• by Karl Greenberg , December 3, 2013

Innovation labs are growing in popularity. No wonder. These corporate woodsheds for technology innovation, strategy, and product development offer companies and their brands a direct plug-in to new ideas and fresh thinking. Who would fault a brand like PepsiCo or Sprint for setting one up and turning the key? As Forrester points out in its new white paper on the phenomenon, companies face exigencies — incursions from digital natives; the chaotic dance between media, consumers and digital and mobile technology; and risk-averse corporate culture — that demand action.  

Yes -- these lab experiments can be expensive, time-intensive, and talent-draining (potentially) -- and they demand at least some reorganization. And sometimes they flame out or explode in the test tube. But they can also be catalysts, distillates of ideas and centrifuges for separating out the sediment.    

The Boston-based consultancy looked at 23 labs created by 18 Fortune 500 companies -- including Ford, Sprint, PepsiCo, Walmart, Wells Fargo, Aetna, and Comcast -- to get a sense of what works, where, how and when. The firm identified five lab models (headquarters, outpost, virtual, outpost virtual and innovation accelerator) and six broad lab goals and objectives (digital tech innovation; commerce tech innovation; corporate culture wake-up; tech transfer; new product or services; and tech investment.) 

To succeed, they need a dedicated budget and C-level oversight, per Forrester. And like everything else, they need clear goals and objectives and "guardrails" to keep work focused. You can't skimp; the digital-native competitors -- regardless of the competition -- are growing in number and mutating at a rate that would make a Vancomycin-resistant bacterium jealous (Forrester gives an example of Comcast's challenges from the likes of Hulu, iTunes and Netflix.) The firm points out that establishing a lab has to be a bold move with a strong cash position in line with Silicon Valley: table stakes, per the firm, is about about $228,515 per employee per year based on fixed costs. "That doesn't include overall lab budget for technology and services."

Location, location, location. Forrester concludes that lab siting should be optimized for its purpose. While Nestle's Digital Acceleration Team started at the company's Vevey, Switzerland HQ, Nestle built outposts in India, Italy and China. Mondelez established the Fly Garage lab in Buenos Aires "specifically to make sure it had a global focus," notes Forrester, which adds that Ford Silicon Valley and WalmartLabs Kosmix (a Silicon Valley firm it purchased to dig into the latest social and search based shopping technology) evince how if the goal is technology transfer from an outpost to headquarters, the outpost has to be where the tech is.   

Forrester also identified ways that form follows function. For example, per the paper, headquarters-based labs accelerate culture change; outpost labs accelerate technology transfer into the organization; virtual labs allow innovation leaders to focus on talent instead of locations; and accelerators — where a lot of company-cultivated or owned startups live under one roof — are idea incubators potentially sprouting revolutionary business practices.  

But when is the pursuit of an innovation lab a waste of time and money for a company? First, says Forrester, if a company can't develop clear goals and objectives it shouldn't do a lab. "They will become political football," says the firm's report, which spotlights Barnes & Noble's Nook lab, where a fuzzy goal was evinced by a schism between “The need to integrate digital into retail, and the need to be a tablet technology player,” says the paper. "That has led to a net loss for the overall business." 

Also, if a brand can't establish a lab budget and keep it sacrosanct for at least a 24-month gestation period, forget it.  And, says the report, scrap the lab if you don't a C-suite boss who can say “yes” to innovations, and scrap it if your organization is too siloed and too defined by fiefdoms to make it work.

"Mad Professsor" photo from Shutterstock.