Saul Kaplan: So Many Corporate Innovation Labs, So Little Innovation
Wednesday, April 20, 2016
It’s not going well.
The CEOs I talk with admit privately that they’re getting tired of hearing Uber, Airbnb and Netflix disruption stories. They want their organizations to play more offense. They want to be market-makers, not just share-takers.
In response, CEOs have climbed onto the innovation-lab bandwagon. Corporate innovation labs have sprung up like weeds across industries around the world. Any self-respecting CEO now has a corporate innovation lab!
I have visited many of these innovation labs and spoken with those who’ve been tapped on the shoulder to start and lead them. My overall impression is that, at best, most of these innovation labs will produce only tweaks to today’s business models.
Innovation labs will launch with lofty rhetoric from CEOs about transformation and thinking out-of-the-box. But as soon as line executives and business unit leaders get control of the lab’s agenda, it is destined to produce only tweaks. This shouldn’t be a surprise, because corporate innovation labs are structured, resourced and governed to produce incremental improvements to today’s business models.
Lab projects are prioritized and funded to produce new products, services and tech-enabled capabilities that will improve performance of today’s business. The projects compete for resources based on financial metrics relevant to the current business model.
There is nothing wrong with that approach—leaders should always improve their current business model to stay competitive. But here’s the rub—today’s corporate innovation labs won’t help a company avoid being ‘netflixed’ or disrupted by an entirely different business model.
My conclusion: Corporate innovation labs aren’t set up in ways that will help companies avoid disruption. Here’s why.
10 Reasons Corporate Innovation Labs Produce Only Tweaks
1) Innovation lab mandates aren’t clear. Incremental versus transformational innovation require very different organizational approaches and support.
2) CEOs must own the transformational agenda. Instead they cede authority to line executives who are accountable for the performance of today’s business model.
3) Innovation labs overemphasize the production of a better mousetrap, as opposed to a better business model.
4) Potential innovation projects that may cannibalize current business are taken off the table, severely limiting the innovation lab’s scope.
5) Requiring a financial forecast for an innovation project—before exploring it in the real world—only works for tweaks, never for transformation.
6) Corporate innovation labs see emerging technologies through the lens of today’s business model, as opposed to a catalyst for an entirely new model.
7) Corporate innovation labs have difficulty shifting their perspective to see opportunities through the lens of customer experience and jobs-to-be-done.
8) Corporate venture funds are not innovation labs. They may provide startup capital to entrepreneurs, but withhold the company’s most important assets: scalable capabilities and market access.
9) Innovation labs aren’t organized as a connected adjacency to the core, a sandbox where capabilities can be combined and recombined, to change how customer value is created, delivered and captured.
10) Companies lack the talent systems to develop future leaders with experience working both in the core and in the innovation lab.
I think we all know that tweaks are necessary—we should all get better every day. But tweaks aren’t sufficient. If tweaking the way things worked today were enough, life would be so much easier. Sometimes we need transformation, and this is one of those times. In the 21stcentury, the most important life skill—and corporate capability—is reinvention,.
Transformation, disruption and reinvention don’t have to be scare words. We can create the conditions to explore and test entire new business models while we are still pedaling the bicycle of today’s models.
An important mandate for these new innovation labs is to do R&D for new business models, the same way we do R&D today for new products, services and technologies. R&D for new business models is the new strategic imperative. Corporate innovation strategies must create discrete approaches to deliver incremental improvements to today’s models, while also enabling the exploration of entire new models. Doing so It will require more clarity on the objectives of the innovation lab, as well as and recognition that the same structure, approach, resourcing, staffing and governance will not work for both incremental and transformational innovation.
It’s a good thing CEOs are taking innovation seriously. I sense they’re realizing that just setting up an innovation lab and delegating it to line executives isn’t enough, and they’re right. I’m finding more CEOs open to talking about how business model innovation fits into their strategic agendas, and I predict we will begin to see this new imperative better reflected in their organizational approaches to innovation.
Today I stand by my observation: So many corporate innovation labs, so little innovation. Tomorrow I expect we will see more corporate business model sandboxes to make R&D for new business models an ongoing strategic capability.
Related Slideshow: RI Business Rankings in US
See how Rhode Island stacked up.
Rhode Island has 2015's eighth highest insurance premium penalties for high risk drivers, according to a WalletHub report.
Rhode Island ranks fifth overall in the category of speeding over 20 mph annual premium increase at $482. While ranking third overall in the category of 2 accidents annual premium increase at $2,721.
Rhode Island ranks ninth overall under the reckless driving annual premium increase at $749.
