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How has R&D developed since 1991?
Over the last 30 years, we have seen a large increase in open innovation, with an increasing amount of R&D being contracted out or done in partnerships with external organisations. We have also seen the introduction of much more agile approaches to R&D. This transitioned from its initial use in software design into more mainstream R&D on physical products by the 2010s, and has continued to progress. We’ve also seen more integration of new products involving digitalisation and technology convergence (combining digital and traditional approaches, and also combining different technologies to solve a problem). This is driving increased complexity and making innovation beyond the core harder.
Why are firms least satisfied with business model innovation?
Even companies that are considered to be innovation leaders in ADL’s benchmark struggle with this — and it’s not due to a lack of resources, smart managers, analytical capabilities, or market pressures to innovate. What makes it difficult to succeed with business model innovation is the difficulty in defining what needs to change in the current business model and who should be responsible for driving this change.
The other big issue is that it is difficult to change business practices and potentially cannibalise current practices/revenues to deliver services to customers in a different way. Companies are built to scale up and replicate operating practices. Challenging existing practices is difficult and is often met with resistance from entrenched parts of the business, which often have significant resources.
What has led to there being little sharing of best practices across business units?
Carrying out R&D in business units strengthens the relevance and applicability of innovation. However, it also leads to a focus on the business units’ own incremental, often short-term innovation goals, particularly if they are incentivized to hit quarterly revenue targets.
Business units want autonomy over innovation and may see organisational best practices as inappropriate for their needs, targets, and aims. There may also be variances in innovation clock cycles (i.e., the pace of innovation) and maturity levels between business units, particularly if they are located in multiple geographies or have different heritages, such as being added by acquisition. This all contributes to a rejection of organisational best practices, no flow of ideas between business units, and a lack of collaboration between teams.
Individual business units have built up their own cultures and may even compete against other parts of the same organisation, undermining efforts to increase transparency and the sharing of best practice. Conflicts around power, politics, and resources lead to an insular “not invented here” mentality and strong resistance to external “interference” in business unit innovation management.
In order to get returns on their investment in innovation, what sort of management systems should companies adopt?
This really depends on which industry we are looking at. It depends on the clock speed of the industry. Usually, we would advise companies to focus on addressing the parts of ADL’s Dynamic Innovation in which they have the weakest performance. ADL offers free benchmarking on Innovation Excellence through their Global Innovation Excellence benchmarking, which has been operating and evolving over the last 20 years. It provides industry level benchmarking of both the impact of innovation and innovation processes.
How come few companies have fully captured the benefits of agile innovation?
Evidence from the GIEB indicates that agile innovation can speed up the innovation process if it is implemented in the right way for the right opportunities. However, innovators should not expect it to be the best approach for every project. Some try to apply agile innovation to every type of project, and it doesn’t really work for projects with low complexity and that have well understood requirements. It works best when there is relatively little technical complexity and very high requirement uncertainty.
Other points of failure include using a “big bang” approach to launching innovation without training a core of agile practitioners.
In your opinion, how can companies best respond to the widespread dissatisfaction with R&D?
Better understanding of the role of R&D in meeting corporate strategy. Often, there is a real disconnect between the two, which means R&D is not delivering on key strategic aims. Achieving better short-term delivery of the new product pipeline helps to build trust towards R&D.
Finally, companies should be clear about how R&D is expected to deliver the future revenue growth that is promised to market analysts.
