What makes a digital lab successful?

Without doubt any business that wants to survive, let alone thrive knows that innovation is the name of the game, specifically “Digital Innovation”.

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Whilst there are many definitions[i] of what Digital Innovation entails most agree on a number of key factors:

  • An unwavering focus on the customer, their needs, experiences and how best to engage with them;

  • Using digital technology to rapidly accelerate development of new products and services;

  • Structuring differently, moving away from traditional hierarchies into flatter more agile teams, squads and tribes.

As Forbes[ii] states Digital Innovation is different to Digital Transformation, its all about the ‘new’ rather than just trying to digitise the existing business.

With this in mind, an increasing number of organisations have created some form of offshoot, where they can incubate and grow a different type of business. There are a plethora of names for these offshoots - Digital Lab, Garage, Foundry, Greenhouse and Studio. Some even enjoy the opportunity to create an acronym, such as the Cisco Hyper Innovation Living Labs (CHILL) who take the concept of a lab to the extreme by tackling ‘really big problems’ in just 48 hours[iii].

The appeal of a Digital Innovation lab is unquestionable but what do you need to consider when creating one? And most importantly, how do you set it up for success?

WHAT TO CONSIDER

There are many factors to consider when embarking upon the creation of a Digital lab (or noun of your choice!).

WHAT’S THE PURPOSE?

Before creating the lab, a clear vision and understanding of its purpose should be defined and communicated. Some labs are created with a very clear definition of the type of product or service they will be focusing on. Others (such as the Barclays Rise Lab[iv]) are set up to engage with customers and a broader innovation ecosystem. There is also the ‘skunk works’ model (such as the famous Google X Research Center[v]) where there can be freedom to explore everything and anything. These purposes need not be mutually exclusive, but clarity of purpose - even if it may change in the future - is important.

WHERE IS THE LAB?

Whilst exposed brickwork and an onsite barista doesn’t necessarily make a lab, the level of separation and differentiation from the main business is a key decision to take. If the purpose of the lab is to focus on Horizon Three[vi] then a radically different environment and culture is likely to be needed to enable the required level of thinking and culture. A lab that is more closely linked to a business line, product or service may benefit from being more closely located with the core business, both geographically and environmentally.

WHO IS IN THE LAB?

A fundamental question is how - should you staff the lab? One thought might be, ‘well this is technology so let’s just put our current IT function in a lab’. It is fair to say this is unlikely to garner success, the wholesale move of an existing business function into a lab (whilst temptingly simple) is far from innovative.

This is not to say that a lab needs to be staffed wholly by new recruits. There are examples of successful labs that have been created with the majority of members being sourced from across the organisation. In fact, it is that cross organisational approach that is key, bringing diversity of thought, experience and skills from existing employees, coupling this with an intimate knowledge of the broader organisation and its market and strategy that can be very beneficial.

New thinking from external sources is generally seen as an accelerator to the establishment of a lab, whether that be temporary via experts and consultants, permanent new hires or a combination of both. Building a sense of integration and camaraderie will be more difficult with this mixture but the need for new thinking and challenging ideas combined with business and market knowledge is well worth the effort.

Another choice to make is - who leads the lab? Will the introduction of a Silicon Valley style tech wunderkind provide the radical innovative thinking needed in a lab? Maybe, however consider how the ideas generated will then be received by the wider organisation? Another approach might be that of Johnson and Johnson who rotate business leaders through their Innovation Centers[vii], this has the added benefit of continually delivering fresh thinking and perspectives to the labs.

HOW DO YOU DEFINE SUCCESS?

The innovative nature of labs means they don’t necessarily lend themselves to measurement by traditional success metrics and therefore performance management and reward must reflect this. Depending on the purpose of the lab it may be possible to assess things such as new product/service revenue generation or number of ideas generated, although the definition of an idea and whether it is successful may be more challenging.

Some organisations look to labs to provide direct internal benefits, for example the number of employees trained in agile ways of working or adoption of digital tools across the whole organisation.

Deborah Arcoleo[viii] of The Hershey Company looks to measure what teams have learned: “As you conduct learning experiments, the amount that you know goes up so the amount that you don’t know goes down … then you feel more comfortable starting to invest a little bit more.”

The home improvement store, Lowe’s, has innovated the measurement of innovation, by partnering with Neurons Inc. They use neuroscience technology to measure customers’ emotional reaction to potential new products and services.[ix]

Whilst labs may be created to design and develop innovative products and services, it is often left to the rest of the organisation to deliver and ‘run’ these new innovations. With this in mind it is important to consider how you not only transition the products and services back into the wider organisation, but also how you transition lessons learned, methods and ways of working from the lab so that the whole organisation gets the benefits and starts to adopt a digital mindset.

