One of the most innovative companies on the planet, Google, is allowing researchers to spend their entire days dreaming up big ideas that have little immediate connection to making a profit—like inventing driverless cars. Research is being done in a lab near headquarters called Google X with an idiosyncratic cast of characters, according to Fast Company magazine. Google X is different from a lot of innovation labs. Two of the criteria for any project are that it has to affect millions or billions of people and it can’t be an incremental improvement.
It’s a great idea, if not for the fact that few American companies bother with such basic research innovation labs. You have to spend money that is hardly justified from a shareholder perspective without any clear goal of making a profit, let alone accomplishing a result in a specific timeframe. Gone are the days of Bell Laboratories, which for decades invented things that would transform the world such as the transistor in the 1950s, which later became the basis for the computer chip, not to mention inventions that were also useful for AT&T. For proper perspective, Google X, as awesome as it clearly sounds, employs 250 people. Bell Labs during its heyday employed 15,000.
“Those were the days of pure research,’’ says Bert DuMars, a former Forrester Research analyst who has gone on to become vice president of digital marketing at Bi-Lo Holdings, the grocery store company. DuMars wrote a report in December 2013 on “The Costs and Benefits of Marketing Innovation Labs.” Many large companies now run these labs, albeit with a clear financial goal and a way shorter timeline than Google X does. They might have a two-year window to implementation, not a 10-year timeline. “No business wants to create another white elephant because they become very expensive and unusable,” DuMars says.
Companies with marketing innovation labs include Wal-Mart, Comcast, Chick-fil-A, Capital One and Wells Fargo & Co. Wells Fargo has a separate space near its San Francisco headquarters that employs more than a dozen people. The company calls it “WF Digital Labs,” and says it is a test-and-learn platform for new, innovative concepts on the digital experience for customers. The mission of the lab is to spark new ideas, re-imagine existing “experiences,” and enable innovation, including developing demos and prototypes for the bank and beta testing those ideas in front of customers and Wells Fargo employees.
This year, the lab’s goals included exploring Google Glass and other smart wearables (such as Samsung Watch) as well as new forms of authenticating customers using biometrics. The lab also worked on creating seamless experiences across digital platforms for the bank, such as online and mobile banking. So unlike Google X, Wells Fargo’s lab is very much focused on improving the basic customer experience with the bank.
DuMars says that companies that succeed with these labs establish clear goals, budgets and venues, with a C-level leader responsible for their success. You have to decide if your company really has the organizational culture to foster and help innovation succeed, otherwise, don’t do it. Innovation labs require:
Significant investments in talent and technology. You could start with as little as 5 to 10 people, but keep in mind, the average annual cost per lab employee is about $228,515 based on an average office lease rate of $400 per square foot in Silicon Valley. Rent might be cheaper elsewhere in the country, but you still have to attract the right talent to your designated location.
Specific goals. Decide what they are. Most labs do not execute their innovations, although some, such as Comcast’s, do.
A calculated decision on whether your lab will be housed in a city known for its innovation such as Silicon Valley or co-located with your headquarters office. Chick-fil-A has two full-sized experimental restaurants where headquarters employees can go test the latest projects, such as using iPhones at the drive-through. Capital One has an innovation lab in San Francisco that allows people to walk in off the street, sip coffee made by baristas and test out new banking ideas and apps from the researchers in the lab.
Many game-changing innovations that transform the world may not be hatched in these laboratories, but they are a start to staying competitive in a changing world.