Teague Hopkins

Mindful Product Management

Innovation at Scale: Corporate Innovation in Regulated Industries

Lessons from Innovation Labs

In 2024, the top 2,500 companies spent more than $1 trillion on innovation initiatives, yet research suggests 70% to 90% failed to generate meaningful returns. In regulated industries, where compliance constraints add another layer of complexity, the challenge is even greater. Here’s what actually works, based on a decade of leading innovation initiatives across multiple regulated sectors.

Three people sit at a table facing away from the viewer looking at data displayed on large computer monitors. Sticky notes with various icons and charts are affixed to a wall behind them, evoking brainstorming and project planning.

The Power of Proving Ground Operations

One of the most effective approaches I’ve encountered is establishing a “proving ground” operation within the larger enterprise. This model allows organizations to test and validate innovations at a smaller scale before rolling them out enterprise-wide. Rather than attempting to transform the entire organization at once, this approach creates a controlled environment where new technologies and methodologies can be refined with lower risk.

For example, when implementing behavioral-based technologies, starting with a smaller customer base of 10,000 rather than 10 million allows teams to iterate and improve while making it easier to maintain regulatory compliance. This approach provides concrete evidence of success – such as improved loss ratios or customer engagement metrics – that can then justify broader implementation.

Building the Right Innovation Infrastructure

Innovation isn’t just about ideas – it’s about having the right infrastructure to execute them. Successful corporate innovation requires three key elements:

  1. Dedicated Resources: Having a separate budget and team that operates outside standard planning cycles
  2. Technical Expertise: A mix of data scientists, engineers, and business strategists who can bridge the gap between innovation and implementation
  3. Access to Enterprise Assets: Leveraging existing compliance frameworks, domain expertise, and customer relationships

The key is creating enough separation to move quickly while maintaining sufficient connection to core business assets and expertise. This balance is critical in regulated industries where compliance cannot be compromised.

From Innovation to Implementation

The most challenging aspect of corporate innovation isn’t generating ideas – it’s successfully implementing them at scale. Success requires:

  • Clear Path to Value: Innovation initiatives need to demonstrate concrete ROI, whether through cost reduction, revenue generation, or risk mitigation
  • Strategic Alignment: Projects should solve real business problems while building capabilities for future growth
  • Stakeholder Navigation: Understanding who the key decision-makers are and how to engage them effectively in the innovation process

For example, when one company implemented a new risk assessment algorithm, they first secured buy-in from compliance by running it in parallel with existing systems for 6 months. This ‘shadow mode’ operation provided the data needed to prove efficacy while satisfying regulatory requirements.

The Spin-In Advantage: A Contrarian View on Corporate Innovation

While most corporate innovation programs focus on spinning out new ventures, there’s a compelling case for the opposite approach. The key advantages of spin-ins include:

  1. Leveraging Existing Infrastructure: Rather than building compliance, risk management, and operational frameworks from scratch, spin-in innovations can utilize established enterprise systems
  2. Clear Path to Scale: When you develop innovations specifically for internal adoption, you’re building with real-world constraints and requirements in mind
  3. Faster ROI: By focusing on internal improvements, spin-ins can quickly demonstrate concrete value through cost reduction, efficiency gains, or risk mitigation

Achieving Balance

The future of corporate innovation in regulated industries isn’t about disruption for disruption’s sake—it’s about systematic value creation through proven frameworks. Organizations that master the balance between innovation and compliance, particularly through spin-in models and proving ground operations, will be best positioned to drive sustainable growth in an increasingly complex regulatory environment.

Note: This post reflects insights from my experience leading product innovation initiatives and recent discussions with peers in similar roles at major insurers and financial institutions.