Survey Analysis Report: Determine Your

Innovation Lab Scenario to Optimize Success

and Avoid Failure
Published: 19 February 2020 ID: G00450821

Analyst(s): Samantha Searle

Innovation labs can accelerate organizations’ technology innovation.

Enterprise architecture and technology innovation leaders can learn how to
apply the factors that affect the success of these different scenarios and to
determine which are the most appropriate for their innovation focus.

Key Findings
The success of an innovation lab depends on the following success factors:

■ A visionary CEO, accompanied by strong senior leadership and business sponsorship.

■ The identification of business outcomes, opportunities or challenges on which the lab can
focus; this makes it easier to determine the relevant business metrics of innovation success.
■ The right mix of skills and experience in the innovation team for applying techniques to find and
develop solutions to address business challenges and opportunities.
■ Investments in strategic partnerships with technology providers and academic institutions,
which help them acquire capabilities the lab may lack and that can improve innovation success.
■ A clear approach to innovation, including techniques such as design thinking and light
governance regarding funding decisions. This allows innovation labs to adapt their approaches
according to the desired outcome.

Recommendations
EA and TI leaders, including CTOs, driving technology innovation by setting up innovation labs
should:

■ Secure executive sponsorship for their innovation labs. Sponsors should help develop
business-focused metrics to track innovation success.

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■ Determine the key business outcomes, opportunities or challenges specific innovation ideas
can address. Labs that embark on innovation programs without a clear business focus risk
failure.
■ Leverage data generated from customer interactions to shape innovation strategies. Successful
innovation labs use customer insight to guide product innovation and capability development.
■ Focus their innovation programs on digital optimization and modernization as a precursor to
preparing for digital transformation, if their organizations have low digital business maturity.
Ensure alignment with business needs to deliver value.
■ Avoid the trap of pursuing technology innovation without measuring the business impact.
Although innovation labs require the freedom to fail fast, they will be closed down eventually, if
no positive business impact can be found.

Table of Contents

Survey Objective.................................................................................................................................... 3
Data Insights.......................................................................................................................................... 4
Four Innovation Lab Scenarios Emerge as the Labs Evolve.............................................................. 5
Collaborators Are CEO-Driven and Customer-Centric....................................................................... 6
Productizers Develop Data-Driven Products and Services................................................................ 7
Modernizers Focus on Digital Optimization....................................................................................... 8
Drifters’ Experimental Adventures Lack Focus and Fuel Failure......................................................... 8
Lessons to Be Learned.....................................................................................................................9
Methodology.................................................................................................................................. 11
Gartner’s Technology Innovation Lab Partner Strategies Study (2019)....................................... 11
Gartner Recommended Reading.......................................................................................................... 11

List of Tables

Table 1. Characteristics of the Four Innovation Lab Types....................................................................... 6

List of Figures

Figure 1. Success Factors for Innovation Lab Success........................................................................... 4

Figure 2. Four Innovation Lab Scenarios................................................................................................. 5
Figure 3. How Success Factors Relate to the Four Innovation Lab Scenarios....................................... 10

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Survey Objective
If you were setting up an innovation lab, how you would optimize its success? How would you strike
the right balance between rapid exploration and discovery, and yet still produce output that
provides business value? Innovation labs are often seen as the best way to support innovation
activities.

In 2019, Gartner’s Tech Innovation Survey explored how organizations with innovation teams were
approaching their innovation activities. The survey targeted individuals who were leading an
innovation program (such as the CTO, CIO or chief innovation officer) or were closely involved in the
innovation program. It indicated that 60% of the organizations surveyed (2019) have an innovation
lab in place. However, there are indications that many innovation labs are failing.1 One way to
reduce the risk of innovation lab failure is to find partners that can supply missing skills and
capabilities, and provide additional innovation and technical expertise. Gartner’s Tech Innovation
Survey also revealed that 62% of responding organizations are partnering with large technology
service providers, while a further 54% engage with academic institutions, to support their innovation
lab activities.

