Jun 30, 2010

Selfish Profit Incentives To Win Military Challenge In A Single Day

Here is a quick article from The Guardian on how MIT Uses Selfish Profit Incentives To Win Military Challenge In A Single Day:
The Guardian: The Darpa Network Challenge, which took place on Saturday, offered a cash prize for the first group to successfully locate 10 large red weather balloons hidden at a string of secret locations across the US. Competitors were asked to use the internet and social networking sites to discover the whereabouts of the balloons, in what Darpa - the Pentagon's Defense Advanced Research Projects Agency - said was an experiment to discover how the internet could help with rapid problem solving.
Effectively MIT used a pyramid scheme to drive behavior and get the desired result.  This may not be a bad thing necessarily.  In fact,  Borderless Innovation talked about a Creative Bazar for innovation and the Indian conglomerate Tatas use karma points in somewhat similar fashion to identify and reward innovation.

May be this could be the answer to right Innovation Incentives?

What is Innovation?

In a HBR blog post, Scott Anthony asks What's Stopping Innovation?  Of more interest is his attempt to define what is innovation:

When I use the word innovation, I think of three interlocking components:  


* Insight or inspiration suggesting an opportunity to do something different to create value 
* An idea or plan to build an offering based on that insight or inspiration 
* The translation of that plan into a successful business (in simple terms, commercialization) 

The senior leaders I talk to believe that the bulk of their innovation challenges lie in the first two components. I suspect this is because the third piece looks like execution, and of course, large organizations know all about execution. And yet, my field experience suggests that it's this third component, not the first two, that actually blocks innovation
As we have noticed several times (Invention vs. Innovation, CEOs want more creativity, BCG Innovation Study and Ideation Tools), lack of clear innovation definition leads to many incorrect conclusions about how and when to drive innovation.  Furthermore, a unclear definition also leads to indeterminate metrics for innovation.  Without clear metrics, it becomes difficult to measure innovation.


The author is quite right about execution preventing realization of the benefits of innovation.  There have been many articles about open innovation and reverse innovation.  However, implementation of  innovation from outside the R&D organization (even a sister division of the same company) is fraught with not-invented-here problems.  R&D managers need to be quite clear in their plans on benefiting from access to outside innovation.

Another problem I have seen repeatedly is lack of funding for converting innovative ideas or plans into delivered products.  Many innovative ideas come from research arms of R&D organizations.  There is always a tension because of researcher ideas that might impact funding for or sales an existing product line.  In many cases, the innovative ideas suffer because of inherent risk and the clout of product managers.  What have you seen?

Jun 29, 2010

The Secret Reason Your Employees Won't Innovate

HBR lays out The Secret Reason Your Employees Won't Innovate:
After surveying hundreds of employees ranging from managers to stock clerks, Feirong Yuan of the University of Kansas and Richard W. Woodman of Texas A&M found that worries about “image risks” (unfavorable social impressions) significantly diminish workers’ innovativeness. People whose roles don’t explicitly call for innovation believe that coworkers will think negatively of them if they try to come up with better ways of doing things. In some cases, they’re even afraid they’ll “provoke anger among others who are comfortable with the status quo,” Yuan says. 
We have discussed some of the reasons why R&D team members are reluctant to put forward new ideas: Risk averseness and misaligned incentives.  Clearly something R&D managers should be consciously changing:
But leaders can have a big impact on this problem, the researchers report in the Academy of Management Journal. Perceived organizational support for innovation significantly reduces workers’ view of the social riskiness. The key is to create a sense of psychological safety: Provide an environment in which differences are tolerated and people feel free to approach problems in new ways.

