Innovation and the Myth of R&D
Innovation continues to be the religion of business in the 21st century. Most companies spend considerable energy attempting to innovate. The temptation is to believe that simply throwing more money at R&D (research and development) is the solution. A new report from consulting firm, Booz Allen Hamilton indicates that the link between R&D spend and company profitability does not exist.
They examined 1,000 companies’ performance of the past 6 years, and discovered that the spending on R&D did not relate to company profitability.
The problem is that most company executives believe that they can simply decree innovation, and if they make a big enough bidget available, it will happen. This could not be further from the truth, and now there is research to prove this. In fact, most R&D spending is little more than gambling. There is a tiny chance that your R&D team will hit on the “next big thing” (and that the rest of your team will “know it when they see it”, and be able and willing to back up the R&D findings with appropriate action to take advantage of the opportunity) – that tiny chance is a “risk and reward” approach to innovation. In most cases, it ends in failure and frustration (and, usually, the sacking of the R&D team).
In their survey, a number of companies are singled out. Apple is one of them. They have an R&D budget whirch is a fraction of the size of others in their industry (like IBM and Microsoft). Yet, they consistently produce innovations that increase bottom line profits. The survey notes, “its the process not the pocketbook.” Its OK to gamble on a few big high-risk initiatives. But, the key at Apple is that they “energize the entire culture around those wagers.”
At TomorrowToday, we believe there are three key ingredients to unleashing innovation in a company:
- Co-operation – specifically including cross-functional interactions and “cross boundary” thinking
- A Culture of innovation – that specifically includes developing a culture of (learning from) failure, and a culure of (embracing) diversity
- Competition – internal and external
For more information on “Innovation Unmanagement”, see http://www.tomorrowtoday.biz/innovationunman/index.htm.
Read more about the Booz Allen Hamilton report here:
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