Webinar Summary: Innovation Lab Excellence - June 4th, 2024
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Speakers:
- Anna Owczarzak (Former Head of Google's Sales Acceleration and Innovation Labs)
- Emily Tedards (PhD Candidate at Harvard Business School)
- Michael Nichols (Director of Corporate Ventures, Mann+Hummel)

The "Innovation Lab Excellence" webinar, featuring experts Anna Owczarzak, Emily Tedards, and Michael Nichols, delved into the intricacies of establishing and managing successful innovation labs. The session covered practical insights and real-world examples of innovation strategies from leading companies like Google, Delta Airlines, and MasterCard. Key themes included the importance of leadership support, resource commitment, fostering a culture of learning and experimentation, and leveraging cross-boundary collaboration. The discussion emphasized the need for clear objectives, appropriate metrics, and the integration of innovative efforts into core business operations.
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Key Takeaways from Each Speaker‍

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‍Anna Owczarzak (Former Head of Google's Sales Acceleration and Innovation Labs)

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Main Takeaway: Strategic Separation for Focused Innovation
Anna emphasized the importance of creating specialized teams to handle high-risk, high-reward innovation projects separately from core business operations. This allows the core teams to focus on efficiency and optimization, while the innovation lab can experiment and nurture new ideas without the constraints of existing business processes.

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Emily Tedards (PhD Candidate at Harvard Business School)

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Main Takeaway: The Role of Bridgers in Innovation Labs
Emily highlighted the crucial role of "Bridgers" – leaders who can curate, translate, and integrate across boundaries. Bridgers establish the social fabric necessary for successful co-creation by fostering trust, mutual influence, and commitment among diverse stakeholders. Their skills in empathy, diplomacy, and negotiation are essential for navigating the complexities of cross-functional and cross-organizational collaboration.

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Michael Nichols (Director of Corporate Ventures, Mann+Hummel)

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Main Takeaway: Aligning Innovation with Strategic Objectives and Resources
Michael stressed the necessity of aligning innovation efforts with clear strategic objectives and securing sufficient resources from the outset. He pointed out common pitfalls such as insufficient funding, lack of talent, and unclear strategic fit, which can derail innovation projects. Properly structuring the innovation process, including flexible funding and appropriate metrics, is key to transitioning from ideation to scalable solutions.‍

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Deep-Dive
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‍Insights from Ana Owczarzak

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The Genesis of SAIL

The story of SAIL began around six years ago, during a planning meeting within Google’s ad sales business. The leadership team was grappling with the challenge of balancing growth through optimizing existing operations and exploring new, unproven opportunities. The realization struck that the team’s focus on efficiency and productivity was overshadowing the potential for innovation. To address this, a separate group was conceived to nurture and explore big bets without distracting the core team from their primary responsibilities. Thus, the Sales Acceleration and Innovation Labs (SAIL) was born.

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Defining Innovation in SAIL

The first step in setting up SAIL was to define what constituted an innovation project versus what belonged in the core business. The criteria were based on two dimensions:
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1. Risk to the Business: This included assessing the financial cost, potential user experience issues, and the impact on current operations.
2. Potential Impact: This involved estimating the potential revenue or user growth from the new initiative.

Projects with high risk but high potential impact were earmarked for the innovation hub, while those with lower risk and more straightforward integration into existing operations stayed within the core business. For instance, the local services program, targeting specific customer sets like plumbers and locksmiths, was moved to SAIL due to its distinct infrastructure needs.

Operational Dynamics of SAIL

Operating under the nautical-themed acronym SAIL, the innovation lab structured its projects with clear hypotheses and charters. Each initiative had to demonstrate a certain level of user reach, revenue potential, and scalability within the broader sales operations. The lab operated under the principle that not every project needed to graduate to the core business; failure was an acceptable outcome if it led to valuable learning.

Example Projects

SAIL undertook various projects, each with different outcomes. One project continued to operate independently, another successfully integrated into the core business, and several others were terminated after learning they were not viable. These varied outcomes were considered successes because they provided definitive answers about the potential of each bet.