Are Companies Protecting the Wrong R&D Investments? - Scott Anthony - Harvard Business Review

An older HBR article talks about Are Companies Protecting the Wrong R&D Investments.
An article in Monday's Wall Street Journal suggests that many executives understand this dynamic. The Journal found that R&D spending at 28 large U.S. companies dropped a mere 0.7 percent in the dismal fourth quarter of 2008.
Is maintenance of R&D budgets a good thing?  We have found a couple of examples (TI and FreeScale) that leveraged the downturn to eliminate low return R&D projects from the pipeline.  There is also some evidence that R&D spending does not automatically guarantee profits.  This article reinforces that theme - use downturn to evaluate and prune the R&D project pipeline, but do not focus exclusively on near-term projects because that will have a negative long-term impact on competitiveness.
Research by Innosight Board member Clark Gilbert found that when companies perceive a threat, they tend to become very rigid in their response. The very act of "protecting" R&D budgets could lead to high degrees of rigidity, which could lead companies to missing the most important innovation opportunities.
Companies should use today's tough times as an excuse to critically evaluate their innovation investments. As I argue in Chapter 2 of The Silver Lining (coming next month!), companies need to think about prudently pruning their innovation efforts to focus on ideas with the most potential. Companies should seek to balance focus on near-in opportunities with appropriate investments in exploring new markets that have the potential to be tomorrow's core business.
While we are on the subject, here is another article suggesting the same thing - Cut Costs, Grow Stronger:
"If you are a corporate leader, you have probably been spending a lot of time lately thinking about costs. In the aftermath of the global economic crisis of 2008–09, the pressure to cut costs — whether driven by cash flow, shareholders, uncertainty, or investment needs — has been extraordinary. Many businesses are struggling to survive. Others, even if they’re doing relatively well, are reducing expenses to make sure they are well prepared for future uncertainties. But there is a positive side to this situation. Dramatic cost cutting gives you a chance to refine or even reformulate your company’s overall strategy. After all, you’re never just cutting costs. You’re making a decision that something is no longer strategically relevant, and that other things are essential to keep. Yes, you may have to lose some product lines and activities, and perhaps some of your employees and customers. You also, however, have the opportunity to help your company grow stronger in the process. We reject the idea that cutting costs in itself makes a business weaker or more limited. To be sure, if you reduce expenses in a panic, or without an eye to strat egy, you could do great harm to your company’s competitiveness. But if you focus on your priorities and on your future potential, cutting costs can be a catalyst for ex actly the change a company needs. 

Finally, here is a simple framework that can be a good reminder of what to keep and what to cut:

Jun 28, 2010

India's Next Global Export: Innovation

Here is a quick read on a new framework for innovation from business week: India's Next Global Export: Innovation:
A Hindi slang word, jugaad (pronounced 'joo-gaardh') translates to an improvisational style of innovation that's driven by scarce resources and attention to a customer's immediate needs, not their lifestyle wants. 
The concept is to get work done by improvising around constraints - the approach does not matter as long as goals are met.  However, as we had discussed in assumptions that executives need to challenge, jugaad can have pretty negative implications:
Moreover, because jugaad essentially means inexpensive invention on the fly, it can imply cutting corners, disregarding safety, or providing shoddy service. 'Jugaad means 'Somehow, get it done,' even if it involves corruption,' cautions M.S. Krishnan, a Ross business school professor. 'Companies have to be careful. They have to pursue jugaad with regulations and ethics in mind.
This might be a good idea to drive innovation in a culture that is overly burdened with bureaucracy.  However, one must really ask the question about why there is bureaucracy in the first place.  In fact,  work getting done bypassing  bureaucracies will reduce the need to remove inefficiencies...

How to Manage Virtual Teams

MIT Sloan Review had an interesting article on How to Manage Virtual Teams. As we have discussed in the past, the need for effectively managing cross-cultural cross-organizational virtual teams will only increase with time.

The article measures virtuality in terms of  "dispersion" of teams and finds that even small distances (different floors of the same building) have a significant impact on team cohesion.  R&D managers probably need to understand that processes and tools needed for managing virtual teams may actually benefit teams that are traditionally considered collocated.

