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The Story

July 2010

“How do you assess Innovation R&D Value for Money?”

This is a crucial, highly contentious, and emotive question which would seem to have no clear answer. Lord Browne, former BP chief executive, calls for spending to be more focused on engineering but this has raised the hackles of the fundamental research lobby. So how should we evaluate R&D? We analyse the thinking behind this key issue.
The key point of the Story – What should business R&D departments and government-funded research bodies spend money on? This Story is about two interlinked key issues – the value of innovation and what exactly should businesses and government-funded bodies be spending their R&D budgets on? Lord Browne, now the president of the Royal Academy of Engineering, sparked a row with Britain’s top scientists by advocating that the government should ‘rebalance’ its research spending towards engineering and high-value manufacturing. But the points of R&D focus and value for money are also highly relevant to all businesses.
What should we focus R&D money on? Lord Browne told the Department for Business, Innovation and Skills that the science budget, mostly spent in universities and some specialised research establishments, should be targeted on where it will have most impact in the foreseeable future. Areas such as low-carbon energy, novel semi-conductors, satellite technology, and automotive and aerospace engineering.
A very different opinion Not surprisingly, his views were utterly rejected by rivals such as the Royal Society, the UK body for elite scientists. Lord Rees, president, retorted “We should support excellence across the board. It is unwise to ‘pick winners’ at the level of academic research.” Similar responses came from the Institute of Physics, the Society of Biology, and an expert in particle physics, and even from the Campaign for Science and Engineering.
The SWOT approach to R&D spending However, Lord Browne found wholehearted support from respected high-tech manufacturing expert Lord Kumar Bhattacharyya, Director of Warwick Manufacturing Group. “We need to focus technology spending both where we have strengths and where there are business opportunities”, insisted Lord Bhattacharyya.

Analysis and Lessons

Core R&D Questions … Thinking Styles needed … Lessons from the past
Relevance to Business R&D planning:
three core questions
There are three basic aspects of this story relevant to business R&D:
  1. how much time, money, and other resources should businesses spend on fundamental versus practical R&D?
  2. what areas of research to focus on?, and
  3. how best to plan and evaluate R&D projects to maximise efficient and effective use of those resources?
This analysis looks at the Thinking (and Thinking Styles) behind each of these aspects and questions.
1. Fundamental v Practical R&D

There are two basic approaches to R&D followed by business: look for ideas then try to find a commercial use for them (essentially fundamental research - FR), or look for needs and develop solutions (the customer-focused approach - CF). Both systems can be highly productive if well managed. The Sony Walkman and 3M’s Post-It Notes were successful inventions that surfaced without an expressed need having been established.

The Thinking Styles needed

In the FR approach, the key Thinking Styles needed must include Opportunity Thinking – the ability to think across a wide range of interests and spot unusual possibilities or new materials or techniques; then thinking “What use could somebody make of them?”

However, the CF approach requires radically different Thinking Styles. The most difficult, and most important of these Thinking Styles are Customer Thinking and Business Thinking. These are two polar opposite ways of thinking (Thinking Styles). Many innovation projects fail simply because teams focus on the business aspects, or on the product and its features, and ignore thinking about how potential customers might respond/react/behave.

Other Key Thinking Styles Two other key Thinking Styles relevant to both approaches are Design Thinking, (thinking how something could/should be designed) and Contingency Thinking (thinking what could go wrong?). See below for examples/lessons.
2. What to focus on? For businesses, Lord Bhattacharyya’s advice can’t be faulted – stick to your strengths and those opportunities that promise the greatest returns against competition and foreseeable scenarios. This means defining and evaluating your strengths, which requires Conceptual Thinking and Analytical Thinking (for defining strengths) and Evaluative Thinking.

It also requires Overview Thinking and Opportunity Thinking, to see the whole picture and spot the most valuable areas to focus on. And it needs several other Styles, eg Future Thinking (“What’s likely to happen?”) and Imagination Thinking.

3. Planning and Evaluation The Stage-Gate process is well known for planning and evaluating innovation projects. The problems occur principally with a team’s ability to plan projects and maintain objectivity. Many projects fail because teams don’t think in the right way (ie deliberately engage the right Thinking Styles) at particular stages, and they can’t see that their view is inherently subjective. It is all too easy to make assumptions that prove to be wrong, and costly. There are many different Thinking Styles needed for successful project planning and evaluation.
Emotions Thinking: critical for decisions And because project teams can get too involved emotionally, they leave themselves open to irrational decisions. Emotions Thinking (eg, deliberately analysing your emotions, and those of others, and looking for their positive and negative effects) is essential to address this key problem.

… that demonstrate the need for Objectivity, Customer Thinking, Evaluation Thinking, Design Thinking, and checking Assumption

The ubiquitous Post-It Notes began life because someone noticed that a particular glue wasn’t very good at doing its job. Then they thought of a fantastic use for this feature. But even after launch the product was slow to sell. Potential customers had to be shown what to do with it – the application wasn’t as ‘obvious’ to customers as 3M had assumed. Lessons – look for positives in negatives, check every assumption, and be ready to communicate with potential customers more than you think might be necessary. Check that people understand your product and your message, and see the benefits - all part of Customer Thinking.

Sir Clive Sinclair’s (high IQ) team suffered from total subjectivity when they invented and marketed the infamous C5 Tricycle. Lessons – a book of them.

Concorde was a brilliant invention, apart from poor Customer Thinking, Evaluation Thinking, and Design Thinking. It was too noisy for New York, and too expensive for most customers. And whilst the design was beautiful to look at, the fuel tanks were too close to the wheels for safety (the design flaw that killed it off). Lessons – don’t get carried away with a seemingly great idea, and remember that Design has several different aspects; it ain’t just how pretty your product is.

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