Why Corporations Are Replacing Innovation Labs with Startup Studios

The startup studio model is steadily gaining ground against its longtime counterpart: the corporate innovation lab.

Over the past few years, some of the world's largest companies have quietly wound down their internal innovation programs. IKEA closed Space10, its decade-old innovation lab, in 2023. Google dramatically scaled back Area 120 during its company-wide restructuring that same year. Walmart followed in 2024, shutting down Store No. 8 after seven years of experimentation.

None of these organizations described the closures as failures. In fact, many of the labs successfully launched products, generated new ideas, and influenced their parent companies. Yet they all shared the same reality: no matter how productive they were, they remained dependent on corporate priorities, executive sponsorship, and annual budgeting cycles.

Large companies haven't lost interest in building new businesses. They're simply becoming more selective about how they do it.

Increasingly, they're turning to startup studios.

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Why Corporate Innovation Labs Struggle, Even When They're Successful

Corporate innovation labs have never lacked talent or ambition. Their challenge has always been structural. 

Google's Area 120, for example, launched more than 50 experimental products during its lifetime. Several graduated into Google's core business. Yet when Alphabet eliminated roughly 12,000 jobs in 2023 and shifted resources toward AI, Area 120 was dramatically reduced despite its track record.

This pattern isn't unusual.

Most senior executives operate on three- to five-year timelines and are expected to demonstrate measurable business results within that window. New ventures, however, often require six to eight years before generating meaningful revenue or profitability.

That creates an incentive mismatch. Leaders are rewarded for improving today's business, while venture building often creates value for their successors.

Innovation labs also operate inside organizations designed to optimize existing businesses. Startups do the opposite. They intentionally lose money in the early years, challenge existing product lines, move quickly, and frequently ignore the processes established for mature businesses.

Those competing incentives create inevitable friction.

Corporate innovation labs exist inside organizations built to protect the core business. As a result, genuinely disruptive ideas often become difficult to sustain, not because they lack potential, but because they're evaluated through the lens of an established enterprise.

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If Innovation Labs Are Fading, What's Replacing Them?

The answer isn't traditional business incubators.

While incubators typically mentor or support existing founders, startup studios take a much more active role. They originate ideas, recruit founding teams, provide shared operational resources, and often become co-founders alongside the companies they build.

The distinction matters.

Rather than simply advising entrepreneurs, startup studios build businesses from the ground up. They own a meaningful equity stake, assemble the initial team, and provide design, engineering, recruiting, finance, and operational support from day one.

That deeper involvement gives studios considerably more influence over execution than a traditional incubator model.

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How Corporations Are Using Startup Studios

As AI, software, and digital products continue to shorten competitive cycles, corporations are under increasing pressure to create entirely new businesses, not just improve existing ones. Increasingly, they are pursuing one of two startup studio models to do it.

Model 1: Partnering with an Independent Startup Studio

Some companies outsource venture creation to independent startup studios while remaining strategic partners or investors.

Creative Dock is one example. The independent venture builder has launched more than 65 companies with organizations including Société Générale, Škoda Auto, Mondelēz, Vodafone, and Swiss Re. In this model, Creative Dock builds the company while the corporate partner typically retains ownership of the resulting venture.

Founders Factory represents another variation. Backed by partners including Aviva, L'Oréal, easyJet, and Johnson & Johnson, it builds startups alongside corporate partners while also allowing those corporations to invest in the studio itself. By 2024, Founders Factory had facilitated more than 300 corporate pilots, with roughly one-third converting into long-term commercial relationships.

The common thread is independence. The studio operates outside the corporation's day-to-day governance while still leveraging corporate expertise, customers, and capital.

Model 2: Building a Corporate Startup Studio

Other organizations create startup studios internally while giving them greater autonomy than a traditional innovation lab.

Examples include P&G Ventures, Kamet Ventures, and Bosch Business Innovations. 

At first glance these may resemble innovation labs because they're owned by the parent company. The difference is how they're structured.

Rather than serving as internal idea factories, these organizations function as dedicated venture builders. They generate concepts, assemble founding teams, invest capital, and launch standalone businesses with greater operational independence than most innovation labs enjoy.

P&G Ventures illustrates one of the biggest advantages of this approach. A new consumer brand emerging from P&G gains immediate access to decades of retailer relationships, manufacturing expertise, distribution channels, and brand credibility that would take independent startups years to establish.

The goal isn't simply to innovate inside the corporation. It's to create businesses capable of standing on their own.

This shift reflects a broader trend. McKinsey has found that roughly half of CEOs rank venture building among their top three strategic priorities, with many expecting to expand these efforts in the near future.

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The Corporate Caveat

Startup studios aren't immune to the same organizational pressures that affect innovation labs. Ownership, governance, and strategic alignment remain challenging whenever a corporation is involved. Markets often reward independence, while corporate parents naturally want oversight and control. Balancing those competing interests requires careful governance.

Kamet Ventures offers one solution. Although launched by AXA, Kamet brings in outside investors to help maintain the independence of its portfolio companies after they spin out.

Leadership turnover also remains a risk.

Telefónica's Alpha successfully incubated Koa Health, helping it raise more than €14 million from outside investors before Telefónica eventually wound down the broader venture program as corporate priorities shifted. Even well-designed venture models remain vulnerable if executive sponsorship disappears.

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Where the Model Is Headed

Corporate venture building is still evolving, and no single model has emerged as the definitive answer. What is becoming increasingly clear, however, is that many organizations are moving beyond the standalone innovation lab.

The issue was rarely a lack of creativity. More often, it was a lack of structural alignment. Innovation labs frequently found themselves balancing long-term experimentation against short-term corporate expectations, a tension that proved difficult to sustain.

Startup studios don't eliminate those challenges, but they're structurally better positioned to manage them. Dedicated venture teams, aligned incentives, shared operational infrastructure, and greater independence give new businesses a stronger foundation than many internal innovation programs have historically enjoyed.

The most compelling corporate models may ultimately be the hybrid ones: studios that leverage the parent company's brand, capital, and distribution while maintaining enough operational independence to build companies that can succeed on their own.

It's still early. The corporate startup studio model has its own growing pains, and the research base continues to mature.

But as more corporations shift from funding innovation labs to building ventures, startup studios are becoming one of the most compelling frameworks for creating the next generation of businesses.

For a comprehensive list of the world's leading startup studios, explore our Startup Studio Directory.