Published on Voices

What’s your strategy for innovation labs?

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Innovation is a hot topic these days. Not just in the private sector, but also increasingly in the public sector. When the World Bank created its Innovation Labs about five years ago, we were one of the few development institutions to do so. Since then innovation units within other international development institutions, foundations, and aid agencies have slowly emerged. This is a welcome trend, as it indicates the acceptance by development institutions that innovation is important to meet many of the new Sustainable Development Goals.

The objective of these labs tend to be something like, ‘generate new ideas’, ‘fund innovations’, or ‘enhance the use of technology in our programs’. Some of these Innovation Labs tend to focus on funding innovation outside their institution (especially donors), while others are doing innovation separately from their core institution. These innovation labs are typically biased towards action, technology, design, and are driven by a desire to start doing something new. The first actions of choice tend to be: (i) doing internal competitions to generate and fund ideas; (ii) doing seminars and workshops around use of new technologies; and/or (iii) doing external competitions or challenges to find and fund new ideas, startups, or social enterprises.
Each of these approaches in itself is worthy of pursuit, and I applaud the bias towards action and demonstration, in institutions that typically tend to be bureaucratic, slow moving, and risk averse. However, what concerns me is that there is often a lack of deliberate strategy around innovation, lack of articulation as to how innovation fits with the business strategy, and even lesser focus on the role of culture and leadership in enabling innovation.

Another aspect that concerns me is the tendency for these Innovation Labs to operate separately or independently from the rest of their host institution. It’s almost like saying we do innovation, but the rest of my institution does business as usual. Sometimes the innovation team does all functions ranging from incubation, venture capital type investment, and management consulting.
This has some key drawbacks based on our own experience. The first and the most important one is that the rest of the institution may not take you seriously, as you may come across as doing something cute, on the sidelines, and at worst wasting precious resources that they could better utilize.

The second issue is that you are not leveraging the strength, footprint, capabilities, and resources of the rest of the institution, thereby limiting the opportunity to scale and deliver impact. After all innovation is only as good as the impact it delivers.
The third issue is that in the innovation unit itself you may be trying to manage different work streams, each with very different business models and skills requirements, thereby lacking cogent metrics of success.

For a private sector company, the competitive forces in the market often dictate the need for innovation. As the choice might simply boil down to innovate or die. However, for an aid agency or public sector entity, the imperative isn’t always as clear. Since, there is usually no such external market test. On the contrary the more immediate pressures to disburse the funds or deliver existing services may directly go against doing innovation, which is usually risky, and takes time to show results.

Therefore the imperative to innovate must be well defined from the outset. Before starting an Innovation Lab the organization should answer some fundamental questions:
● Why do we need to innovate? What is our imperative?
● What is the problem we are trying to solve? Is it lack of ideas? Is it lack of funding? Is it culture?
● Do we need innovation to respond to our client demand? If so, what are the areas of such demand and why aren’t we able to respond to it? Is it lack of skills? Is it lack of solutions?

The answers to such questions should then drive the strategy and business model for the Lab. In the end if the answers point to a need for an innovation lab, then it’s crucial to make sure that the senior most leadership in the institution is fully behind it. After all, innovation in most institutions will live or die based on the buy-in and support from senior leadership.

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