How to build an innovation hub that’s actually innovative

Innovation hubs created by corporations have grown in popularity in the past decade. But with a growing number of failed innovation hubs helping fuel the criticism they have garnered over the years, it makes one wonder if that criticism is warranted or if there’s something else causing them to fail.

Move fast and fail often

Innovation hubs are often created by a startup, established company, or a group of companies. The goal is to apply the startup “move fast and fail often” approach to deliver new innovations that can spin back to the company. In other words, how can big companies launch great new ideas, faster?

Innovation hubs aim to discover or create innovative technology solutions for companies to help them in a variety of ways, such as competing in a new market, acquiring customers at lower costs, or developing new tools to do work more efficiently. In addition, they are a great opportunity to partner and experiment with other companies, without the constraints and distractions of the day-to-day business. 

“The great thing about innovation hubs is that they are vital to foster ideas, collaborate, and learn fast, says  Marcella Simons, innovation manager and product owner of DARE, stimulating innovation within ABN AMRO. “Moreover, they provide a ‘safe’ space for people to experiment, make mistakes and explore new ideas.”

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It’s this failure-friendly that makes learning possible, she continues. “At ABN AMRO, we are comfortable with our failures. For example, we invalidated a Risk-as-a-Service proposition without wasting millions on building a product.”

Solving complex problems

In order for companies to continue growing and not be left behind by rapidly changing technology and environments, they often feel the need to create or join an innovation hub that can help them accelerate and focus on innovating. For example, some of the best innovations to come out of innovation hubs include Amazon’s Alexa and Nestle reinventing the coffee machine after they acquired Nespresso. 

How would a company go about setting up an innovation hub that’s actually successful? 

Defining your innovation process will help innovation teams focus on what matters. When setting up your innovation hub it is essential to allocate people, time and money to two kinds of innovation: sustaining innovation and disruptive innovation.

“To get up to speed it is recommended to have a common understanding, structure and way of working in place. To accelerate and always focus on the customer, we created DARE as our innovation approach, tailored for ABN AMRO. It offers innovation teams a range of tools and methods, such as Lean Startup, Design Thinking and Agile into a singular and data-driven approach to innovation. Teams can easily find them on a single internal website.” 

“Over the years, I’ve experienced that it’s important to set up governance for your innovation hub,” details Simons. “This helps you to align goals, allocate resources and assign decision-making authority —  which all contribute to developing a successful innovation hub. Further, build an innovation mindset and capabilities. We are thrilled to work with intrapreneurs from all places in the organization, to work on experiments for a longer period of time.”

Innovation theater

In order to be successful, innovation hubs should focus on innovations that solve business goals and problems and not fall into the trap of “innovation theater”, as described by Tendayi Viki on Forbes, “they take the canvases, sticky notes, whiteboards, and bean bags, and they start thinking that they are all set for doing innovation. The teams then focus their attention on making cool products, without thinking about the business models that underlie those products.”

Simons describes other traps companies could fall into. “Falling in love with your own idea, creating shiny presentations about how great your idea is without any proof your idea solves an actual problem, and building solutions, without first testing your idea on real customers.” Falling into these traps can become expensive and cause the innovation hub to fail if they cannot produce the real results and innovations they are looking for. Simons explains, “start small, prove your innovation by showing real added value based on real data, to gain the right to exist.”

Additionally, innovation hubs greatly benefit from having a clear purpose and goal(s), instead of simply having the goal to “innovate” and come up with anything. With clear direction and purpose, the tools and resources available can be fully and adequately used while all the members of the team are working together towards a common goal. 

It is important, however, that this goal and expectations are agreed upon by the parent company as well. If not, innovations might be ultimately rejected because they distract from the company’s strategy.

Define a clear innovation strategy

According to Viki, leaders who create innovation hubs often expect to provide magical solutions that will turn the company around. Viki continues, “the first symptom of this is the lack of a clear innovation strategy. A lot of corporate leaders have not taken the time to consider where the world is going and how this will impact their business in the future. And for those who have thought about the future, only a few have developed a clear point of view about how their company will use innovation to respond.”

The Stanford Social Innovation Review observed different innovation hubs and outlined ten different defining features that innovation hubs can use to better understand their usefulness and impacts. Some of these features include having rich innovation tools (i.e. design thinking, randomized controlled trials, and crowdsourcing), focus on experimentation, systematic thinking, and imposed but open-ended innovation themes. 

Some did get it right

Despite the criticisms of failing innovation hubs, those who are successful (either by following some of the ideas above or have otherwise found success) have produced some of the best innovations that we use today. Such examples of successful innovations from innovation labs, according to CBInsights include Amazon Alexa, Unix OS (that powers Apple iOS and macOS), Watson (AI from IBM), Amazon Kindle, Ethernet, the first smartphone (from IBM), and photovoltaic cells used in solar panels. 

The success of early innovation hubs (specifically from IBM and AT&T Bell Labs) have helped later innovation hubs (such as Google and Amazon) by providing guidelines and ways in which to work. Innovation hubs are more numerous now and are created for a variety of reasons more so than they have in the last decade, so the chance of failure is much higher. Mix that with the startup mentality and it can prove to be either very successful (such as Amazon’s lab) or a disaster.

Adapt if you need to

Companies who create innovation hubs should monitor their success closely and be able to make changes if something is not working or nothing of value is being produced in the way they initially intended. Simons explains how ABN AMRO had to do this with their innovation hub when things were not working quite as they expected.

“For disruptive innovation, we designed a new setup of innovation within the bank two years ago, divided into separate labs — one for each business line. It did not work as well as we hoped because innovation was too distributed throughout the organization. A single way of working and managing your portfolio ensures consistency and equal KPIs. That why we designed DARE, a single way of working for innovation within ABN AMRO,” details Simons.

With this revelation, she explains, “we changed the strategy to one innovation department in which all teams are working on disruptive innovation” including the bank’s technology hubs (AI, blockchain, etc.), DARE ‘the innovation approach, learning and development, partnerships, and reinventing customer experiences. “This is now one department, pursuing one purpose and aiming towards the same goals.” 

Key takeaway

Creating innovation hubs is a great way to quickly innovate within a company and to mimic the ‘fail fast and learn’ mentality that startups benefit from. Some of the best innovations that we use today (such as the computer mouse) have come from innovation hubs, so their success is possible if created and operated correctly.

However, if an innovation hub is not set up properly or driven with the focus to innovate quickly, it can become an expensive and wasteful resource that only sets companies back. Avoiding pitfalls such as “innovation theater,” the lack of a purpose or goal, or innovating to try to save the company, are crucial to any innovation hub’s success.