CONCLUSION

It is important to realise digital innovation is not just technology. It requires a customer focused innovation culture, suitably structured to offer the flexibility to identify new opportunities and rapidly develop offerings to take advantage of them.

Digital disruption presents all organisations with both challenges and opportunities. Creating an innovation lab may well be part of a strategy to address these challenges and accelerate your ability to benefit from the opportunities, but it is not as simple as moving part of the business to an environment more suited to start-ups.

Be comfortable with the fact the lab will be a different type of business, be clear on the purpose of the lab, what the lab workforce will look like and what skills they will need; most importantly think how the rest of the organisation will work with the lab, and how they can benefit from the creation of this lab.

Finally, with organisations in all industry sectors creating labs, learning from peers in your ecosystem can be an excellent way to get started.

If you would like to explore how Wharton Business Consulting can accelerate your digital journey through people change, and connect you with other likeminded organisations on this journey, please get in touch or visit www.whartonbc.co.uk

[i] Digital Innovation - what does it really mean? OECD Insights, 2016

[ii] Digital Transformation doesn’t mean innovation. Forbes, 2018

iii] How Cisco chill turns ideas into companies in 48 hours. Forbes, 2018

[iv] Barclaye launches new home of Fintech, 2015

[v] X Company

[vi] Horizon Three is a reference to the The Innovation Horizons Model from The Alchemy of Growth. by David White, Mehrdad Baghai, and Stephen Coley. Horizon Three is where “Visionaries create viable options”

[vii] Innovation Centres, JNJ Innovation

[viii] Hersheys Exec on metrics and how they keep innovation focused

[ix] Lowe’s innovation Labs and Neurons Inc

Rethinking talent in the digital age

Let’s face it. We are all thinking it. With record-high retail store and high street bank closures, and predictions of robots driving our cars and taking our jobs – what does the future hold for our careers and those of our children?

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With 31% of organisations saying Artificial Intelligence (AI)* is firmly on the agenda for the next 12 months, what once seemed like only part of a fictional movie is very much becoming a reality.

Robotics and AI will no doubt transform the workforce, but are we ready? After all, “recruiting, developing, motivating, and retaining highly skilled, talented people is the single biggest barrier to CIO success” (Forbes, Jan 2017). According to the British Chamber of Commerce 2017 study, three in four UK businesses have reported a digital skills shortage among their employees.

What impact will the digital age** have on our search for talent? How can leaders identify the skills they need in the future and how can they ensure their organisation can adapt to the changing digital landscape? This blog explores the steps leaders can take, today, to bring their talent strategies in line with the digital age.

Rethinking skills in the digital age 

The digital age promises expansion through widespread, rapid and radical change to the nature of work. Automation will have a huge impact on the global workforce: by 2030 an estimated 50% of current activities will be automatable, and 6 of 10 current occupations have technically automatable activities. Work, and workers, will be displaced, meaning millions of people worldwide may need to change jobs, re-train or upskill. At the same time, AI and Machine Learning are also creating jobs elsewhere. AI alone is an emerging field that is expected to create 2.8 million jobs by 2020.

The skills organisations need for the future are changing, with a greater focus on innovation and creativity. With the rise of AI leading to quicker gains, people are freed up to focus on creating innovative products and solutions. According to the 2018 Deloitte Global Human Capital Trends survey human skills, such as cognitive abilities (55%) and social skills (52%), are predicted to be in tremendous future demand. This change in the skillset needed by businesses is creating a key challenge for leaders today with 73% of CEOs saying they see skills shortage as a threat to their business, compared with 46% just six years ago.

To address this challenge, leaders should be developing hiring strategies long before the skills gap becomes an issue. First leaders need to consider the skills and capabilities required to execute their strategy in the digital world. Comparing these requirements to their current employee skill base, will enable them to develop a workforce plan and robust talent strategy, defining when to buy, build or borrow skills and how to create an enabling culture. What do employees need to do differently to adapt to a digital culture?

Rethinking sources of talent in the digital age

The advent of a digital economy has enabled a rapid transformation of the shape of the workforce: the gig economy*** and rise of freelance means that traditional models of employment are changing. The notion of lifelong careers and full-time jobs are no longer the norm. In many ways, it has never been easier to go it alone. Geographical boundaries are being eroded as more and more tasks can be completed remotely, with many businesses able to move to 24/7 operations by taking advantage of a diverse workforce bringing not only additional flexibility in operating hours but greater diversity of thought.

