The Four Main Challenges Facing In-House Innovation
November 12, 2020
There are innovation programs, internal ventures, and moonshot factories in nearly every major company, spanning all industries and accounting for billions of dollars in investment. From Daimler’s Lab1886, to Visa’s Innovation Labs to Coca Cola’s KOLab Collaboration Center, an innovation program has become every Executive’s favourite speaking point, an opportunity to convince the shareholders and it’s board that they are in fact ‘one of the cool kids’.
Unfortunately, a lot of these programs are little more than corporate theatre, with entrenched industry-executives wearing skinny jeans, apple watches, and pretending to be Google for the day. Why is it that after billions of dollars in investments and shiny new offices in Silicon Valley, these internal start-ups have struggled to produce impactful products?
Where are the inventions like transistors and photovoltaic cells we saw come out of Bell Labs? Or the graphical user interface to come out of Xerox’s PARC? These were revolutionary technologies. And they came from laboratories that sat outside of the organization, with the intention of discovering products that leapfrogged the parent companies’ business altogether.
Don’t get me wrong, new product development is hard. Really hard. But for argument’s sake, let’s assume that the top 100 innovation programs (here’s a list of 85 from CB Insights) each conduct 5 experiments a year. With a 3% success rate, we should be seeing or hearing about 15+ of these innovations a year. In the last decade, how many new impactful products have you come across? If the number can be counted on your fingers, we have a problem.
Which is why we, at Connected, are putting together a report on the challenges that innovation groups face, so that as a community of Product Thinkers we can push toward more impactful products. In order to understand and define the challenges, we’ll be leveraging key learnings from our experience working on new product development within these innovation programs, as well as interviewing product leaders. This research will focus on listing out and prioritizing leaders’ biggest challenges to discover, develop, and release impactful products into the market.
This article is an introduction of the work to follow, designed to set the stage for a deeper dive into the problem. This begins by identifying the key challenges, and although the entire list of challenges is long, most can be bucketed into four main categories:
Hiring the wrong people, especially to lead
This is one of those challenges, we see being repeated over and over again. Oftentimes it comes down to the leader not being able to speak the same language as the Engineers, Designers, or Product Managers. This isn’t a small issue, it’s fundamental. If your leader fails to understand the day-to-day processes and semantics of product development, they will be unable to prioritize resources and inspire the workforce effectively. It doesn’t matter if they were a partner at one of the top management consulting agencies, they’re strategic brilliance just doesn’t translate to a world where hunches and early learnings are the currencies that inform product strategy.
The structure of the innovation program
Some programs lack a unique mission and culture, continuing to be tethered to the goals and priorities of the core product. Additionally, the way its people are incentivised ensures these programs are prioritizing evolutions of the current product, and not building entirely new products designed to disrupt their own offering.
How these programs approach product discovery and development
Most innovation programs we work with don’t have a shortage of opportunity spaces they would like to explore. In fact, they usually have too many and prioritizing them to a few to invest in seems to be the problem. Other challenges include understanding how to measure success and failure in the Discovery phase. Pull the plug too early and you could’ve killed the next iPhone. Pull the plug too late and you’ve got an Evian Water Bra, tens of millions less in cash flow, and an embarrassing PR situation.
How these programs approach product release and scaling
This has been a challenge at every company I’ve worked with and has been highlighted in most of the interviews we’ve conducted. Once product market fit has been found, programs and the mothership struggle to scale these. Do they bring the product in-house to leverage existing competencies? Or do they continue to scale it within the innovation program or as its own entity altogether? The uncertainty leads to the product being collateral damage in internal politics.
Now that I’ve talked about the key challenges and set the scene, keep an eye open for the report that will follow in the following months, where we will be doing a deep dive into each challenge. Until then, please email us at firstname.lastname@example.org to tell us which of these you believe to be the biggest barrier in your experience.
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