The article is a very good read.  However, here are the key findings:
* The overall effect of dispersion (people working at different sites) is not necessarily detrimental but rather depends on a team’s task-related processes, including those that help coordinate work and ensure that each member is contributing fully. 
* Even small levels of dispersion can substantially affect team performance. 
* When assembling a virtual team, managers should carefully consider the social skills and self-sufficiency of the potential members.
I guess the main takeaway is very encouraging - virtual teams can be as effective (or probably even more effective) than collocated teams as long as tools exist to provide effective communication.  The key challenge is for R&D managers is to avoid communication through large documents: they are filled with discipline-specific jargon and no one has time to either develop thorough documentation or to read someone else's large document.  More importantly, documents fail to capture rationale followed by one team member to reach decisions that impact other team members.  Interesting challenge...  DPSTBNMT3VHA

Jun 27, 2010

Success of change (improvement) programs

Financial Times has another interesting take on success of process improvement projects in Management - Failing to cope with change? 
At the meeting, survey data were presented which suggested that, while 37 per cent of UK board members believed that their change programmes were generally successful, only 5 per cent of middle managers did. 
As we discussed in the recent post on key success factors for lasting process improvement results, managers have an inordinate amount of responsibility and power to drive success.
A confident leadership team may know that the right choices have been made. But it may take longer for this to become apparent to the rest of the organisation. Of course, there are two other possible explanations for this gap in perception: wishful thinking in the boardroom or plain bad communication. 
The keys to success (real not imaginary) remain the same: long-term focus, metrics, rewards/raises tied to metrics and manager involvement.  I guess the point the article makes may be important to - a consistent simple message from the executives (and board) to the teams:
Send a small number of simple messages again and again,” he advised. “And the larger the organisation, the simpler the message has to be.

Jun 26, 2010

Questioning and Skepticism in R&D

The New Scientist had an article about questioning culture in organizations Living in denial: When a sceptic isn't a sceptic: "
A climate denier has a position staked out in advance, and sorts through the data employing 'confirmation bias' - the tendency to look for and find confirmatory evidence for pre-existing beliefs and ignore or dismiss the rest. Scepticism is integral to the scientific process, because most claims turn out to be false. Weeding out the few kernels of wheat from the large pile of chaff requires extensive observation, careful experimentation and cautious inference. Science is scepticism and good scientists are sceptical.
R&D management probably is as close to science as we would get in most commercial ventures.  As we saw in a recent post, one needs to encourage questioning and skepticism to drive innovation.  However, managers need to strive to keep the entire process constructive and avoid "rote denial."

Jun 25, 2010

Where Process-Improvement Projects Go Wrong

Here is a very interesting article from MIT Sloan Management Review on effectiveness on Where Process-Improvement Projects Go Wrong. I have read the results of a survey on cost cutting that more than 90% of the organizations surveyed failed to maintain savings for more than 3 years.  This article mentions another interesting result: more than 60% organizations adopting 6 sigma are dissatisfied with the results.

The underlying thesis is that even though process improves under the management attention in improvement projects, it revers back to original unless organizations puts in place concrete practices to make sure changes stick.  Normally, the pre-improvement practices exist because of culture / team member tendencies.  These are difficult to change and or maintain.  The article points out four lessons:
First, the extended involvement of a Six Sigma or other improvement expert is required if teams are to remain motivated, continue learning and maintain gains.
Second, performance appraisals need to be tied to successful implementation of improvement projects. Studies point out that raises, even in small amounts, can motivate team members to embrace new, better work practices. 
Third, improvement teams should have no more than six to nine members, and the timeline for launching a project should be no longer than six to eight weeks. The bigger the team, the greater the chance members will have competing interests and the harder it will be for them to agree on goals, especially after the improvement expert has moved on to a new project.
Fourth, executives need to directly participate in improvement projects, not just “support” them. Because it was in his best interests, the director in charge of the improvement projects at the aerospace company created the illusion that everything was great by communicating only about projects that were yielding excellent results. By observing the successes and failures of improvement programs firsthand, rather than relying on someone else’s interpretation, executives can make more accurate assessments as to which ones are worth continuing.
 I think the fourth point is probably the most important one.  I have seen many a six sigma projects failed because there was no real incentive to change, no pressure from the executive in-charge to drive performance and no clear way to measure performance to start with...