We wanted to explore the benefits and challenges of innovation partnerships to determine whether
they helped innovation labs become more successful. As part of Gartner’s recent Technology
Innovation Lab Partner Strategies Study 2019, we interviewed 20 individuals who lead or are heavily
involved in their organizations’ innovation labs (see Methodology section for more details). The
overall aim was to explore whether these organizations’ innovation labs were succeeding or failing.
In particular, we strove to explore how end-user organizations are partnering with technology
providers and/or academic institutions to find out whether these partnerships boost innovation
success or contribute to failure.

Our hypothesis was that innovation labs are failing and closing because:

■ They are not focused on business outcomes, so they struggle to move beyond pilot projects to
find practical use cases for their technologies.
■ They are not recruiting the right people, with the right mix of skills and experience to run them.
■ They are not embedded into their digital business transformations.
■ The organizational culture does not support innovation.

The interviews were designed to explore how large end-user enterprises are:

■ Setting up innovation labs to deliver meaningful results and identify valid use cases for the
business.
■ Partnering with technology service providers and/or academic institutions to improve their
chances of success.
■ Measuring their successes; acquiring the right talent and capabilities; and determining how they
are moving from ideation to pilots to production.

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Methodology Explanation: Given the small sample (n = 20) on which this qualitative research is
based, the findings should not be seen as a statistically representative sample of organizational
behavior. Instead, they should be interpreted as qualitative insights into the factors that may
contribute to innovation lab success and those that may result in failure. We define successful
innovation labs as those that have delivered output (digital products and/or services including
physical, smart products, software, digital capabilities and digital platforms) and use relevant
metrics to prove the business value of these innovations.

Data Insights
From the innovation labs we interviewed, some common success factors emerged that significantly
improved the chances of innovation lab success. They are shown in Figure 1.

Figure 1. Success Factors for Innovation Lab Success

Innovation labs that follow these five success factors are more likely to produce valuable output that
contributes to revenue and/or increased customer/employee satisfaction. As it evolves, the aim of
an innovation lab should be to follow these success factors. Of course, it’s unrealistic to achieve all
five at once. Start with the factors that are within your control, such as determining the goals, skills,
partnerships required and innovation process. You may have little control over the type of CEO your
organization has, but you can ensure that your innovation program aligns with strategic objectives.
You can work with business executives to establish your innovation goals (see “Successful
Innovation Begins With the Business Strategy: Use Business Objectives and Goals to Start Your
Innovation Journey”).

Once you’ve identified your innovation goals, it is easier to determine business metrics to measure
the business impact of your innovation efforts. Gartner’s Tech Innovation Survey revealed that
organizations using business metrics to track innovation performance are more likely to outperform
their competitors.2 Using business metrics to measure innovation progress isn’t just about proving
value; more importantly, it’s about achieving competitive advantage through your innovations.

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Your innovation goals also shape the right mix of skills and experience you need in your innovation
team. Most innovation labs first recognized the importance of building data and analytics
capabilities to enhance decision making. For example, this provided valuable insights into the kind
of digital products and/or services needed to improve customer experience (CX). Therefore, they
sought to staff their innovation teams with data scientists proficient in machine learning skills to
meet their initial focus on producing innovative algorithms. Successful labs would have a blend of
programming, design and business acumen skills, as well as data science, to support their
innovation projects.

Those innovation labs with strong innovation processes all had one thing in common. They put
extensive effort into scoping and validating their ideas before proceeding further. They used a range
of techniques, such as design thinking, customer journey mapping and hackathons, to achieve this.

The goal of an innovation lab is to be embedded in digital business transformation, rather than
isolated and disconnected from the business. This helps ensure strategic alignment and that
innovation lab output is contributing to driving the organization’s transformation.

Four Innovation Lab Scenarios Emerge as the Labs Evolve

The innovation labs that we interviewed can be categorized in four scenarios (see Figure 2). They
can be thought of as a snapshot in time during the innovation lab’s journey. The various
characteristics that these different innovation lab scenarios exhibited are shown in Table 1.

