At ADP, a network of innovation labs was born with an app.
In 2011, ADP opened an innovation lab to develop a mobile app — the first one created by the $10.9 billion payroll and business-process outsourcing firm, based in Roseland, NJ.
Five years later, the app is used by nearly eight million employees to monitor their paychecks, 401Ks, and other benefits.
More importantly, the development of that initial app laid the foundations of a new product-development framework for the firm, which serves 610,000 clients worldwide.
After the success of its first lab, ADP launched additional labs in New York City and Pasadena, Calif. The lab network has helped the 67-year-old company transform itself from simply a payroll vendor to a major supplier of data analytics, gleaned from the employment and pay records of its millions of customers.
The company has also become a provider of human-capital management apps; in fact, their new iTunes-like “ADP Marketplace” offers apps addressing everything from recruiting and time management to health benefits. Already, more than half of ADP’s national clients are customers of its payroll services and its HR apps.
Roberto Masiero, vice president and head of the company’s New Jersey lab, sat down with InnoLead to share some wisdom for other companies that are considering starting an innovation lab. Here are his recommendations:
Get Away from Excessive Process
The ADP labs seek to incubate new ideas and technologies that will better serve existing clients. “Our product is software-as-a-service, so all of our labs are really focusing on that,” says Masiero, “and how to better serve our clients through better software.”
However, the ADP labs are trying to do that on accelerated timeframes. According to Masiero, the labs look for ways to serve that market “in a faster, more agile way, without the burden of the processes that are naturally created when a company grows to the size of a big corporation like ADP.”
According to Masiero, decoupling a rapid-development team from the core business can help accelerate the pace of innovation. “It’s almost like [we are] taking away all those things that are necessary when you treat volume and complexity the way we do, to be able to experiment faster.”
Masiero notes that it’s important that a company fully flesh out its strategy long before building any lab. For example, ADP’s labs are structured to approach both incremental and transformational innovation (see InnoLead’s 2015 Innovation Benchmarking Study for a breakdown of incremental vs. transformational approaches at large companies).
Specifically, ADP’s labs are exploring new ways of managing human capital, which is ADP’s core business. That means the labs are tackling new approaches to the way people are hired, how they get trained, how they access their pay and benefits, and other staffing-related issues.
But the time horizons for those projects can differ widely, so the labs are structured to accommodate varied approaches. The Pasadena lab, with about 350 employees, focuses on product development, user experience, and product management. The lab in New York, with about 200 people, focuses on new core HCM (human capital management) projects with one- to three-year incubation timelines. And the ADP lab Masiero oversees in New Jersey works on longer-term three- to five-year out projects.
According to Masiero, this multi-layered, multi-lab approach ensures ADP can innovate at the scale and speed necessary to meet the needs of its market.
Limit the Focus
In addition to having a clear strategy, Masiero emphasizes the importance of focus. Specifically, he says that restricting the number of projects at any given lab is crucial.
“If you look at the characteristics of a good startup, one of them is focus,” says Masiero. “Startups say, ‘This is what we’re going to do, this is the product or feature,’ and then they laser focus on that.”
One of the pitfalls Masiero has witnessed at other labs has been related to that lack of focus. “If you try as a startup to accomplish 10 or 20 things at a time, it’s probably not going to work.”
According to Masiero, there are currently about five projects in the works at the New Jersey innovation lab, which means that about six to eight people work on each team.
That number is in line with data collected in our 2015 Benchmarking Report. The majority of respondents to that study (62.2%) stated that they were also managing fewer than 10 projects in their early research or “lab” stage at any given time; and most of those (37.3%) had the same number as Masiero, with fewer than five innovation projects going on at once.
Masiero also explains that the small number of employees on any given team helps fuel speed and agility. “They almost become like a family,” he says. “It drives the project, and it has been quite successful so far.”
He also acknowledges that a clear focus on a small group of projects makes it easier to move them forward — or kill them — based on the merits. “If they will fail, we’ll try to do that as fast as we can,” he says.
ADP Lab Projects
The ADP Marketplace
The latest project from the ADP labs is the ADP Marketplace, which won a top HR tech industry award in 2015.
The iTunes-like Marketplace serves as a store for ADP clients to purchase or obtain free HR apps, which can be customized to their industry.
Marketplace also provides developers access to the firm’s APIs [application programming interfaces], so others can develop custom apps using ADP data, or can integrate that data into their own mobile apps. Masiero says that gaining such access requires a thorough vetting and security clearance for developers, but already more than 140 developers have integrated their applications to work with ADP’s data and apps.
