Innovation Labs vs. Venture Studios:
Which Should Your Company Open in 2025?

What are they?

An innovation lab is an internal hub designed to explore new ideas, experiment with emerging technologies, and create prototypes to improve existing products or services. These labs operate as dedicated teams within larger organizations and focus primarily on internal transformation rather than creating standalone businesses.

A venture studio is a startup factory that systematically builds and launches new companies. Unlike innovation labs, venture studios operate more like incubators, developing ventures from ideation to market launch. These studios attract external entrepreneurs and co-founders to lead new businesses, with the parent company retaining equity stakes.

Innovation Labs: A deep dive.

Key Features of Innovation Labs

Focus on R&D and Prototyping
Tests concepts and technologies without immediate pressure to commercialize.

Supports Existing Business Models
Works to enhance or streamline current processes.

Encourages Cultural Change
Acts as a catalyst for instilling an entrepreneurial mindset in employees.

Collaborative Approach
Often partners with startups, universities, or accelerators to gain insights.

Benefits vs. Drawbacks of Innovation Labs

Venture Studios: A deep dive.

Key Features of Innovation Labs

Startup Creation
Focuses on launching new businesses rather than improving internal processes.

Ownership and Equity Model
Retains ownership stakes in ventures for financial returns.

Fast Iteration and Scalability
Employs lean startup principles to test and scale ideas quickly.

External Focus
Often targets entirely new markets and customer segments.

Benefits vs. Drawbacks of Venture Studios

Which Model Should Your Company Build?

Choose an Innovation Lab if:

• Your company wants to enhance internal capabilities and test new technologies.

• You aim to improve existing products or services rather than create entirely new businesses.

• Cultural transformation and employee engagement are priorities.

• You have lower risk tolerance and prefer long-term experiments over quick wins.

Example: A manufacturing company seeking to integrate AI into its supply chain may use an innovation lab to prototype solutions before rolling them out.

Choose a Venture Studio if:

• Your company seeks disruptive growth opportunities beyond its core business.

• You are prepared to invest heavily and tolerate higher risks for potentially high returns.

• Entering new markets or exploring emerging industries is a strategic priority.

• You want to diversify revenue streams and reduce dependence on legacy products.

Example: A pharmaceutical company looking to leverage biotech advancements might launch a venture studio to create health-focused startups.

Or Consider a Hybrid:

Some companies leverage both models by building an innovation lab to generate and test ideas internally before transitioning them to a venture studio to scale and commercialize externally.

Before running down the hybrid path, however, build one of the two first. Attempting to build both an innovation lab and a venture studio at the same time can prove overwhelming.

Final Thoughts

Whether your company should open an innovation lab or a venture studio in 2025 depends on your strategic goals, appetite for risk, and timeline for results. Innovation labs provide incremental improvements and cultural shifts, while venture studios focus on building disruptive businesses with the potential for rapid scaling.

Regardless of which direction you choose, however, there’s no time like the present. Innovation isn’t something that just happens after you launch either of these models; it takes time to create the cultural and operational impacts necessary to leverage innovation.

If Innovation Labs and Venture Studios are so awesome, why are they constantly shutting down?

What do Verizon, AB Inbev, and SAP all have in common? They all shut down their corporate innovation labs or venture studios recently.

So why are we advocating for these innovation platforms if so many major corporations are shuttering them? Because innovation is hard.

You may have noticed a trend over the last 20 issues of Innovate, Disrupt, or Die: Innovation is hard.

We’ve discussed, presented case studies, and quoted highly researched works that all center around a theme: Innovation is hard.

Creating and fostering truly disruptive innovation within a corporate environment is akin to swimming against the current of a raging river. All of the business processes, financial targets, and quarterly earnings calls in traditional organizations focus on KPIs that are at direct odds with the ideals of innovation.

The moment you stop trying or take a rest, you’re pushed in the direction of the flow of capital which is constantly pressuring companies to earn more money with greater efficiency and at less cost.

But that’s not how innovation works.

By establishing a unit within your organization that’s focused on swimming upstream, all the time, you’re giving your company a fighting chance to break the mold. You’re embedding a 10th man rule within your organization—a team who is always focused on considering the unexpected or contrarian perspective on progress.

5 Lessons that will guarantee success:

Align Innovation with Core Strategy

Innovation efforts must be tied to business objectives and customer needs, not just technology exploration. Labs and studios should prioritize projects that solve real problems and complement the company’s growth strategy.

Key Insight: Procter & Gamble’s Studio 55 Ventures thrives by focusing on consumer-driven products that enhance the company’s existing portfolio, like Zevo insect control.

Commit to Scaling Successful Ideas

Companies need clear processes for scaling prototypes and startups. This includes allocating resources for commercialization, developing go-to-market strategies, and integrating innovations into the core business.

Key Insight: Samsung NEXT successfully launched and scaled SmartThings, integrating it into Samsung’s broader IoT ecosystem.

Measure Impact Beyond Vanity Metrics

Instead of tracking patents filed or ideas tested, labs and studios should emphasize market traction, revenue growth, and customer adoption. Metrics should mirror startup performance, including customer acquisition costs (CAC) and lifetime value (LTV).

Key Insight: L’Oréal’s Technology Incubator measures success through product launches like Perso, which generated widespread adoption and revenue growth.

Balance Short- and Long-Term Goals

Innovation programs need a mix of quick wins and moonshot ideas. This balance ensures consistent progress while maintaining the ambition to disrupt markets.

Key Insight: Alphabet’s X continues to operate because it balances short-term AI tools with long-term bets like Waymo’s self-driving technology.

Consider Alternative Models

Instead of standalone labs or studios, companies can adopt hybrid models—combining internal innovation labs with corporate venture capital (CVC) investments or partnerships with accelerators.

Key Insight: Kraft Heinz’s Foundry collaborates with startups, blending in-house innovation with external expertise.

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