Figure 2. Four Innovation Lab Scenarios

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Table 1. Characteristics of the Four Innovation Lab Types

Characteristic Collaborator Productizer Modernizer Drifter

Primary Focus Business model New business Optimization, Unclear (no identified
innovation, CX, new capabilities, CX, modernization, CX business outcomes)
business product
capabilities development

Innovation CxO/board-level CxO sponsorship CIO/CTO or partner Director, with some

Sponsor/Driver CIO/CEO backing

Nature of Strategic; they have Tactical and Too dependent and don’t Dysfunctional —
Partnerships a main strategic encountered set clear expectations organization lacks
partner or competing upfront direction and
multisource objectives encountered partner
issues that impeded
delivery

Innovation Lab Data insights, Digital capabilities Digital optimization, No finished output
Output digital platforms and products including data quality — yet
(from data output may be ongoing
insights) and not yet finished

Innovation Lab Successful in Successful in At risk of failure due to the Failing to deliver any
Status delivering digital generating combination of the lack of products or
capabilities and prototypes active business outcomes
platforms sponsorship, lack of
relevant metrics and slow
product delivery

Innovation Business metrics Business and Mixture of project, IT, Either none or
Measures innovation metrics business and innovation efficiency metrics
metrics

Source: Gartner (February 2020)

Collaborators Are CEO-Driven and Customer-Centric

If the main objectives of your lab are business model innovation, reinventing CX and creating
business capabilities, then the collaborator may be the scenario to which you should aspire. These
innovation labs are forward-thinking — either striving to disrupt or responded promptly to market
disruption. They have the advantage of being sponsored by visionary CEOs. This makes it much
easier for them to generate innovation activities focused on certain business outcomes,
opportunities or challenges. Consequently, they are better able to find relevant business metrics to
measure innovation success.

Collaborators recognize the importance of partnership in driving disruptive innovation. Because they
have a clear idea of what they want to achieve, they are more likely to establish effective innovation
partnerships. Most collaborators are skilled multisourcers that usually work with several partners.
They know the skills and capabilities they lack, choosing the right partners to fill those gaps. They
build teams with strong leaders and a mix of business and technical expertise.

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Collaborators have clear innovation processes that seek out stakeholder and customer input, while
validating the business case after ideation. Of the four scenarios, collaborators are the most likely to
succeed, based on the labs we interviewed, because they followed the five critical success factors
closely.

Productizers Develop Data-Driven Products and Services

If your innovation goals focus on developing digital products, services and capabilities, with a
strong focus on customer excellence, then the productizer is the most relevant scenario for your
lab. Productizers have a vision of the products that will deliver a delightful CX. They have CxO
support, and innovation labs may be aligned to product business units. They strive to create smart,
connected products that leverage the big data and Internet of Things (IoT) revolutions. Furthermore,
they realize that quality data insights are a crucial first step to understanding customer needs that
guide product development. Consequently, they focus on building digital capabilities around data
and analytics and smart “things” to lay the right foundation to launch digital products.

Productizers focus on creating multidisciplinary teams with the right product development and
technical skills, but often lack strong innovation leadership or direct stakeholder input. They have a
clear innovation process that includes business case assessment, prototyping with customers and
testing minimum viable products (MVPs). Usually they adopt innovation metrics to track their
progress.

Productizers tend to take a tactical approach to their innovation lab partnerships. They hope their
partners will provide the technical skills that productizers lack in-house. Furthermore, they also
expect guidance from their partners on product innovation that will accelerate time to market. For
example, productizers picked their partners to leverage technologies, such as artificial intelligence
(AI) and IoT, which they hadn’t developed themselves in-house. In this way, they can accelerate time
to market for their products through assistance with prototypes and commercialization. However,
they were cautious of getting too involved with technology service providers (TSPs), in case their
ideas were shared with TSP clients, and it risked their intellectual property (IP).

Productizers face two main challenges that can prevent them from succeeding. The first is battling
internal resistance to innovation, as they try to expand their innovation culture beyond the lab. There
is a risk that their lab will be perceived as a cost center, which doesn’t help. The second challenge is
that sometimes they struggle to commercialize products. Both challenges are likely due to their
primary use of innovation-focused metrics, rather than metrics that link innovation output to
business value (e.g., revenue increase, increased customer wallet, ROI, increased brand value and
market share).

If productizers can adopt more business metrics to prove the value of their output, that will dispel
the cost center perception. They should also promote their activities and products internally,
explaining how they exploited business opportunities or solved business problems, to overcome
internal resistance to innovation.

