8 imperatives for organising R&D to drive innovation

22 July 2015 Consultancy.uk

To create a smooth R&D process for businesses, focus needs to be placed on creating a supportive leadership, governance and organisational structure, research by Arthur D. Little shows. According to the consulting firm, eight imperatives for leadership, governance and organisational structure will play an important role in successful innovation.

In a business world marked by rapid technological developments that are causing disruption in various industries and markets, the need to be at the forefront of the changes remains an imperative for many businesses. One of these ways of staying ahead in the ‘hyper-competition’ is to have a strong Research and Development (R&D) function.

Arthur D. Little, imperatives for innovation

Consulting firm Arthur D. Little has supported a number of organisations in their R&D journeys. As part of those journeys, the firm found that a number of factors related particularly to leadership, governance and organisational structure have a significant role in the success of the enterprise. In many cases however, there are suboptimal executions of the various functions as a result of history and on-going evolution of the business – and thus may need to be changed significantly to create a smooth R&D process.

Arthur D. Little has developed eight imperatives for effective leadership, governance and organisational structure. Consultancy.uk provides a summary:

1. Focus on process and governance as well as structure:
Organisational charts become the fixation of companies in reorganisations – yet changing these alone will have limited effect. Focusing early on on good governance by designing effective processes that clearly stipulate authority and relationships, while involving other functions such as marketing and manufacturing, is paramount.

Global & organisational complexity in 3 dimensions

2. Make the links to business strategy explicit:
The alignment of R&D with the needs of a business is the principal task of any R&D or innovation leader and key in a business strategy surrounding reorganisation. What the strategy means for R&D can be given (quantitative or qualitative) targets for growth from incremental versus radical innovation, or for manufacturing efficiencies.

3. Clarify the role of R&D and interfaces with other functions:
Another key is developing clarity between the role of R&D and broader innovation. Different companies have different criteria for the role of their corporate R&D leader. Important is clarity about what R&D should and should not do, its role within innovation, and its strategic and operational interfaces with other parts of the business.

4. Establish a cross-functional steering team:
R&D is part of a wider organisation structure whose role is to develop company innovation. However, it has a companywide interface as its offspring may come to affect most parts of the business in time. It is therefore essential to create a steering group of influential individuals to represent these other parts of the business as well as R&D. This will provide benefits through increased channels between departments and functions.

Use of scenarios and evaluation criteria

5. Use a transparent process to evaluate options:
As R&D reorganisations often involve difficult decisions, major investments, closures and relocations, it is essential to use a transparent and systematic process to evaluate the redesign and identify how each option performs against an agreed set of criteria.

6. Deconstruct the whole to manage complexity:
For review and evaluation purposes of the reorganisation, the options for the redesign need to be broken down into ‘building blocks’. According to the firm, this will prevent the complexity from becoming unmanageable.

Example of design block breakdown for evaluation

7. Pressure test using realistic situations:
To ensure the feasibility of the proposed changes, a series of pressure tests with real-life situations need to be conducted. Doing so, company can experience how current programmes and projects will run with the new processes and flow through in the new organisation. The test will provide vital input for the fine-tuning of the new design.

8. Manage hearts and minds carefully:
Reorganisations can be sources of great anxiety and unrest for those affected, managing the ‘hearts and minds’ will be important. Confidence in the core R&D process confines possible emotional contagion from cultural changing innovation. In addition, newly developed organisations also require realignment of personal incentives. This might include recognition for cross-functional innovation efforts, new bonus mechanisms to reflect changing roles, and new career development paths to reward both technical excellence and management excellence.

The firm concludes: “R&D reorganisation can deliver immense value to any large company for which innovation is important – and in today’s era, in which creativity is essential for growth and even survival, this means virtually every company.”

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