Friday, December 5, 2014

Is R&D Spending Proportional with Innovation Success Rate?

R&D activity shall lay the foundation for the ability to sense, seize and respond to new ideas and technologies.

Many organizations invest significantly in their R&D department, and expect R&D becomes their innovation engine, however, many innovation studies show that the best innovators are not the one that invests the most in their R&D. So what’s the role of R&D in innovation, and is R&D spending proportional to innovation success rate?


From innovation research made by the prestigious company, there's not really a tight correlation between innovation success and R&D spending. Don't conflate innovation and invention. The invention is the transformation of capital to a new product/process/idea, etc., R&D does more invention. Innovation, on the other hand, can be incremental changes to an existing product or process or breakthroughs on a large scale, expensive or inexpensive, is an all-hands effort not relegated to the R&D department, can involve changes in management processes, quality improvement, business communication or corporate culture... In short, innovation is what keeps businesses moving forward between spurts of the invention. Looking at it another way, aren't there plenty of businesses doing just fine without huge R&D spending, and they're doing so by adopting an attitude of continuous improvement.


R&D has a role, especially in complex technology. Basic R&D lays the foundation to respond to new ideas etc. The rate and pace by which organizations deliver cool stuff are accelerating fast. Big companies go through these cycles. There are empirical studies supporting these concepts such as Dynamic Capabilities and Absorptive Capacity. And R&D activity lays the foundation for the ability to sense, seize and respond to new ideas and technologies. The question is worth digging through because it is so tightly aligned with how businesses address the age-old problem of human change when it comes to deploying any sustaining enterprise-wide program initiative. Specifically, how do you re-engineer all those poorly-performing or under-performing Enterprise Risk Management (ERM) programs?

Assess R&D ROA (Return on Asset) via systems thinking and logic steps:
1) Improve critical thinking
2) Foster a new understanding of how to enhance an individual’s abilities in complex problem solving, and
3) Strengthen judgment and decision-making
4) These 3 Critical Success Factors, in turn, drive and enhance four other enterprise capabilities...
Build a new Corporate Architecture of the Future
5) Organizational Performance
6) Operational Effectiveness
7) "Concurrent Enterprising" including the development of parallel ways of working and collaborative work methods

For many organizations, especially the large enterprises with decades of long history, R&D still plays as their innovation/invention pipeline, however, with emerging digital technologies, lightweight, consumerized, and the expanded scope of digital innovation, it is not the only function played as innovator, every business unit needs to embed culture of innovation into their business core, and manage their innovation portfolio with mix of incremental improvement to breakthrough innovation. And perhaps it is also a good time to reimagine and reinvent R&D as an integral and dynamic capability to execute business strategy.

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