With a disciplined approach to research and development, midsize companies can create innovation that enhances their position in the marketplace.
Research and development (R&D) can be a puzzle for management. Investment decisions are riddled with so many questions:
- How do you focus those efforts without stifling creativity?
- How do you know when—or if—to pull the trigger on that risky new idea?
- Should you devote resources to new products or more efficient internal processes?
There are no easy answers, but the clearer you are able to articulate the core customer value of your brand, the more aligned your R&D efforts will be to enhancing it, whether through incremental improvements or blue-sky innovation. Here are four best practices to optimize your company’s investment in research and development:
- Articulate a strategy. The first step in leading your R&D team is to “help them aim their research efforts by creating strategic intents and clear strategies,” says Gary Getz, CEO of Chicago-based consultancy Strategos. “That includes homing in on areas of significant change in the environment as well as unmet customer needs.” He cites ‘no-mess’ crayon products as an example of such an approach. “The companies who developed these products have built brands around no-mess creative play for children, so with that clear aspiration, the R&D team can ask itself, ‘what are all the things we can do to achieve that?’” The results have ranged from the basic – sidewalk chalk – to the unexpected, such as clear, non-staining “ink” that becomes visible only when used with special paper.
- Create a common purpose. A familiar problem with many R&D departments is that they can become isolated from other business functions, such as marketing. When working with clients, Getz says that he often finds himself helping technologists and the business side of the house align and communicate better. “One of our clients had a great analogy for this relationship. ‘It should be a garden, but mostly it’s a big brick wall with a barbed wire fence,’” he says. Getz suggests looking at ways to permeate that boundary and engage the R&D team with other parts of the company. “It’s about helping the technologists empathize with customers and helping the marketers to understand the technologists better,” he explains.
- Devise a common language. Even when marketing and R&D get together, they may be talking past one another. “When marketers and technologists talk about innovation, they’re not talking about the same thing,” Getz asserts. He illustrates his point with a diagram representing innovation along a continuum. At the end farthest left is “solution-driven” innovation, a tactical approach used by marketers to satisfy known customer needs. In the middle is “strategy-driven” innovation, in which the technology group is guided by management toward a strategic goal. And at the far right sits technology-driven innovation, where new technology can actually cause a shift in strategy. “The business people are mostly talking about the left end, and the technologists are mostly talking about the right end, but neither recognizes this disconnect,” he says.
- Develop an innovation portfolio. Getz is a strong proponent of the portfolio approach to innovation, in which a company diversifies its R&D spend across multiple types of investments, much as a money manager may invest in equity and bonds, small and large cap stocks, etc. “It’s a matter of spreading your bets in an intelligent way so that you are managing not just the individual research and development projects but also the characteristics of the entire set of projects,” he says. One dimension might be the drivers described above: solutions, strategy, and technology. “Part of effective portfolio management is a lively discussion of how to apportion your technology, efforts, resources, people, dollars, and time across these three areas” and other dimensions, he notes.
By its very nature, research and development can pose complex management issues, but it is by no means a black box. In applying discipline to your company’s R&D efforts, you increase the likelihood that your investment will pay off in the form of a stronger, more valuable brand.