Key Success Factors

Owczarzak highlighted two critical factors that contributed to the success of SAIL:
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1. Clear North Star and Leadership Alignment: Having a clear mandate from leadership that included an understanding of the high-risk, high-reward nature of innovation was crucial. This alignment provided the team with the autonomy to experiment and the comfort that failure was part of the process.
2. Learning Mindset and Culture: Embedding a culture of learning within the team was vital. This mindset involved openly discussing failures, rigorously analyzing successes, and continuously sharing insights. Team members with an entrepreneurial spirit and a background in innovative projects were particularly effective in this environment.

Challenges and Solutions

Maintaining Sponsorship

One of the significant challenges was maintaining sponsorship and funding. Initially, SAIL benefitted from strong leadership support, but as priorities shifted, securing continued funding became a challenge. The solution lay in diversifying investment options by building relationships with multiple parts of the business, including engineering, marketing, and core sales operations. This approach ensured a steady stream of support even as individual leaders’ focus shifted.

Connectivity to the Core Business

Balancing the degree of connectivity between the innovation lab and the core business was another challenge. Some projects required operating independently due to their unique nature, while others needed to integrate smoothly into existing operations. Regular discussions with engineering and UX teams helped determine the feasibility of integration and the necessary adjustments to make it work.

Lessons Learned

From Owczarzak’s experience, several key lessons emerged for anyone looking to build an innovation lab:
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1. Secure Strong Leadership Support: Having leaders who understand and support the mission of the innovation lab is critical. This includes financial backing and a willingness to accept failures as part of the innovation process.
2. Foster a Learning Culture: Encourage a culture where team members are not afraid to fail but are committed to learning from every outcome. Documenting and sharing these learnings can provide valuable insights for future projects.
3. Maintain Flexibility: Innovation is inherently uncertain, so being adaptable and open to changing course based on new information is essential. This includes having flexible funding mechanisms and the ability to pivot when necessary.
4. Embed Innovation in the Business: Ensure that the innovation lab is well-connected to the core business while maintaining enough independence to explore new ideas. This balance can help in scaling successful projects and integrating them into the broader organization.

Final Thoughts

Innovation in sales, especially in a tech giant like Google, involves navigating unique challenges and opportunities. Ana Owczarzak’s leadership of SAIL demonstrates that with clear strategic intent, a supportive culture, and robust operational structures, innovation labs can drive significant business value. By taking calculated risks, learning from failures, and maintaining strong connections with the core business, organizations can unlock new growth avenues and stay ahead in a competitive market.

Q&A Highlights

The presentation concluded with a lively Q&A session. Here are some of the key questions and insights:

Avoiding Undue Influence from Leadership

Owczarzak suggested that ensuring leadership stays close to the user experience can help mitigate undue influence. Engaging in regular user listening sessions and maintaining a user-centric approach in decision-making can align leadership with the innovation lab’s goals.

Time Frame for MVP

The time frame for developing a minimum viable product (MVP) can vary. Owczarzak emphasized the importance of aligning the development cycle with the typical sales cycle for the target customers. This ensures that the team runs multiple iterations and gathers enough data to make informed decisions.

Connectivity with the Core Business

Maintaining the right degree of connectivity with the core business is crucial. Owczarzak highlighted the importance of regular communication with engineering and UX teams to evaluate integration feasibility and necessary adjustments.

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‍Insights from Emily Tedards

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Defining Innovation

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‍Innovation, as defined in Emily's research, is anything novel and useful. It involves a process of co-creation and encompasses three essential components: collaboration, experimentation, and learning. Given the complexity of modern business challenges, leaders must increasingly co-create with individuals outside their immediate teams and organizations to harness the necessary talent and tools.