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Modernizers Focus on Digital Optimization
If your organization recognizes that it needs to invest in, optimize or modernize existing technology,
including digitalizing the CX, then the modernizer is the most relevant scenario for you. Modernizers
recognize that they are behind the curve on technology adoption compared to their competitors.
They know they need to improve data quality and CX, which requires new digital capabilities. Their
focus on digital optimization means their innovation efforts are usually sponsored by the CTO or
CIO, but lack strong business support. Although they know they need to gain business buy-in, they
don’t use business or innovation metrics to show the strategic business value of their efforts. They
instead focus on operational metrics, such as cost savings and efficiency, technology adoption or
getting customer and employee feedback on the new capabilities they have developed.

Modernizers know the business outcomes they want to achieve. They succeed in delivering some
quick wins; however, their organizations lack a long-term innovation vision. This doesn’t help
modernizers scale up beyond their first few quick wins. Furthermore, they are not experienced in
innovation. They recognize the need for a broad range of talent to succeed. Despite this, they don’t
manage to get the best composition of skills and experience for their innovation teams.

Modernizers approach innovation partnerships with a strong expectation for partners to accelerate
their digital optimization efforts. This results in situations in which they depend heavily on partners
to establish innovation processes, methods and skills, as well as technical skills. They find that their
partners don’t always deliver on their promises, but modernizers could do more to set the right
expectations upfront.

The broad needs of modernizers puts pressure on their partnerships, as they tend to need more
partners to fulfill different gaps. A situation like this inevitably requires more time to manage, which
is a challenge. These factors, combined with a lack of business sponsorship and finished projects,
put modernizers at risk of failure. It is likely an innovation lab may not be the best approach from
modernizers. Instead, they may benefit from establishing a center of excellence (COE) to guide them
through digital optimization or modernization efforts.

Drifters’ Experimental Adventures Lack Focus and Fuel Failure

If the aim of your innovation lab is to showcase what can be done with emerging technologies, then
the drifter scenario may be of interest. However. it should only be a temporary phase for the
innovation lab, because Gartner research shows that drifters fail due to a lack of focus. Drifters
represent the type of innovation lab that loves to experiment. They are often used to showcase the
latest technologies to boost the company brand and generate excitement from their customers.
This may be OK if senior management agrees that this is the main objective of the lab and measures
its success by increased brand reputation.

However, the main drawback with drifters is that these labs rarely determine a business outcome to
support or define a final product. They usually have an idea of a problem to solve, which means
they’re unsure how to measure innovation success in terms of business value. They typically use
operational metrics or customer/employee satisfaction measures, rather than contributions to
revenue or ROI. Consequently, it is difficult for them to get senior management buy-in, which means
drifters are likely to fail in the long run.

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The lack of a clear focus has other consequences. It does not set up innovation partnerships for
success. Drifters do not communicate clear innovation outcomes and deadlines, so their innovation
partners tend not to deliver. Instead, there’s a risk that the partners get carried away exploring the
possibilities of new technologies, or that they don’t get the best people from the partner
organizations. Like modernizers, drifters rely heavily on their partners to help them innovate.

Drifters and their partners follow a loose, informal innovation process, which doesn’t help them build
a strong business case to develop their innovations further. Similarly, they give little thought to how
to source the right combination of people to produce the desired innovations. The combination of
issues means that drifters never succeed in generating valuable output, and their labs fail to deliver
on the original vision. We would issue an obvious word of caution in following this innovation lab
scenario. In situations where there is a valid reason to establish an innovation lab for marketing to
increase brand reputation, agree with senior management that this should be a finite initiative, once
that goal has been achieved.

Lessons to Be Learned
These four innovation lab types represent the different, potential scenarios an innovation lab can
enter (see Figure 3). These scenarios should be viewed as snapshots in time during an innovation
lab’s evolution. Obviously, the more success factors an innovation lab follows, the greater chance of
success. Conceivably, if a drifter or modernizer were to follow more success factors, it should be
able to reduce the risk of failure. Similarly, if a collaborator or productizer were to deviate from the
identified success factors, it may increase the risk of failure.