Jun 24, 2010

How Do Innovators Think? Harvard Business Review

Harvard Business Review has an interesting article about How Do Innovators Think?  The entire article is a good read, but here is the list of capabilities/tendencies of innovative people:

  1. Associating: Connect ideas together
  2. Questioning: Ask why, how, what
  3. Observant: Look into details
  4. Networking: Know who to talk to and how to reach them
Clearly a good list.  The one thing that they make a point of (and I agree completely) is inability of even the most creative people to question - mainly due to cultural/social learnings:
 We think there are far more discovery driven people in companies than anyone realizes. We've found that 15% of executives are deeply innovative, meaning they've invented a new product or started an innovative venture. But the problem is that even the most creative people are often careful about asking questions for fear of looking stupid, or because they know the organization won't value it.
 I guess the biggest challenge for R&D managers then is to develop an environment that encourages civil and constructive questioning.

Three Big Assumptions Leaders Should Question

In an article in the Washington Post, John Boldani points out Three Big Assumptions Leaders Should Question

  1. It is important for organizations to set firm goals
  2. Quick wins are essential to managers in transition
  3. Senior leaders believe in their CEOs
Many organizations I have seen suffer from too much focus on goals.  One widely known example of this is in "Stuffing the Channel" at the end of the measurement period to meet sales goals and get bonuses.

It is important for organizations to set firm goals. People need to have direction so it is important to point them in the right direction. But such a single-minded focus on goals may end up damaging individuals and the organization says a study conducted by Maurice Schweitzer of Penn's Wharton School. Relentless pursuit of goals tempts managers to cross ethical boundaries and abandon 'sound business practices.' Unreached goals may then end up frustrating an organization rather than helping it to succeed.
However, if the goals are not firm than organizations tend to not really perform anyway.   If one enforces a culture that goals need not be met, how does one motivate and reward the organization?  I think a better approach would be to set up a tiered goal structure: An (exponentially) increasing reward for meeting or exceeding goals.  It is even more important to make these tiers somewhat achievable - encouraging teams to try to reach the next level (Remember the Lincoln Electric case in business school?)

Another key with goals is to have balanced goals: opposing goals that make sure that behavior does not become too goal focused.  In an R&D world for example, successful R&D projects are a goal most organizations have.  A success driven goal alone will encourage managers from hiding failures and impede risk taking.  A balancing metric would be wasted development effort: tying some fraction of bonuses to projects that fail - 90% of bonus for success and 10% for failures...  This would encourage R&D managers to take risks and encourage acceptance of failures.

The other recommendations are similar.  Senior leaders clearly should not always believe in the CEO.  However, a show of solidarity might be good for encouraging and motivating R&D teams.

Jun 23, 2010

Innovation Incentives

Slate Magazine in an article titled How to make America more innovative: give scientists more incentives to innovat: shows that just opportunity and skills are not enough to drive innovation.  Organizations need to align incentives with needed behavior to innovate successfully.
"Incentives matter for innovation, and it's a critical lesson for the government bureaucrats set to disburse hundreds of billions of dollars through Obama's national Innovation Strategy, which is supposed to return America to innovative pre-eminence. The way we spend those dollars will be at least as important as how much we spend, and if we want the next generation of ideas to be Made in America, Obama's team had better get its incentives right."
The authors point out that HHMI with guaranteed support for five years tends to have more publication than NSF/NIH funded project.  I think that in many R&D organizations, guaranteed employment may not have exactly the same results  - HHMI only allows people to work there for a few years.  Employees have to find a permanent home someplace else at the end of their stay.  This would probably drive some behavior.  Also, amount of money being awarded may have some impact on results as well.