With millennials soon to represent half of the workforce, organisations need to rethink the way in which they source talent. According to a recent study by Future Workplace study 91% of millennials expect to stay in a job for less than three years. The rise of the gig economy presents a number of challenges for leaders from adapting recruitment and onboarding processes, exploring internal mobility programmes to energising and engaging freelance talent and preserving an existing culture with a constantly changing workforce.

Leaders need to set themselves up to be able to flex the shape and size of their organisation with changing demand, sourcing skills from the freelance labour market and gig economy as needed. Some of the key activities leaders can begin to implement today include developing a flexible operating model, adapting sourcing and hiring processes to prepare to recruit from a wider range of sources, and mapping out a clear plan for taking advantage of new sources of labour. How will organisations assess and recruit candidates from a new area of skills they currently don’t have?

Rethinking managing and leading talent in the digital age

As the digital economy evolves we can be sure that there will be continuing focus on managing the impact on people, both within organisations, and on a wider economic level. As organisations move to more agile flatter hierarchies, engagement and motivation of the workforce is key with a focus on the employee experience. Leaders and managers should move away from traditional end-of-year appraisals and provide constant real-time feedback alongside creating an environment of continual development, where people can move fluidly internally and externally. The question is no longer about who do you work for but with whom do you work.

Leadership continues to play a critical role in developing a culture in which innovation can thrive, both through direction with the “tone from the top” articulating a compelling digital narrative and also through modelling the desired behaviours and actions. But what are the characteristics leaders need to excel in the digital age? It is clear that leading through change requires a very different skillset and as a result we are seeing a significant shift away from traditional command and control leadership styles. When it comes to predicting leadership effectiveness a recent study shows that personality traits such as curiosity, extraversion, and emotional stability are twice as important as IQ, indicating that inherent traits may prove more important than learned skills.

Leadership teams should look at whether they are truly aligned on their vision of the future and this may result in hard decisions about whether the right individuals are in place to continue to lead the business. Any leadership team needs a mix of skills and styles but they all have one thing in common and that is the need to constantly evolve, developing new skills and never settling for complacency. It is also imperative to create an environment for middle management to speak up and for leaders listen to the “tone from the middle” and act on it. Are leaders ready to let go of their empires and direct from the sidelines?

Finally

Even though we are starting to predict what the future of work might look like, and understand how digital and AI will shape the workforce moving forward, there is still a great deal of ambiguity in any vision of the future workplace. This is mainly due to the exponential speed of technology development. We therefore need to feel “comfortable with being uncomfortable” when it comes to how our jobs (and those of our children’s) will look like in the future and embrace this as a positive change.

To survive and thrive in the new digital age, companies must first and foremost focus on defining the skills and capabilities required to drive their vision, underpinned by a robust talent strategy and enabling culture, driven by an effective leadership.

dEFINITIONs

*Artificial Intelligence (AI) falls under the “digital umbrella”, as a branch of computer science that aims to create systems that can function intelligently and independently

**Digital age: the current era of technology, characterised by automation, mobile, cloud-computing, big data analytics, social media

*** Gig Economy can be defined as an environment wherein temporary positions are common and organizations engage independent workers on short-term contracts

References

OC&C Talking Shop, the rise of voice commerce. Feb 27, 2018

People strategy for the digital age, PWC, 2015

What the future of work will mean for Jobs Skills and Wages. McKinsey Global Institute, November 2017

Workforce of the future. The competing forces shaping 2030. PwC, 2017

Extreme onboarding: how to wow your new hires rather than numb them. Dr John Sullivan, July 2015

Rewriting the rules for the digital age. 2017 Deloitte Global Human Capital Trends

How the meaning of digital transformation has evolved, Harvard Business Review, May 2017

Managing talent in a digital age. McKinsey Quarterly, March 2016

What AI can and can’t do (yet) for your business. McKinsey Quarterly, January 2018

Forbes Top 10 CIO Priorities, January 2017

Artificial intelligence is going to completely change your life. World Economic Forum, November 2017

Are you ready for the workforce of the future? World Economic Forum, February 2015

Jobs are changing. But two skills will always be in demand. World Economic Forum, September 2017

7 skills your child needs to survive the changing world of work. World Economic Forum, September 2017

AI Explained in 5 minutes, YouTube, 2017

Intelligence and Leadership: A Quantitative Review and Test of Theoretical Propositions, Journal of Applied Psychology, 2004

Talent strategy for the digital age, People Matters, Oct 2015