The strategy and model is similar to how companies like Google and Apple have grown their user bases by encouraging the development of apps by outside parties. According to Masiero, “It facilitates us creating an ecosystem of human capital management apps.”
Collaborating with other R&D groups at ADP, the lab has also co-developed products that take advantage of “Big Data” analytics to create predictive services.
For instance, through ADP DataCloud — developed by ADP’s analytics team with support from the New Jersey-based innovation lab — companies can predict when employees are likely to leave their jobs, or become a “flight risk.” The modeling is based on myriad data points, including salaries, commute times, historical data, and more.
“The data really speak,” Masiero says. “One factor we saw in the data was that if you live in an area where people make substantially more money than you, you have a higher probability of leaving or changing jobs.”
With DataCloud, companies are also able to create benchmarks to contrast their labor data with competitors in the same industry and location. For example, an employer can determine whether a particular overtime spike was industry-wide, or specific to their company alone.
Keep the Organization Flat
Another “startup-like” attribute that Masiero adopted for his labs is a flat organizational structure, with all 30 people at his lab reporting directly to him.
The flat management style dates to Masiero’s early career in Brazil, where he founded and launched three companies. One of them, a human-capital management software firm called B&M Informatização Ltda., was acquired by ADP. Masiero was invited to the U.S. for a two-year assignment at ADP after the acquisition, “and here I am 10 years later.”
That experience as a software entrepreneur has played a major role in cultivating the flat management style at the labs. But Masiero also makes sure that the labs are linked with the parent company. At ADP, people move in and out of the labs, so they feel connected to the core business.
That’s a major advantage. “The brand, the size, [and] the installed base is a phenomenal value,” says Masiero, and it’s something that any startup would love to have. “I used to say our lab is a startup with a $12 billion angel, which is our corporation behind us,” he says.
Purpose and Recruitment
As we’ve covered extensively in our “Recruiting Innovation Talent” section, hiring innovators is one of the biggest challenges that corporate labs face. And the competition is especially difficult in hot markets like New York, where companies like Google and Facebook have a major presence.
But Masiero says he’s found something that pulls more weight than free food, foosball tables, or other startup perks: purpose. According to Masiero, in dealing with potential innovation recruits he has found that “they want to have a purpose in what they’re doing.”
One of the big selling points for ADP is that the company touches the lives of millions of people on a daily basis. As a result, Masiero is able to explain to recruits that the work they will do at the lab can help make a real difference in peoples lives and futures, by “improving the way people save their money on 401Ks, improving the way they make the choice, or what benefit makes sense for their families.”
In addition, Masiero says he works hard to recruit not just software engineers and data scientists, but anthropologists, writers, and financial analysts. That’s because ADP’s vision requires unique perspectives and communication skills.
He notes that anthropologists, for example, are important because ADP needs to understand people’s views about employment, and the relationship between employees and their employers. Copywriters are becoming more critical because software systems are increasingly interacting with users through conversations.
“By design, we try to hire talent not coming from our own space [enterprise software or human capital management],” says Masiero. “We wanted to have this different perspective into what we do.”
He recommends that other companies consider such diversity in recruiting, because it provides fresh ideas and perspectives that can drive the innovation agenda. “We bring so many ideas to the table that we probably would not have if we’d chosen to hire people from our own industry.”
Disseminating the Lab Mentality
One major question for companies with labs relates to product migration. In other words, what happens to products developed in labs? Where do they “graduate” to?
At ADP’s labs, the path is clear and distinct.
First, a project has to hit specific criteria or goals. For ADP’s first app, for example, the objective was one million users.
At that point, the project graduates out of the lab, with the team that developed it in control. At this point, the project becomes an official ADP “product,” which means it receives traditional support and service.
According to Masiero, this process yields two benefits. First, the project remains in the hands of the engineers or other staffers who built it. That both rewards the team for its hard work, and also ensures that the product isn’t simply dumped on another business unit that isn’t supportive enough, or invested in its success.
Second, the team that developed the product has the ability to spread the processes and approaches that the lab uses to other business units. By default, they become innovation champions, who can lead by example.
According to Masiero, this approach has had a wide impact on the rest of the business. The lab’s application of design thinking, for example, has since been infused throughout the enterprise. Masiero says it even resulted in an overhaul of the ADP brand and logo. Design thinking has also led to the creation of consumer-friendly “experiential” paychecks, which enable employees to better understand and interact with their pay and benefits.
Importantly, Masiero notes that one objective of the labs is “to make the entire company more innovative, agile — almost like creating this coterie.”
And that ripple effect is starting to have an impact. “My goal is maybe five years from now, we don’t need a lab anymore, because all of ADP is a lab,” he says.