Unfortunately, no simple solutions / rules.  Only thing for certain is that R&D managers have to keep incentives in mind when trying to drive innovation.

Freescale CTO on R&D Strategies

NE Asia Tech-On has interviewed Freescale CTO on R&D Strategies.  The interview does focus quite a bit on the semiconductor industry, but there are some useful hints for R&D managers everywhere.

First - a clearly defined strategy is quite useful do build focus and drive efficiency (even though it is not done very effectively in many organizations):

Before the Lehman Shock, we detected a sign of business recession. So, we decided to retreat from the business for mobile phones and announced it in October 2008. At the same time, we decided to focus on four areas, namely, automobiles, networking, consumer and industrial products.
Among them, we will cover almost everything in the fields of automobiles and networking, which we consider are our core businesses. In the fields of consumer and industrial products, we will cover part of them such as smartbook PCs and electronic book readers in the field of consumer products and smart meters, smart grids and home-use mobile medical devices in the field of industrial products.
It is also important to define what will be done in-house and what will be sourced from the outside.  Many organizations run into problems with open innovation when there is a conflict between what is being done internally and what is sourced:

We did basic researches when we were a part of Motorola. But, currently, we do not do basic researches in our company. We tie up with colleges and consortiums for them. For semiconductor makers, the day of technological development for technologies ended long ago. 
There is also a need for tighter communications between R&D and marketing, and FreeScale clearly recognizes it
What is important now is to solve customers' problems. Therefore, the ideas of the R&D division are summarized as PowerPoint files. The sales stuff and marketing people bring them to our customers and ask their opinions. If the customers do not like the ideas, they will be dumped
However, I am not sure if PowerPoint files are the best approach to communicate R&D intent to customers for many organizations.  Who will be developing these documents?  How does one maintain version control?  How does one bring feedback from the customers back and incorporate the into R&D - through PPT?

Finally, one more hint about being responsive to customer needs vs. being submissive to customer demands:
We cannot make products that have an impact on business just by using the ideas of the R&D people. We are doing research and development by considering customers' opinions and market needs as well as taking advantage of our technologies. I said that we tie up with colleges and consortiums. But, in addition to that, we are collaborating with the industry leaders and our partners to solve our customers' problems. 

Jun 22, 2010

Customer Loyalty driving R&D

Corporate Executive Board has another one of their useful lists: Six Myths of Customer Loyalty. R&D managers probably are a key driver of customer retention and loyalty and three of these myths are relevant to R&D:
Myth 3: Customer Loyalty Efforts Should Focus on What Customers Say is Most Important
Myth 5: Developing Personal Relationships with Customers is the Best Way for Sales to Drive Loyalty
Myth 6: Employees Who Don’t Face Customers Cannot Affect Customer Loyalty
The idea is that one has to balance internal evaluation with voice of the customer.  Customers are becoming more fickle (necessarily - competitive pressure are enormous throughout the ecosystem.  As pointed out in a Forbes article: The New Normal: Your Customer Is In The Driver's Seat:
"Today's consumers are more diverse, more inter-connected and more demanding than ever. Their expectations are rising while their propensity to be loyal to companies is declining, so (let's face it) they are in the driver's seat. The questions for companies today are then: Are companies orchestrating where consumers go, and are they making the trip pleasant?"
Some key concepts to keep in mind when R&D managers interact with Product Managers or Marketing...
DPSTBNMT3VHA 

Big Pharma's stalled R&D machines

Reuters has a Special Report: Big Pharma's stalled R&D machine.  The industry is under tremendous pressure to develop new products and address new emerging markets:

One factor forcing Big Pharma to rethink its business model is the huge number of patents that are set to expire over the next five years. As patents run out on blockbuster prescription tablets like Pfizer's $12 billion-a-year cholesterol medicine Lipitor and AstraZeneca's $5 billion heartburn pill Nexium, cut-price generics are sure to rush in and slash margins. Between now and 2015 products with sales of more than $142 billion will face copycat competition, according to IMS Health, the leading global supplier of prescription drug data. It is the biggest "cliff" of patent expiries in the history of the pharmaceuticals industry.

