5 reasons innovation labs get closed in year two

Innovation labs are rarely closed in their first year. Year one is protected by launch enthusiasm. Year two is when the first full budget review arrives, a sponsor may have moved on, and someone asks what the lab has actually changed. These are the five reasons labs fail that test, and what to do in year one so yours does not.

For the full picture of what a lab is and how it should work, start with What an innovation lab is, and why most fail.

The five reasons

1. The lab can only show activity, not decisions

When the review comes, the lab counts workshops, not changes.

Year-one reports often list sessions held, people trained, ideas generated and visitors hosted. These numbers feel like progress, but they cannot answer the question a finance director asks: what is different because this lab exists? Activity measures are also easy to cut, because cutting them seems to cost nothing.

What to do instead: from the first quarter, keep a running list of decisions the lab's work led to. A service changed. A project stopped before it spent its budget. A policy option dropped after testing. Write a short value case for each significant one, in the language of the people who fund you. Our article on counting ideas explains why idea counts are particularly misleading.

2. The sponsor moved, and nobody else owns the lab

A lab built on one leader's enthusiasm becomes an orphan when that leader leaves.

Leadership changes are normal, especially in government and large groups. A new executive inherits a lab they did not ask for, staffed by people they do not know, producing work they have not seen. The easiest decision is to fold it into something else. Denmark's MindLab, one of the best-known public sector labs, ran for sixteen years across several ministries before it was closed in 2018 and replaced by a smaller task force with a narrower digital focus. Even long-lived labs depend on whether current leaders see them as part of their own agenda.

What to do instead: name two sponsors from the start, one senior and one operational. Meet each new senior leader within their first month with a one-page summary of decisions the lab has enabled. Map what each sponsor and senior stakeholder expects using a stakeholder expectations map, and revisit it whenever someone changes.

3. Successful pilots had nowhere to go

The lab proved ideas worked, then watched them sit in limbo.

This is the most frustrating failure because the work was good. A pilot succeeds, everyone agrees, and then nothing happens because no department budgeted for it, no one's job includes running it, and the lab cannot run services itself. After a year of this, the lab looks like a source of nice ideas that never land.

What to do instead: refuse any challenge without a named owner who will run the result if it works. Ask at intake what adoption would require: people, budget, system changes, policy approval. Plan the handover from the start, as described in From lab to operations: the handover nobody plans.

4. The lab worked on interesting problems, not important ones

The challenges were chosen because they were exciting, not because they mattered to the people who pay.

New labs are tempted by visible, futuristic topics: emerging technology, new ventures, big speculative ideas. These can be worthwhile, but if the lab's whole portfolio is far from the organisation's daily pain, directors stop seeing it as useful. Meanwhile, the unglamorous problems that cost money and frustrate customers every day go to consultants or get ignored.

What to do instead: balance the portfolio deliberately. Use portfolio mapping to keep most work close to current services and pain points, with a smaller share for exploration. Choose early challenges with the tests in How to choose your lab's first challenges.

5. The lab became the organisation's events team

Every workshop, hackathon and visit request landed on the lab, until there was no time left for real work.

Labs are good at running sessions, so they get asked to run all of them: the annual retreat, the innovation week, the visiting delegation, the training day. Each request seems reasonable. Together they consume the team. By year two the lab is busy, visible and producing almost nothing of lasting value.

What to do instead: write down what the lab will not do, and hold to it. A stop-doing list reviewed each quarter helps. Accept facilitation work only when it serves a live challenge, or teach the requesting team to run the session themselves.

Run a premortem in month one

The simplest protection against all five is to imagine them in advance. In the lab's first month, gather the team and both sponsors and run a premortem: "It is two years from now and the lab has been closed. Why?" Write every reason, group them, and assign one action per group. Return to the list every quarter.

Do's and don'ts

Do

• Track decisions and outcomes from the first month.
• Brief every new senior leader early, in their terms.
• Make an owner and a handover route a condition of every challenge.
• Keep most of the portfolio close to real, current pain.
• Protect the core team's time from events and requests.

Don't

• Lead your annual report with workshops and ideas counted.
• Rely on a single sponsor.
• Celebrate pilots that have no path to budget.
• Fill the portfolio with showcase topics.
• Say yes to every facilitation request because it raises your profile.

An illustrative example

Illustrative: an invented organisation, described to show the pattern.

A retail bank in Southeast Asia opened a lab with strong backing from its chief operating officer. Year one was busy: a hackathon, a dozen workshops, a visit programme and two pilots of new digital features. Both pilots tested well.

Early in year two the COO left. The new COO asked for a summary of the lab's impact. The report listed events and ideas; the two pilots were still waiting for an IT slot and a business owner. The lab was merged into the digital team within months.

A sister bank in the same group took a different route. Its lab had a COO sponsor and a co-sponsor running branch operations. Every challenge needed a named owner. Its year-one report listed seven decisions, including two projects stopped early. When its sponsor changed, the co-sponsor briefed the successor with that list. The lab kept its budget.

Questions people ask

What is the most common reason innovation labs fail? In practice, the most common pattern is that the lab cannot show what changed because of it. That usually traces back to work with no owner and no route to operations, so good results never land.

How can I save an innovation lab that is under review? List every decision your work has led to, including stopped projects, and express their value in the reviewer's terms. Brief the decision makers in person. Show a plan for the next year that ties each challenge to a named owner.

Is innovation theatre the same as a failing lab? Innovation theatre means activity that looks like innovation but changes nothing: events, posters, showcase rooms. It is one of the main causes of lab failure, because once budgets tighten, theatre is easy to cut.

Where to go next

The guides that protect a lab in year one are the premortem, value case, portfolio mapping and stop-doing list. For the bigger picture, read What an innovation lab is, and why most fail and From lab to operations.