Innovation labs have become increasingly popular over the past decade. We see them in those shiny, modern and well-furnished spaces that make up government-backed innovation hubs or in corporate lobbies all over the world. (You know, the ones that are vacant 75 per cent of the time and leave you wondering how much was spent on building it and what its return can possibly be.) But I understand why companies are investing in innovation labs — large corporations are under attack. According to Innosight & Standard & Poor’s data, the average company lifespan on the S&P 500 index has declined steadily, from 35 years in the 1970s, to 20 years in the 1980s, to 17 years today. It is projected that in the 2020s, this lifespan will drop to about 12 years.
Smaller and less-visible strategies have also proliferated. While they allow executives to check boxes to show that they have an innovation agenda, they are only the first steps toward doing new, smart and meaningful things. Real issues arise when companies stop at these Band-Aid strategies. This can be especially true for the hospitality, transportation and finance industries, where disruptive startups are eating the lunch of large incumbents. It took AirBnB only seven short years to become more valuable than Hilton Worldwide and only six for Uber to overtake the value of Ford and General Motors.
CB Insights accurately refers to short-term strategies as “Innovation Theatre,” but I like to think of this as the awareness stage to becoming a more innovative company. It involves such tactics as launching an innovation lab, bringing on an innovation or digital prophet, having a startup-like office, planning executive visits to Silicon Valley, launching an accelerator and instituting casual office dress codes. Taking these steps often result in little actual, sustained innovation, but I would argue that they are a necessary beginning for creating a culture of change, iteration and agility within a company that truly wants to innovate to stay competitive.
Once the company has gone through the awareness stage, it’s time for the real work to begin. Corporations are beginning to recognize this. Innovation and transformation activities used to be the 10th or 11th bullet on an executive’s job description. That’s changing. Fast. More and more, we are seeing executives with the word innovation or transformation in their title — Chief Innovation Officer, Chief Transformation Officer. For these people, innovation is the first bullet on their job description and their very career is dependent on their ability to drive real, meaningful change across their organizations.
This means making tough discussions with their senior management peers about what change is really needed. For example, there needs to be discussions on how to attract and retain the right talent. They need to perform careful analysis about what markets and products can provide the best opportunities to drive shareholder value, how to bring on the right partners to help hand-hold the organization during a wholesale change process, and so on.
However, of greater importance is the ability to get tactical about instilling Innovation DNA within their organizations. How will products get analyzed and built? What processes, platforms and tools will the company use to launch and test these products in an agile manner that reflects the pace of innovation happening in the world today? How will the organization maintain a constant dialogue with their customers? How can they maintain cycles of continuous improvement in their product innovation efforts?
As we all know, execution trumps strategy. It’s not enough to have innovation strategies.
*The original article was published in the Financial Post on November 8th, 2017
Roger Chabra has more than 20 years of venture capital, operating and entrepreneurial experience. He currently leads TribalScale’s venture creation platform as Chief Innovation Officer.