Add in tougher regulatory hurdles and a brutal squeeze on healthcare budgets as cash-strapped governments push austerity programs and it's little wonder that drug companies are cutting back and shifting focus. The strategy so far has been to buy promising new drugs from outside developers and boost investment in the relative safety of non-prescription consumer products. Big drugmakers are also moving into new markets -- with Asia at the top of everybody's list. It all adds up to a redesign of the multinational pharmaceutical company. In the 21st century, says Isaly, Big Pharma will primarily be a distribution business.
However, the existing/historic R&D model does not seem to work effectively:
The problem is, Big Pharma doesn't have nearly enough new drugs in the pipeline to replace all those it is about to lose. Since 1950 -- virtually the dawn of the modern era of medicine -- a total of 1,256 new drugs have been approved by the U.S. Food and Drug Administration (FDA). But the industry today produces roughly the same number of new medicines that it did 60 years ago.
Ten years ago there was a lot of hope that process-led research systems would industrialize the hunt for new drugs. But that optimism may have been misplaced. A spike in drug approvals in the mid-1990s, it turns out, was not the result of any fundamental improvement in productivity but largely down to the FDA clearing a backlog of applications after the introduction of a new system under which companies paid "user fees" to help speed the process.
Despite pouring billions into research -- more than $65 billion last year in the U.S. alone -- the number of new drugs launched annually has fallen 44 percent since 1997, according to CMR International, a Thomson Reuters subsidiary.
It appears that the PE ratio of pharmaceutical firms have dropped below that of consumer goods companies such as P&G.  Instead of figuring out a way to make R&D more effective, the industry seems to want to move towards a more consumer goods model and cut R&D as much as possible:
The move to cut R&D, he says, is one of the most profound changes in the industry in decades. Some firms are pulling back from problematic areas like depression, where proving the value of new medicines in clinical trials is fiendishly difficult. Lack of progress in this field is a prime reason behind Glaxo's decision to cut research in Verona. Other firms are cutting back in areas that used to be their bread and butter. Pfizer, for instance, is trimming research into cardiovascular drugs and AstraZeneca is ending discovery in psychiatric medicine. Instead of pouring money into R&D themselves, drugmakers are turning to smaller firms, outsourcing routine research functions and even buying in smart blue-sky discovery work.
However, the large gross margins can not be sustained in a non-R&D discriminated business.  Hence the industry seems to want to outsource R&D to contract research organizations (CRO):
They're also happy to pick up Big Pharma's leftovers. Glaxo, for example, is negotiating to sell its Verona site to a U.S.-based CRO called Aptuit. Parexel International Corp, which is based in Boston and conducts clinical trials for drugmakers around the world, is busy hiring hundreds of new staff -- many of them refugees from Big Pharma. "It's a brain shift," says Parexel's chief executive and founder Josef von Rickenbach. "The rate of outsourcing has continued to tick up pretty much every year across all clinical trial activities."
Does it not mean that the fundamental problem is not necessarily that R&D is ineffective, but that is costs too much?  R&D will be not outsourced to CRO who can maintain lower costs and higher efficiencies by leveraging economies of scale.  My question is: How large does a company have to be for economies of scale to be no longer make a difference?  What does a company give up in strategic / competitive advantage by outsourcing critical R&D?

