DAOs: The New Digital Innovation Labs

DAOs: The New Digital Innovation Labs
  1. What is an Innovation Lab?

Innovation labs are organizations that seek to foster economic and social innovation through experimentation. Used by big and small businesses, city administrations, NGOs, think tanks, and multinational corporations, innovation labs are an almost default framework for collaborative innovation.

With “innovation” as the byword for growth, many traditional companies are leaning into the concept of an innovation lab. They’re opening entire offshoots of their companies that are entirely dedicated to the pursuit of new ideas, products, and services. Enterprise companies across all industries, including Walmart, Citibank, H&M, and Starbucks, have opened innovation labs to help them fast-track new products, understand market trends, and develop solutions for customers.

An innovation lab is tasked with coming up with new ideas, executing them, and iterating until the idea is fully executed or integrated into the business.

2. How are Innovation Labs Traditionally Structured?

Innovation labs function in many different ways. They can operate completely separately from the parent company, or be set up internally and staffed with existing contributors. They can also refer to programs set up for employees to ideate. Some innovation labs are third parties that partner with companies who want to be strategically connected to startups or want to host programs for employees.

The innovation lab entity is usually separated from the parent company in some way, because that’s the best way to think outside the company’s business-as-usual four walls and to reduce legal liability. In order to innovate, companies recognize they must break out of the typical, often bureaucratic ways of doing things. The mere fact of having innovation lab contributors be in a different geographic space than those working at the core business has been shown to promote new ideas.

One example of an innovation lab is the London-based Finance Innovation Lab (FIL) which builds on a diverse international community of over 2,500 people who have joined the lab voluntarily and are “committed to reworking the financial system”. Members of FIL comprise a diverse mix of social entrepreneurs, bankers, activists, design students and academics, and their interactions are facilitated by the lab founders as well as host organizations.

The FIL uses approaches such as crowdsourcing to solicit ideas that might contribute to their mission of a better financial system. They turn the most attractive proposals into projects and prototypes that the lab helps resource. To effectively orchestrate these activities, the core lab team has broadcast its transformative vision as widely as possible to attract a range of participants with different views and areas of expertise.

Even if you’re just slightly aware of DAOs, this should be starting to sound very familiar.

3. DAOs as Web3 Innovation Labs

Innovation labs present an unorthodox and varied typology, but one common denominator among them is the goal to create complex inter-organizational collaborations in order to tackle complex problems. Like DAOs, innovation labs are systemic, experimental and social in nature.

DAOs offer an improved framework for innovation labs because they allow for more flexibility, further reach, and more room for experimentation of innovative products and services. Due to the novelty and disruptive potential of emerging blockchain technologies, some of the existing organizational designs seem to be insufficient to provide the right environment both to explore new innovations based on digital technologies and to exploit their potential for the business.

Traditional innovation labs were a promising approach to provide the appropriate structure for the development of digital innovation in Web2, but in Web3, DAOs will pave the way for digital innovation.

The widespread introduction of DAOs as innovation labs where businesses can more freely experiment could potentially challenge traditional corporate-bureaucratic contexts with established structures of authority and resource allocation.

In DAOs, everybody can potentially be an entrepreneur. However, how rewards are distributed and how resources are allocated and how projects are governed remains to be a challenge in early stage and experimental DAO projects.

Sporos DAO solves this problem and revolutionizes how DAO projects launch and scale. Sporos’ Sweat Equity Management System is built on Kali DAO’s infrastructure providing a solution that reduces U.S. legal risk while also improving organizational efficiency by rewarding contributors with proportional ownership interests. While traditional business entities provide liability protection, ownership, and the ability to enter contracts, not every project is ready to be a traditional LLC or corporation. In many startup projects, there is a need for innovative experimentation to find a product market fit before taking on the obligations and liabilities of such a legal entity.

Early-stage startups and DAO projects can use Sporos sweat equity token to award ownership in a project based on contribution. With Sporos, you’re creating a Series LLC (which can be an umbrella organization for the lab with subDAOs for side-projects) as you work through bootstrapping/building mode and are trying to find product market fit. Using the innovation lab analogy, imagine just having an idea for a new project. You’d create a Sporos LLC on day 0 to give legal protection and personhood while building and also be able to proportionally distribute ownership as contributions were made to develop the idea. After the project has demonstrated success (e.g. generating revenue/customers), you’d probably look for a liquidity event of some kind (e.g. VC investment) and need to graduate from the Series LLC structure into some other legal entity. Sporos DAO makes this easy and affordable. Through this first of its kind system, Sporos DAO is helping other DAOs become new innovation labs for Web3 businesses.