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Big corporates should just ditch innovation labs -- because they don't work

Mario Tama/Getty Images

A startup expert who acts as a consultant to big companies says corporates should give up on innovation labs because they don’t work.

The Village of Useful co-founder and director Andy Howard told Business Insider said he applauds “genuine efforts” of big corporates that attempt to create innovation units, but they’re just not the same as an actual startup.

“Corporations are creating innovation labs for the wrong reasons. Many of them amount to nothing more than ‘innovation theatre’ – opening an innovation lab will appease the board, appease the shareholders, and it gives corporations an easy answer to ‘What are you doing about innovation?'” he said.

“So it ticks the box for them, until the innovation lab proves it’s not working and needs to be closed.”

The Village of Useful’s Andy Howard. (Source: supplied)

Big brands like Coca-Cola, British Airways and Disney have closed or downsized innovation teams in the last few years, according to The Village of Useful, with 90% of innovation labs considered a failure.

But in the internet age, all the incumbents have startup challengers nipping at their heels and can’t afford to not come up with new solutions to old problems.

Tech analysis firm CB Insights last month described this “Catch 22” for big companies, taking the example of US retail chain Walmart.

“First, it was ‘They’re not doing enough to fend off Amazon’. Then Walmart bought Jet.com for $US3.3 billion and it was ‘Wow. The world’s most expensive acqui-hire’,” wrote CB Insights co-founder and chief Anand Sanwal.

“Yes, pretty thankless.”

Howard, who has advised the likes of BHP, NSW government and Unilever, said it’s difficult for corporates to staff an innovation lab the same way as a real entrepreneurial venture would.

“It’s typically not enough to take someone from inside the organisation and put them into a new [innovation] role,” he said.

“People who are successful in corporate innovation are generally more entrepreneurial and customer-focused and would typically come from outside the organisation.”

Howard cited multinational conglomerate Proctor & Gamble and car maker Daimler as two incumbents that have successfully fostered innovation. Locally, media company Seven West Media’s strategy earnt praise.

“Seven West leading the investment round in [labour exchange startup] AirTasker is brilliant,” he told Business Insider.

“Who knows how that helps Seven West in the long run, but good on them for making a genuine start. It’s a great learning opportunity for [the incumbents] to invest in startups and bring in outside thinking, whether it’s from a startup, from a consultancy or whether it’s just about building a panel of customers.”

One of Howard’s clients, CarZoos, took out the “most innovative company” award this year at the global Stevie Awards for replacing traditional used car yards with technology. The CarZoos brand is a subsidiary of the 104-year-old Queensland automotive retail group AP Eagers.

“If [the incumbents] rest and do nothing, they’re absolutely under threat – and the chances are they won’t exist in a decade’s time,” said Howard.

CB Insight’s Sanwal agreed that doing nothing “guarantees” irrelevance, and presented a startling chart on the ever-shortening lifespan of S&P 500 companies to demonstrate the point:

Longevity of S&P 500 companies. (Source: CBInsights)

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