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Figure 3. How Success Factors Relate to the Four Innovation Lab Scenarios

The first critical step to innovation lab success is securing executive sponsorship. If a senior
executive is not on board with the trigger to start an innovation lab, you are better off postponing
the lab setup. Instead, continue with some innovation projects that can solve key problems and
deliver some quick wins to gain executive-level attention.

Executive sponsorship brings business buy-in with it. This makes it easier to identify the business
outcomes, challenges and opportunities you should focus on. This is one of the key reasons why
drifters fail. The innovation lab is then able to focus its ideation efforts on that business challenge or
opportunity.

Once you know what projects the innovation lab will support, you are in a prime position to assess
the skills and capabilities you lack. This will vastly improve your chances of finding the right kind of
innovation partner to complement your existing capabilities and fill in the gaps. However, there are
three other important areas of consideration.

First, before launching yourself into your depths of a complex digital business transformation,
consider what infrastructure modernization and process optimization may need to occur first. How
can a partner help accelerate this effort? How can you build a solid digital foundation for future
innovation and transformation success?

Second, use your skills and capabilities gap assessment to identify the specific roles, knowledge
and experience you will need an innovation partner to supply. Rather than just seek out data

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scientists or product engineers, specify what programming languages or technologies they should
have experience in. Find out what else they have worked on that might be similar to the innovations
you want to generate.

Third, establish an effective innovation culture. This can be an even bigger challenge when working
with partners with cultures that differ from your own. Our research showed that fast-paced
organizations got frustrated with the slow pace of academic institutions, for example. Instead, set
up an innovation environment that will foster the right culture for what you want to achieve.

These factors illustrate the importance of having an individual based in your innovation lab who is
accountable for managing partnerships. This person should liaise with account managers,
consultants and university professors to ensure focus on mutually beneficial business outcomes
and bidirectional knowledge transfer.

Finally, your innovation process should also be tailored to the specific needs of your innovation (see
“Jump-Start Your Innovation Journey With a Customizable Innovation Framework”). Although
innovation processes will vary, they should be common key components. These include ideation,
business case proposal, getting feedback from customers and developing prototypes for further
feedback, prior to commercialization.

Methodology

Gartner’s Technology Innovation Lab Partner Strategies Study (2019)

This survey was conducted by qualitative phone interviews with 20 lab leaders who had
partnerships with academic institutions or technology service providers during the period June
through August 2019. To participate, respondents were required to be highly involved with a
technology innovation lab in the U.S. or Western Europe and to have insight into the strategies of
partnering with TSPs or academic institutions.

The 20 qualitative research interviews were conducted for 45 minutes with end-user organizations
across various industries, including manufacturing, financial services, retail, healthcare providers
and other industries. Interviewees were a mix of senior innovation lab leadership; innovation team
leaders and managers; or, innovation lab advisors, from large organizations with more than $750
million in revenue.

Additional Research Contribution and Review

We’d like to thank the following from Gartner’s Primary Research Management group who
contributed to this series of reports: Julie Meyer, senior market research specialist; project lead Pui
Cheng Chang, senior project manager; and Sreeya Bagchi, data manager.

Gartner Recommended Reading

Some documents may not be available as part of your current Gartner subscription.

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“How to Build an Innovation Lab”

“Executing on Innovation: Design the Process From Idea to Value”

“Strengthen the Three Pillars of Innovation in Your Organization: Purpose, People and Process”

“Jump-Start Your Innovation Journey With a Customizable Innovation Framework”

“Navigate the 9 Common Pitfalls to Scaling Innovation”

“Driving the STREET Process for Emerging Technology and Innovation Adoption”

“A Maturity Model for Innovation Management”

Evidence
1A Capgemini study indicated that as many as 90% of innovation labs fail (see “Capgemini
Consulting and Altimeter Global Report Reveals Leading Businesses Continue to Struggle With
Innovation, With Traditional R&D Model ‘Broken’”).

2 Gartner’s Technology Innovation Survey 2019 was conducted by online survey from September
2018 to February 2019 with 273 innovation leaders in the U.S. and the U.K. The study explored
effective approaches to innovation (e.g., goals, enablers, and inhibitors of innovation) and the
importance of emerging technologies to meeting future innovation needs. Participating
organizations were required to have an innovation team and respondents were recruited to have
direct knowledge of and involvement with the organization’s innovation initiatives and strategies.

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