Harnessing Offsite Innovation Labs and Talent-Based Acquisitions

By: New Markets Advisors

Off-site innovation labs and acquisitions are often an effective way of bringing in tech talent or capabilities that a company otherwise does not possess.

These outposts — which often contain a mix of existing employees and outside hires — can be useful places for creating new competencies and fostering innovative ideas that might meet resistance back at headquarters. However, the gap between the outpost and the core can quickly become a breeding ground for tension and miscommunication. In many cases, the off-site team produces valuable output that either fails to meet the needs of the core or that fails to gain traction because of an ill-prepared landing zone back at the core. Over time, the innovation lab or acquisition may quickly fall victim to the traditional “out of sight, out of mind” perils. By talking to some of the world’s leading companies and exploring their experiences with off-site teams, New Markets has collected some first-hand strategies for successfully harnessing the value of such a unit. ​

Tirelessly foster critical relationships — The head of an acquired IT startup for a large North American retailer spoke with us about the importance of building relationships with people back at headquarters. He admitted that 9 months after the acquisition, his off-site team still did not fully understand the core’s needs, and the core had a limited understanding of the team’s capabilities. He noted, however, that the team’s early successes in delivering usable concepts to the core were a result of connections he built through his monthly trips back to headquarters. Even when companies make a senior-level decision to acquire specific capabilities, a strong and continuous voice needs to integrate those capabilities with ongoing projects and priorities. In-person meetings are an important way to nurture the relationships that keep each side abreast of the other’s needs and competencies.

Enable quick wins — The off-site mobile experience team for a global retailer acknowledged that the team’s output gains the most traction when it delivers a “wow” factor back to the receiving team at headquarters. The team has learned that quick, head-turning wins have given it the credibility to pursue longer more meaningful projects. By delivering upfront wins that gain attention, off-site teams can buy more time and trust from managers back at the core. Nevertheless, even quick wins need to be substantive. Rather than focusing on building a flashy component for a long-term challenge, teams should generate quick wins by focusing their efforts on important — but relatively compartmentalized — challenges that can be solved quickly.

Bring in strong external leadership — Although quick wins are helpful for building confidence and relationships, outposts are often regarded as a failure because they are unable to meet unrealistic expectations about the value they can deliver. The new head of an off-site innovation team for a global manufacturer helped solve this problem by negotiating a schedule for its output in advance. In particular, the schedule included a generous scale-up period during which the team was not required to deliver results. Accordingly, the team was not forced to prematurely deliver unfinished output, and it had more time to focus on integration with the core. External leaders often feel less pressure to modify projects to fit unreasonable timelines, and they typically have an easier time pushing back on the design of success metrics.

Recognize the burden of your biggest asset — External leaders also have the ability to solve another unusual problem facing large companies looking to build innovation outposts. Many of the highly-regarded companies we spoke with were troubled to learn that their brands — ordinarily their most valuable asset — were scaring away the best tech talent. Top programmers and designers expressed wariness of joining these industry titans because they lacked a reputation for innovativeness and tech-centricity. Bringing in a well-known outsider to head your lab allows you to capitalize on a reputation that your brand would otherwise lack. This separation between core and outpost also signals to prospective employees that the off-site lab is likely to have a distinct culture and an appreciation for true innovation.

Avoid taking on too much — When we spoke with the head of an off-site digital innovation lab for a global company, he was keen on emphasizing the importance of a clear mandate. When designing the lab, his conversations with other innovation teams revealed that they often got pulled into “all things digital,” diluting their ability to deliver value. When off-site teams take on too much, it typically creates two problems. First, the team’s purpose becomes murky. Leaders at the core become unwilling to send the team high-priority projects because it is not clear that there is a particular thing that they do really well. Second, the team tends to work on projects that overlap with those back at the core. Accordingly, resources are used inefficiently, and multiple teams waste time working on the same task. By focusing on a targeted group of projects, off-site teams can both raise their status back at headquarters, and avoid fostering workflow redundancies.

Running an innovation lab or tech outpost is very different from running a department in the core business. Capturing value from these off-site teams requires a different set of strategies than those that the company normally employs. One of the biggest challenges is finding the proper balance between distance and connectedness. On the one hand, there needs to be a strong relationship between the innovation lab or acquisition’s off-site team and the core, which includes a hospitable landing zone for the team’s output. Quick wins and in-person connections can help support that relationship. On the other hand, there needs to be a strong leader who can push back on unreasonable expectations for output, create an innovative culture, and attract top talent. The ideal point on that connectedness spectrum will vary by company, depending on its industry, goals, and culture. Regardless of where a company falls, however, creating a tightly-defined mandate will be essential to generating anything more than short-term excitement.

Story by Dave Farber.