Photo by Christian Wiediger
Spark Innovation with 4 Essential Books
At its core, R&D is all about innovation. Before implementing your first program, you’ll want to check out these four books for inspiration.
Before diving head-first into implementing an R&D program, consider the following factors:
Market Landscape: What is the current market landscape? Is the industry heavily commoditized or saturated? Is it difficult to differentiate from competitors? If yes, innovation via R&D might be your only path to differentiation and making a meaningful impact in the industry over the long run. If you can’t innovate and build moats around your business, then you are doomed to perpetual competition in a saturated market. If that’s the case, it might be time for an exit.
Customer Base: Do you have a loyal customer base open to experimental services or initiatives? If so, you make them an integral part of the innovation ecosystem – bringing the relationship closer in the process. They will feel part of your team and be actively vested in your success by taking ownership in building the solution to their problem.
Financial Picture: Depending on the size and stage of the organization, a cutting-edge, costly innovation lab may be unrealistic and unnecessary. Try for a bootstrapped, guerrilla-style version. Being resourceful and innovative at the earliest stages can set you up for long-run success once your R&D reaches the “production” stage. You will also want to take inventory of all additional funding options that are available to you. For example, if you are looking to make a software play, there may be grants and other government programs available. External financing from government agencies or private investors may also be an option.
Long Term Outlook: Is there a clear vision of where you want to go over the next decade? Has it been communicated to everyone? A clearly defined vision, mission, purpose, culture, and path to victory need to be codified and used as a guiding light for the R&D program. Shareholder risk tolerance also plays a part here. If the appetite for experimental and speculative R&D projects is low, that will result in a more conservative R&D strategy and budget. The reverse is also true, so it’s vital to hash this part out before making other decisions.
Structuring the Team: What capabilities does the existing team have across the organization? Do the individuals needed to drive R&D have excess capacity to dedicate the necessary time to it? If not, how can you free up excess capacity (hire, reduce/eliminate existing activities, etc.)? Keep in mind, the R&D team should be lean, engaged, and diverse. Leaders and industry veterans are imperative, but so are bright, young employees and industry “outsiders” who can bring fresh perspectives and ideas.
“But for R&D to deliver genuine value, its role must be woven centrally into the organization’s mission. R&D should help to both deliver and shape corporate strategy, so that it develops differentiated offerings for the company’s priority markets and reveals strategic options, highlighting promising ways to reposition the business through new platforms and disruptive breakthroughs.”
Source: Building an R&D Strategy for Modern Times by Tom Brennan, Philipp Ernst, Joshua Katz, and Erik Roth
Understanding the Elements of R&D Strategy
After thinking through some of the above considerations, you can diver deeper into the R&D strategy itself. According to Gary Pisano’s 2012 Harvard Business School working paper, Creating an R&D Strategy, there are four elements involved in R&D strategy to be aware of: architecture, portfolio, processes, and people.
Architecture: Refers to the structure of R&D, such as the level of decentralization or ratio of internal to external team members. There is no right way or undeniable best system, only trade-offs that must be managed.
Processes: How things will be done within R&D. This encompasses systems, procedures, management, oversight, KPIs, and workflows.
People: Involves the HR components, such as the talent mix, depth chart and recruiting pipeline.
Portfolio: Covers the allocation of resources for each R&D initiative and the criteria to sort, select, and prioritize these initiatives.
“The failure of many organizations to improve R&D performance is not due to lack of effort or commitment by the management or people involved. It is due to a misconception about the drivers of R&D performance. Too often, R&D performance is boiled down to a few simple universal practices. Unfortunately, there is no one best model for R&D that is universally superior.”