, team members can learn from each other, gain new perspectives, and develop a broader skill set. What’s more, innovation labs provide access to advanced tools and technologies, allowing the members of the in-house team to learn how to leverage new technologies to solve complex problems. 

How to Set Up an Innovation Lab That Delivers

Although more and more companies are creating innovation labs, most are doing it for the wrong reasons. The Capgemini research estimated that 80 to 90% of innovation labs inevitably fail. 

So, how do you make sure that your innovation lab is successful? Here are some things to keep in mind. 

Create a flat organization with diverse talent

Innovation centers prioritize flat structures over traditional hierarchies, promoting equal partnership and cross-sector collaboration. 

They use various methods, like design thinking, open innovation, and human-centric design, to experiment and solve problems. 

These approaches facilitate ideation, guide discussions, and enable prototyping. To boost collaboration, companies often use idea management platforms. 

Define precise goals for your innovation lab

Many companies design innovation labs to showcase the “cool stuff” they’ve made and how innovative they are. 

But without an authentic goal, innovation is no more than creating “cool ideas” that have no real value. 

To maintain a long-lasting innovation center, a real strategy must be employed, and the goals of the innovation lab should be aligned with the main objectives and values of the company. 

With no plan for what to work on and no ties to the core business units, the innovation lab will quickly fail.

Clarify your approach to innovation lab

Creating an innovation lab starts with understanding the specific needs it will address and identifying the challenges or opportunities it will tackle. 

The reasons for establishing an innovation center can vary, but companies must seek to have total clarity behind why they're doing it and what they're planning to achieve. 

Typically, there are two main goals you can have with your innovation lab: to innovate and improve the core business processes or to develop new solutions to specific problems. 

Having a clear understanding of your lab's focus and how close or how far it should be from the core of your business will ensure the approach and pace of innovation you aim for. 

Carefully design the team structure

Innovation labs gather people with different backgrounds and skill sets to create a collaborative environment where everyone can build on each other’s ideas and contributions. 

Creating a small, focused team is a good place to start. When forming your innovation team, you can build an in-house-only team or bring external help. 

In-house teams strengthen company culture, improve employee skills, and increase employee engagement. However, they can lead to tunnel vision and complacency. 

External partners bring fresh perspectives and insights, filling strategic gaps and driving innovation.

Choose your innovation lab leader carefully

Of course, a well-chosen team can propel your innovation lab toward success. But without someone your team can rely on to guide the innovation process, direction and focus may quickly fade. 

Because of this, your innovation lab should have a dedicated innovation lab leader to steer initiatives and maintain enthusiasm.

A thriving innovation center requires a leader who is trusted, respected, and connected to the team or can build that kind of relationship quickly. When choosing an innovation lab leader, people with experience at the company are often favored over newcomers. 

Quantify success and fail fast

To measure the impact of the innovation lab, adopt a long-term, data-driven outlook and set realistic timelines. Although celebrating quick wins helps build momentum and confidence, the team should have long-term goals, up to two to three years.

As with any innovation venture, there is a big risk of failure. Yet, many innovation labs struggle with the concept of failing fast. But failing fast allows the team to quickly identify what isn’t working, learn more failed experiments, and pivot to more promising ideas.