The global investment in research and development (R&D) is staggering. In 2019 alone, organizations around the world spent $2.3 trillion on R&D which is roughly 2 percent of global GDP – McKinsey. This figure is poised to grow at an unprecedented rate, considering the recent pandemic. Given such levels of investments, let’s try to understand the evolution in R&D as a business function, and key traits of R&D leaders to transform into #GrowthLeaders.
R&D leaders are under tremendous pressure with rapidly advancing technologies, fast-changing consumer preferences, shortening product cycles, and globalized market presence. Large organizations are growing product variation, expanding product portfolios, updating existing products, continuously to stay relevant to the market. These changes are heavy load that R&D functions have to bear.
On the contrary, R&D units across industries are still following traditional linear models of organization—models not designed for today’s accelerated needs for increased collaboration amongst the various adjacent business functions. However, basis our experience with R&D teams from Fortune 500 club, we have identified that its not the case with successful enterprises.
The traditional component-based approach to R&D is no longer sensible in an era when digital and electronic systems are so thoroughly integrated with hardware. Still, many companies struggle to shift toward an approach that focuses more on the function the customer wants, rather than the components that make the desired function work.
The role of R&D is still evolving
R&D alignment with corporate strategy has been growing lately, to develop differentiated offerings as per company’s priority and strategic decisions. R&D is no more specific to developing in-house technologies, or group of scientists/Ph.ds working together. The role of an R&D department has evolved in successful organizations by providing insights into the market along with developing new services / products or improving existing capabilities. The Research and development is now enabling the ‘growth’ of an organization in a new-way.
Basic vs Applied Research – Which is more relevant for Business Growth?
To make the most out of an R&D function, enterprises need to build a customized strategy and tailor it with an organization-level strategy. Regardless of any R&D objective, whether to build a core competency, a first-mover advantage to capitalize on new technology to break into a new market – strategy around R&D is essential.
Popularly there are 2 types of R&D methods accepted across the globe – Basic research, and Applied research. Basic research is about performing technology, market landscapes to build understanding and intelligence that a business can use to its advantage. This knowledge will be used to build roadmap for future R&D projects which will also feed into overall business decisions.
Basic research has been observed to be more relevant to organizations, focussing on building new capabilities, adopting a specific technology to improve their current processes and productivity. The typical digital transformation, IP licensing, and technology landscaping initiatives belong to this category. As per Ideapoke’s analysis, basic research is more seen in service oriented industries like insurance, Energy, Power & Utilities & Gas, Engineering & Infrastructure, etc.
Applied research is a lot more defined, and often objective specific. This could be using a new technology, reaching a new market, improving safety or cutting costs. Applied research is often what leads to the development phase.
Through our experience working with the world’s best R&D teams, we observed that legendary organizations owning technologies, patents in-house are achieving growth through extensive applied research. These organizations focus on expanding, diversifying their proprietary, patented technologies into new industries, applications. R&D teams are working closely with market strategy folks, to identify unknown applications, business use-cases for their current technologies. Chemicals, Manufacturing (all kinds), and other core products, industrial technology providers adopt this type of research.
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R&D leaders hold the keys to their enterprise’ success
The R&D managers, leaders assume an especially prominent role: As the person with the primary responsibility for the end product/service, the head of R&D represents the core of the company — its very technology. Thus, this role is particularly key for the brand, and the R&D leader’s demeanor and actions carry a great deal of influence in the company‘s strategic focus and success.
During our project review calls, transformation meetings we sometimes come across questions like – “How smart is it to insist on 20+ years of functional experience when 30-year-olds are disrupting entire industries?”, Can subject matter expertise, knowledge be replaced by technology-based scouting, research? and many similar questions.
Typically, these questions come from the world of debate on choosing the right people for key R&D positions, given the rapidly changing business conditions. There has been a significant rise in the number of discussions on substituting the requirement of technical expertise with advancing technologies like AI, NLP, and their futuristic combinations(Let’s keep this topic on the shelf, for now, to discuss in detail later).
Over the next few years, the R&D leaders need to expand their skill sets, to ensure their teams, companies are ready for these inevitable changes. The ones who get an early start on this evaluation will gain a tangible competitive advantage down the road.
Qualities of next-gen R&D leaders to transform as Growth Leaders
Openness to digitization —Enterprises should not see rise of advanced digital technologies as a substitute, but complement the R&D leaders to empower them. The next-gen R&D leaders should be open, comfortable and develop a holistic understanding on ways to leverage digital mediums to enable their decision-making capabilities.
Business minded too – In continuation with the first point, R&D leaders from predominantly technology background should leverage tools to gather business understanding. Only technology expertise is not going to be a sustainable advantage anymore.
Accelerated decision making: R&D managers, leaders must move fast when scouting for trends and setting the right direction. Rapidly changing business factors need faster idea to prototype lifecycles, quicker but accurate decisions.
Collaboration with agility: Being an organizational player more than a departmental player has become an even more important element. It’s important for the R&D leaders to create an agile, startup-like culture collaboration with cross-functional departments to make R&D actions more aligned with other business functions. Transform R&D from being a silo to making it a continuous part of the strategic decision-making process