The Components of Innovation

• Collaboration: Innovation thrives on the integration of diverse perspectives. By working with a variety of stakeholders, including those outside the organization, teams can leverage a broader range of expertise and ideas.
• Experimentation: This involves testing new ideas in a controlled environment to learn what works and what doesn’t. It’s about fostering a culture where failure is seen as a learning opportunity.
• Learning: Continuous learning is crucial. Organizations need to systematically capture insights from their experiments and collaborations to refine and improve their innovation processes.

The Role and Challenges of Innovation Labs

Innovation labs and accelerators are popular tools organizations use to foster creativity and develop new solutions. However, many of these initiatives fail to deliver the expected impact. A telling example is from an SVP at MasterCard, who described presenting a new product that the organization ultimately did not know how to integrate or utilize.

Why Many Innovation Labs Fail

Many innovation labs promise to deliver a continuous stream of new products and solutions, disrupt core business practices, transform organizational culture, and drive growth. Yet, they often fall short due to several reasons:
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• Lack of Alignment with Core Business: Innovation labs frequently operate in isolation, resulting in products and solutions that do not align with the core business or meet its needs.
• Insufficient Integration: The failure to integrate new innovations into existing business processes can render them ineffective or irrelevant.
• Cultural Barriers: Resistance to change within the organization can impede the adoption of innovative solutions.
• Resource Constraints: Innovation labs are often the first to face budget cuts during financial constraints, as they are seen as peripheral to the core business.

Identifying Successful Innovation Labs

Emily's research identified several successful innovation labs and the factors contributing to their achievements. These labs often sit at the intersection of multiple organizations and disciplines, requiring collaboration across diverse functions and industries. However, the key to their success is not just technical and structural setup but the people driving the work and the social fabric they build.

Case Studies: Delta Airlines and MasterCard

Two exemplary cases of successful innovation labs are Delta Airlines and MasterCard. Nicole Jones at Delta and Gary Lyons at MasterCard built their labs from scratch and navigated complex ecosystems to achieve their goals.

The Importance of Bridgers

A critical insight from Emily's research is the need for "Bridgers" – leaders who can establish the social connections necessary for effective collaboration across boundaries. Bridgers perform three interrelated functions: curation, translation, and integration.

1. Curation

Bridgers have a deep understanding of who they rely on both inside and outside the organization. They step into their partners' shoes, understanding their priorities, capabilities, and constraints. For example, Nicole Jones at Delta Airlines successfully developed a biometric boarding pass by deeply understanding and integrating the needs and processes of various stakeholders, including Delta’s IT organization, government actors, and an external startup.

• Understanding Stakeholders: Nicole spent considerable time understanding the IT department's priorities, constraints, and fears, particularly their risk aversion after a significant outage.
• Building Trust: By personally engaging with IT experts and demonstrating a clear understanding of their concerns, Nicole earned their trust, facilitating smoother collaboration.
• Ecosystem Coordination: The project required coordination among various internal and external stakeholders, including TSA and CBP, highlighting the importance of broad stakeholder management.

2. Translation

Working across boundaries often means dealing with different organizational languages and cultures. Bridgers translate these differences to build a shared understanding and language. Gary Lyons at MasterCard exemplified this by translating the future of digital technology into terms that senior leaders, employees, customers, and investors could understand, thereby fostering trust and collaboration.

• Empathy and Communication: Gary spent time with senior leaders to understand their technology expertise and concerns, tailoring his communication to meet them where they were.
• Building Common Ground: By respecting the legacy knowledge and blending it with new technological insights, Gary facilitated a smooth transition and integration of innovative ideas.
• Diplomacy and Negotiation: Gary's ability to navigate and negotiate between the old and new guard within MasterCard ensured broad-based support for innovation initiatives.

3. Integration

Integration involves facilitating ownership alignment and coordination among partners. Bridgers use tools and processes to establish shared values, mutual influence, and clear decision-making rights. Both Nicole and Gary used deliberate strategies, such as customized contracting arrangements and carefully designed intake forms, to ensure alignment and ownership.

