It has long been known that research and development, or R&D, plays a crucial role in the innovation process. Investments are made with long-term ambitions in mind and with a clear understanding that not all new ideas will deliver on their early promise.
Nevertheless, investing in R&D is a gamble that usually pays off. Looking on a global scale, the highest levels of R&D expenditure are associated with some of the most innovative markets in the world, including South Korea, Japan, and the US. The Netherlands currently spends around 2.16% of its GDP on R&D, and although this compares favorably with the EU average, a target of 2.5% has been set.
The reason why countries are so keen to up their R&D expenditure may be because of private sector outliers. Innovative companies like Apple demonstrate what R&D spending can achieve when it is targeted in the right way. In previous years, Apple has been able to achieve more than $11 gross profit for every $1 spent on R&D. But not every company is capable of achieving such figures. Many organizations actually make a loss on their research initiatives – certainly in their early stages.
If R&D is to ever deliver returns, it cannot be viewed as separate from the rest of your business; it must be strategically integrated, combining input and insight from all of your supporting business teams.
Turning ideas into action
There's no shortage of good ideas being proposed by businesses. In the FMCG space, companies like Else Nutrition, Beyond Meat, and ConAgra Brand are investing heavily in new product launches, responding to consumer demand for plant-based alternatives and nutritional foodstuffs. But while these ideas are promising, they will not have the desired impact unless they are scaled rapidly to deliver the maximum commercial value.
At Innoleaps, it is surprisingly common to find that a client is unaware of the types of innovation that its R&D department is working on. In these examples, even if a promising new idea is being developed, it is unlikely that the core business will be prepared to support it.
When businesses are looking to accelerate their innovation pipelines, they should have a cross-functional team working closely with the R&D department. Without supporting functions like supply chain management, marketing, and finance on board, even the best ideas will ultimately fail. R&D teams are unlikely to thrive if they are siloed from the rest of the business.
R&D personnel certainly have a district role to play, however. In the first three months of a new venture, it is fine for R&D team members to take a leading role, exploring whether new ideas are viable. However, even here there should be a collaboration with other business teams to test market viability, scalability potential, legal issues, and other important factors. Organizations need to move away from thinking of R&D as simply an “ideas factory” – it must fit with the rest of the business as well.
Internal gaps are hampering the innovation process within many organizations, leaving R&D teams cut adrift from their colleagues. Of course, cross-team collaboration is not always straightforward. Communication is key to getting this process right, as is getting different teams to work together throughout the innovation journey from the very beginning.
Even within the more open-ended approach to venture building that sometimes develops in R&D departments, a clearly defined strategy can help to ensure that new ideas can scale quickly when they gain traction. Iteration planning and product roadmaps can help to ensure that promising innovations are not left ignored or allowed to meander, ultimately to be pursued by an industry competitor.
At Innoleaps, we work very closely with R&D-driven companies to help them accelerate their business opportunities. One of the ways that we do this is by ensuring that the right people are involved at the right moment of the innovation journey – internal integration starts from the beginning.
Our R&D accelerators help clients to develop new value propositions with the potential to become a core business product or a disruptive venture. By making research a cross-department issue, colleagues are able to inspire one another and more ideas are likely to emerge.
This doesn’t mean turning R&D into a free-for-all. Clear roles, milestones, and timelines should be introduced as and when new ventures emerge. Strategy remains key to the R&D process but this must involve personnel from across all business functions – not just those coming up with cutting-edge, new ideas.