“These co-creation innovation labs and hubs are now all the rage,” says Dean DeBiase, an entrepreneurship professor at Northwestern University’s Kellogg School of Management.
Innovation hubs serve several purposes. Companies use them as ways to find new clients, develop products in-house, or identify startups and technologies to acquire.
More innovation hubs burnish the city’s reputation as an innovative and tech-forward place to do business. They also help support Chicago-area startups by connecting budding companies with deep-pocketed potential customers, investors or buyers.
“(Innovation centers) are a bridge between the startup ecosystem and the bigger corporate world,” says World Business Chicago President and CEO Michael Fassnacht.
Innovation hubs shouldn’t be confused with corporate technology offices, which have also been cropping up in Chicago lately. Companies like Deere and Amazon have opened Chicago tech offices, which often employ hundreds of software engineers and other specialists developing technologies for frontline business operations.
Although innovation hubs help strengthen the local economy, they seldom create large numbers of jobs. Most operate more like small satellite offices designed for collaboration with external companies, startups and organizations. And because corporate leadership is often located at a headquarters in another part of the state, country or world, Chicago doesn’t necessarily benefit if an out-of-town company develops its next big product at an innovation hub here.
Companies are choosing Chicago for innovation centers based on the city’s proximity to strong research and academic centers and a cluster of vibrant industries, including in the food, manufacturing and industrial sectors.
There’s no data showing how Chicago compares to other cities as a location for innovation centers. But Illinois ranked 9th nationally in 2017 in research and development activity, reaching $18.1 billion across businesses, universities and federal labs, according to a 2020 report from the Illinois Science & Technology Coalition. When it comes specifically to business R&D, expenditures in Illinois reached $14.4 billion in 2017, which has increased by about 2.4% annually since 2013, the report shows.
Univar Solutions, a Downers Grove-based food chemical and ingredient distributor, is the latest example of the innovation center trend. The Fortune 500 company opened an innovation hub in January at The Hatchery, a food incubator home to hundreds of startups on the West Side. Battle Creek, Mich.-based Kellogg also opened an innovation hub there in 2020.
Kevin Hack, global vice president of food ingredients at Univar Solutions, said a presence at The Hatchery will help the company stay abreast of emerging food trends and find new customers.
“As these companies grow and develop, they will need people like Univar Solutions to provide them with ingredients,” Hack said.
Univar Solutions also considered Los Angeles and New Jersey, but chose Chicago because of its massive food industry and the fact that many Univar suppliers and customers are based in the city.
“Chicago is the epicenter of the food industry, both from an agriculture perspective as well as food manufacturing,” said Lavanya Venkateswar, head of marketing and sales of food ingredients at Univar Solutions.
Bosch, the German manufacturing giant, was one of the first out-of-town companies to open an innovation center in Chicago back in 2017. Called the Chicago Connectory, the center launched through a partnership with startup incubator 1871 on the fifth floor of the Merchandise Mart.
“We thought that we needed a connection with an innovation ecosystem,” said Fermin Fernandez, the Connectory’s managing director.
The hub, which houses about 25 full-time Bosch employees, has been a way for the company to find new customers, but also develop internet-of-things (IoT) products. One example is Bosch’s BlueHound service, which helps clients electronically keep track of drills and other tools.
Not all innovation hubs result in new products, though. DeBiase says some are mere marketing tools aimed at convincing consumers and shareholders that an old company is innovative.
“There’s a little bit of innovation theatre still going on,” DeBiase says. “It’s companies showing everyone that they’re great, cutting edge and they’re doing innovation. But when you look at what new products, services and ventures have actually been developed in these programs, they can’t point to 100 products.”
Some hubs focus on connections rather than product development. Dublin-based consulting giant Accenture opened an innovation center at 500 W. Madison St. in 2017. Now it’s in the process of expanding the space from one floor to two. The company says its main goal is to connect Accenture clients to and educate them about emerging technologies.
“When they come into our hubs . . . they get more engrossed and engaged in the conversation, which allows them to co-create with us and come up with newer ideas,” said Shivani Vora, head of innovation in North America at Accenture. “It’s just a different environment for them to solve some of their toughest problems.”
Accenture also uses its innovation center to find startups to acquire or invest in. Since opening the hub, Accenture has acquired Chicago-based companies like big data and artificial intelligence startup Kogentix and data science consultant Clarity Insights.
Whatever their purpose, innovation hubs keep coming to Chicago. Fassnacht says WBC is having “early conversations” with other companies looking to put innovation centers in Chicago later this year. “There’s more to come.”