• Tools for Integration: Nicole’s use of detailed intake forms helped align stakeholders on project goals, values, and timelines, fostering shared ownership.
• Simplified Processes: Gary’s simplification of contracting processes for startups reduced barriers to entry, making collaboration more attractive and feasible.
• Ongoing Dialogue: Continuous dialogue and reconciliation of different priorities ensured that all stakeholders remained aligned and committed throughout the innovation process.

Developing Bridgers

A common concern is whether the ambition to create a repeatable innovation engine is feasible or if it depends on the serendipitous emergence of Bridgers. Emily's research suggests that Bridgers can indeed be cultivated. Organizations can expose leaders to diverse parts of the business, different functions, or even extracurricular activities to develop the necessary skills.

Cultivating Bridging Skills

• Rotational Programs: Exposing leaders to various functions within the organization helps them gain a holistic view and develop empathy for different perspectives.
• Experiential Learning: Activities such as improv training can enhance leaders' ability to listen, empathize, and engage effectively with diverse stakeholders.
• Holistic Development: Encouraging leaders to participate in external communities, such as startup ecosystems, broadens their understanding and enhances their ability to bridge gaps.

Practical Tools and Strategies

During the Q&A session, practical tools and strategies for fostering innovation were discussed. For instance, rotational programs help leaders gain a 360-degree view of different functions. Convenings, whether regular meetings or always-on platforms, foster interaction and collaboration. Additionally, forms and templates designed to facilitate alignment discussions can serve as useful tools for dialogue and planning.

Tools for Effective Bridging

• Intake Forms: Tools like Delta's intake form facilitate alignment discussions, ensuring all stakeholders are on the same page regarding project goals, values, and timelines.
• Convening Spaces: Creating physical or virtual spaces for regular interaction helps maintain ongoing dialogue and collaboration.
• Simplified Contracts: Reducing bureaucratic barriers, as seen in MasterCard’s two-page contracts for startups, fosters smoother collaboration and trust.

Final Thoughts

Innovation labs are not a guaranteed source of breakthroughs simply by their existence. Successful innovation requires effective Bridgers who can navigate the complexities of collaboration across boundaries. By focusing on the people, not just the processes, and developing the necessary skills and social fabric, organizations can significantly enhance their innovation capabilities.

Questions and Discussion

The presentation concluded with an engaging Q&A session, highlighting the practical challenges and solutions in leading innovation labs. For those interested in fostering innovation within their organizations, the insights from Emily Tedards' research offer a valuable roadmap for building and leading successful innovation labs.

Key Takeaways

• Innovation as Co-Creation: Innovation involves collaboration, experimentation, and learning, requiring co-creation with diverse stakeholders.
• Importance of Bridgers: Effective innovation relies on leaders who can bridge gaps between different organizational cultures and perspectives.
• Cultivating Bridging Skills: Bridging skills can be developed through experiential learning, rotational programs, and exposure to diverse environments.
• Practical Tools: Tools such as intake forms, simplified contracts, and regular convenings facilitate alignment and collaboration.
  
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Insights from Michael Nichols

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Understanding the Purpose of Innovation Labs‍

Nichols began by emphasizing the importance of understanding the "why" behind innovation labs. Many organizations set up these labs with the goal of fostering an entrepreneurial culture or driving growth through new business models. However, Nichols stressed that merely going through the motions of innovation—what he refers to as "innovation theater"—is insufficient. True innovation requires doing the hard work, much like practicing a sport or learning a musical instrument.

The Core Purpose

The ultimate goal of innovation labs, Nichols argued, should be to drive sustainable growth by developing repeatable, scalable business models. For corporate ventures, this means not just focusing on internal improvements or personnel development but aiming for tangible business impact and profitability.

The Stages of Innovation

Nichols identified three critical stages in the innovation process where organizations often face challenges:

1. Strategy Level: Ensuring the innovation lab aligns with the company's strategic goals.
2. Incubation to Scale: Bridging the gap between developing a Minimum Viable Product (MVP) and scaling it.
3. Financing and Governance: Securing and managing resources effectively to support innovation.

