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Here are four ‘watch-outs’ you should consider before setting up an Innovation Hub

We are regularly asked about innovation hubs, either from an advisory perspective in improving an existing capability, or for help in constructing a complete blueprint from scratch. Here, we focus on step-change innovation.

The focus here is reaching beyond incremental improvement, providing new revenue and growth opportunities to transform business. In some instances, this can only be achieved by taking activity outside of the day-to-day to avoid the barriers that exist. We realise that, for many businesses, an innovation hub separate to BAU is essential to provide this opportunity.

Our experience in building innovation hubs has helped us understand a number of ‘watch-outs’ that should be considered when developing a new innovation capability. Innovation hub initiatives are met with a wave of enthusiasm in a business and are seen as a clear indication of willingness to try something new. Whilst this is positive, it often comes with the added pressure of expectations of short-term results and transformation of the business. Being aware of these ‘watch-outs’ are crucial to ensure that not only are the expectations of the hub managed but that they are also surpassed.

Find a balance between commercial and creative

Research has shown that innovation hubs that focus solely/major on ideation fail; they tend to end up with lots of ideas but no way to take them forward or determine which will be the most successful. Building a robust business model and investable business case is essential to ensure that the outputs of your hub can be taken forward. The hub must therefore include business-focused skillsets such as customer validation, business case development, go-to-market and investment case in order to build a comprehensive proposal capable of investment. It may not be possible to guarantee that your hub will come up with the next big idea, but this approach ensures that when you come up with a good idea, you identify it, can quantify it’s worth and take it forward.

Focus on customer needs: don’t get blinded by technology

It’s all too tempting to start with technology in mind. The problem with this however is that it can often lead to being blinkered by a multitude of factors that are irrelevant to your target audience, such as your current tech stack, various issues and limitations etc. Instead, building propositions around real customer needs can ensure that there is a valid market for the proposition that will ultimately drive uptake and growth. Once you’ve identified your addressable market, then you can start thinking about one of the many ways to implement it with technology. There are usually many ways to solve a technical issue, but it’s not possible to develop growth trying to address a non-existent market.

Grant freedom to innovate outside of BAU: but maintain strategic alignment with your core business

It is common to set up a separate entity to business as usual – both in terms of balance sheet but also in terms of a separate physical space and environment. This reasoning is valid to ensure that the innovation process can run at a faster pace, and not be constrained by or subject to the limitations of BAU thinking. However, it is essential that the innovation function is able to build and scale target propositions, which often means feeding them back into the organisation to take them forward. There must therefore be a route out for a successful proposition to be taken on by the core business, or by partners. This requires alignment between your hub and your organisation as to how this will happen both strategically and operationally. Such considerations should be central to your hub’s prioritisation and selection process to avoid a string of opportunities that sound really impressive but are in fact never taken forward to the point that they deliver results.

Set goals for your innovation hub, but manage expectations appropriately. Don’t prioritise profit-making too rigidly

As with any business plan it’s essential for you to define the success criteria and goals that the function will be measured by. However, providing your innovation hub with heavy-handed profit-making targets are likely to result in the hub over-promising at an early stage and later be perceived as failing:

  • Firstly, there is no guarantee that a hub will deliver and commercialise the next ‘big idea’, or when that will be. It therefore makes sense to focus on some easier “quick win” opportunities to start with to test the hub and gain momentum and buy-in from the wider organisation. Failure is fine. Success is better.
  • Secondly, your KPIs should reflect that the business unit commercialising the proposition is likely to be external to the innovation hub, so make sure there is a process to attribute these benefits back to the hub when results crystallise.
  • Thirdly, step-change innovations will often take longer to commercialise than incremental, so if you’re after step-change innovation, ensure you’re giving credit for progress in building the proposition before a hard commercial result is realistic.

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