Rhode Island has been ranked as the 8th most eco-friendly state in the country, according to a recent study by WalletHub.
Rhode Island ranks third in environmental quality and 16th in Eco-Friendly Behaviors Ran landing them in 8th overall.
RI is behind Washington and New Hampshire who are in the six and seven spots respectively, and in front of Connecticut and Hawaii who come in at the nine and ten spot.
Rhode Island is 2015's 4th Worst State to be a taxpayer, according to a recent WalletHub report.
Rhode Island ranks 48th of 51 with an average state and local tax price of $7,159 which is good for a 27% difference from the national average.
The states that are directly behind Rhode Island are Wisconsin at $7,159, Nebraska at $7,298 and Illinois at $7,719 for a 37% difference from the national average.
Rhode Island has the highest vehicle property taxes in the country, paying an average of $1,133 according to a report from WalletHub.
Virginia and Kansas are the two states just ahead of Rhode Island in the 49 and 50 spots, paying $962 and $905 respectively.
RI also ranks 42nd in average real estate tax, paying an average of $2,779, according to the WalletHub report.
WalletHub has ranked Rhode Island as the 7th worst state to be rich in in a recent in depth analysis of 2015's Best States to be Rich or Poor From a Tax Perspective.
On a scale with 1 being the best, and 25 being average, Rhode Island ranks 37th in low income earners, 42 in middle income earners and 45th in high income earners.
To see the full report, click here.
Providence-metro ranks at the bottom for job creation in 2014
Rhode Island has been ranked amongst the worst in job creation, according to a recent survey done by Gallup.
Gallup gives the Prov-metro area an index score of 23, the lowest score is the New York- New Jersey area with 20.
Salt Lake City, Utah and Austin-round Rock, Texas rank the highest with a score of 37.
The 2014 state rankings by Forbes has just been released and Rhode Island moved up two spots from #48 in 2013 to #46 in 2014.
What does Forbes say about RI's business environment"
After Michigan and Illinois, Rhode Island has experienced the third worst net migration out of its state in the country over the past five years. With a recent unemployment rate of 7.6%—lower than only Georgia and Mississippi—residents are leaving the state in search of jobs. Rhode Island has been stuck in the bottom five overall for six straight years. One plus: labor costs are 5% below the national average, which stands out in the expensive Northeast.
Findings from The State Business Tax Climate Index were released this morning by Tax Foundation which found Rhode Island to have the 45th best tax climate for businesses for 2015. The state's rank has not changed since last year after The Index analyzed 100 different tax variables in multiple categories.
Providence is the second worst city in America for small business, according to a new survey conducted by Thumbtack.com and the Kauffman Foundation.
More than 12,000 small businesses in 82 cities across the country participate in the survey. Providence received an overall "F" grade for small business friendliness.
Small Business Friendliness Grade: F
The Economist grades states on an A+ to F grading scale for its small business climate. Rhode Island is one of just 6 states to earn an "F" grade.
Overbearing bureaucracy and excessive licensing is stifling small business in America.
Forbes ranks each state in business costs, economic climate, and growth prospects. RI is third worst in 2013.
The most damning in the commentary:
After Michigan, Rhode Island has experienced the second worst net migration in the country over the past five years.
ChiefExecutive.net ranks each state in taxations and regulations, workforce quality, and living environment.
The most damning in the commentary:
Sky-high unemployment rate bespeaks continuing terrible business climate.
#46 Tax Foundation
Tax Foundation ranks each state in corporate tax rank, sales tax rank, and unemployment insurance tax rank.
Rhode Island and the other states in the bottom ten suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.
ALEC ranks each state in economic performance and outlook.
Although Rhode Island ranked low in economic performance, a forward-looking forecast is based on the state’s standing in 15 important state policy variables. Some of these variables include top marginal personal income tax rate and sales tax burden.
#47 Free Enterprise
Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.
Rhode Island has continued to feel the direct impact and ripples from the recent recession—it ranks 47th overall in economic performance. However, positive rankings of 15th in talent pipeline and 16th in innovation and entrepreneurship suggest the existence of a foundation on which to build the future.
The Pew Charitable Trusts
#40 The Pew Charitable Trusts
The Pew Charitable Trusts ranks each state in job growth and job creation.
Rhode Island added 6,223 jobs in 2014.
10th Worst in Gallup's Annual Ranking of State Job Markets 2014
Rhode Island has been ranked 10th worst for job creation in Gallup's annual ranking of state job markets in 2014 with a job creation index number of 21
Rhode Island is one of two (Connecticut) states to rank in the bottom ten each year since 2008.
The 2014 State level findings have were drawn from 201,254 interviews with employed adults across the nation.
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