Common Pitfalls and Solutions

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Innovation Theater

One of the biggest pitfalls Nichols highlighted is "innovation theater," where activities like pitch contests and prototype showcases are conducted without real commitment to scaling the ideas. He stressed the importance of having a clear mandate and aligning innovation efforts with business goals from the outset.

Insufficient Talent

Another major challenge is the lack of sufficient talent experienced in innovation. Nichols pointed out that while hiring outside talent can bring fresh perspectives, these individuals often lack internal networks, making it difficult to integrate their ideas into the core business. Therefore, fostering internal talent and building a robust internal network is crucial.

Resource Allocation

Nichols shared an anecdote about a colleague who wanted to run an accelerator program without sufficient budget or personnel. He underscored that innovation requires serious commitment of resources, comparable to those allocated to core business operations. Without this commitment, innovation efforts are doomed to fail.

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Internal vs. External Innovation

Nichols discussed the debate between internal innovation (like R&D labs) and external innovation (such as partnerships and open innovation). He suggested that organizations should explore all options—venture capital investments, partnerships, internal labs, and co-creation labs. By diversifying their approach, companies can increase their chances of success.

The Importance of a Fixed Budget

A key takeaway from Nichols' presentation was the necessity of having a fixed budget committed upfront. He argued that innovation cannot thrive on uncertain funding. Without a predetermined budget, promising projects often falter when they reach the scaling stage due to lack of financial support.

Funding Dynamics

Nichols illustrated this point with a comparison to venture capital, where initial funding is hard to secure, but as startups gain traction, more capital becomes available. Corporates need to adopt a similar mindset, ensuring they have funds available to support innovation throughout its lifecycle, not just during the ideation phase.

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Strategic Commitment

For Nichols, a major factor in the success or failure of innovation labs is the strategic commitment from leadership. He emphasized the importance of having a clear innovation thesis that outlines where the company wants to innovate and why. This clarity helps ensure that resources are allocated appropriately and that innovation efforts are aligned with the company's overall strategy.

Organizational Behavior and Setup

Nichols also touched on the importance of organizational behavior and setup. Innovation is not just about the tools and tactics but also about creating an environment that supports innovative thinking and experimentation. This includes:

• Clear Rules of the Game: Establishing clear guidelines for how innovation projects will be evaluated and funded.
• Appropriate Metrics: Using metrics that match the stage of innovation, from qualitative metrics in the early stages to quantitative metrics as projects mature.
• Flexible Funding: Having the ability to allocate funds outside the regular budget cycle to support promising innovations as they arise.

Addressing Ambiguity in Innovation

Nichols acknowledged the inherent ambiguity in innovation, noting that it can be viewed as an outcome, a process, or a mindset. He argued that it's crucial for organizations to have a shared understanding of what innovation means to them. This shared language helps ensure that everyone is aligned and working towards the same goals.

Cultivating a Culture of Innovation

Creating a culture that supports innovation involves more than just setting up an innovation lab. Nichols shared examples of successful practices from MasterCard, where Gary Lyons dedicated a team within the innovation lab to raise internal awareness and run competitions with significant cash prizes. These initiatives not only generated excitement but also produced material outcomes.

Fostering Tolerance for Failure

Nichols and other presenters stressed the importance of fostering a culture that tolerates failure. Innovation involves taking risks, and not all ventures will succeed. By rewarding efforts and learning from failures, organizations can maintain morale and encourage ongoing experimentation.

Navigating the Innovation Journey

In conclusion, Nichols offered several practical tips for navigating the innovation journey:

• Commit to Resources: Ensure sufficient budget and personnel are allocated from the start.
• Adopt a Portfolio Mindset: Place multiple bets and explore various innovation pathways.
• Focus on Strategy: Align innovation efforts with the company's strategic goals and articulate a clear innovation thesis.
• Encourage Learning: Foster a culture that supports experimentation and values learning from failure.