Jun 21, 2010

How to improve performance reviews

The article Yes, Everyone Really Does Hate Performance Reviews  in Wall Street Journal has some good advice on making performance reviews more effective:
The good news is that none of this is the way things have to be. The one-sided, boss-dominated performance review needs to be replaced by a straight-talking relationship where the focus is on results, not personality, and where the boss is held accountable for the success of the subordinate (instead of just using the performance review to blame the subordinate for any problems they're having). In this new system, managers will stop labeling people 'good guys' and 'bad guys' -- or, in the sick parlance of performance reviews, outstanding performers, average performers, and poor performers to be put on notice. Instead, they'll get it straight that their job is to make everyone reporting to them good guys.
This is important (if difficult) in R&D management - especially larger organizations.  Most engineers tend to dislike performance reviews any way.  The fact that engineers work in cross-functional teams and have multiple bosses makes reviews even more difficult.  Functional managers may not have all the information about actual work performed by an engineer on a project team, while the project manager may not know the discipline involved sufficiently to value the effort.  Interesting conundrum.

Building focused R&D commuities

As organizations grow larger in size, it becomes more and more difficult for R&D team members to know all the development in progress.  Furthermore, as disciplines get more specialized and demands for lower costs and higher efficiency increase, cross-disciplinary communications decline and the need for building focused R&D communities increase.  Many companies like Caterpillar have taken web-based or wiki-based approaches to drive communications across geographic locations (with varying degree of success).  MIT Sloan Review has a useful article on How Reputation Affects Knowledge Sharing Among Colleagues.
Social networks are a defining feature of 21st-century information exchange. Within research and development-intensive industries, in particular, social networks have always been key to fostering innovation. But what lies at the heart of a researcher’s decision to share information within a network of fellow researchers?"

As anticipated, people who have known one another longer and have meaningful relationships are more likely to share knowledge. Predictability and reciprocity are also positive factors. But being indebted to someone is a negative factor: Someone can't be seen as taking more than giving. There are surprising results as well. The frequency with which people correspond, for instance, doesn't correlate to them being more likely to share knowledge.
So, what are the drivers to building focused communities?  Clearly physical distance is one.  The other is familiarity or shared connections (a way to know who to contact and how) and lastly reputation (is it worth going through the effort?):

The research has a number of practical implications. It suggests that physical distance, for instance, poses barriers for those seeking knowledge. The best course of action is to talk to someone in the same city, or at least the same state. It's also best to request information from those with whom you have a shared connection within an organization. Other scientists within the same company are most likely to share unique and not easily replicated scientific knowhow--that which could potentially provide a greater contribution. So someone seeking assistance will more likely succeed if he or she can make the case that the knowledge is vital to accomplishing a task and that the source has the expertise to provide it.

Because both proximity and organizational ties positively influence people to share knowledge, R&D workers may be more innovative if they are closely connected. The study even lends support to the idea of rotating groups of workers to improve knowledge sharing.
However, most R&D managers do not have simple approaches to change physical locations or drive familiarity.  The cost and efficiency pressures are such that there is not enough budget to allow for social networking across large distances.  Furthermore, the effect of social contacts fall off rapidly with time, so even if R&D managers hold internal meetings the return-on-investment in increased interaction is not guaranteed.  Furthermore, disciplines are getting so specialized communications needs are for very specialized expertise (e.g. not just any electronics, GaN LNA implementation at 40 GHz).  Hence, R&D managers need new tools that automatically build an expertise directory that allows engineers to quickly locate people who are working in exactly the same area.

Jun 18, 2010

Six Myths of Corporate Strategy

Corporate Executive Board had a very good summary of Six Myths of Corporate Strategy:
  • Myth 1: Most Executives Want a Clear Strategy
  • Myth 2: Employees Want Strategies to Succeed
  • Myth 3: Visionary Strategists Deliver Premium Returns, Silencing all Opposition
  • Myth 4: Executives Should Force-Rank Investment Opportunities Based on Expected Return
  • Myth 5: Strategists want to Maximize Shareholder Value
  • Myth 6: Strategists Should Start with the End in Mind
I have found many an organization where executives do not wholeheartedly support a well defined strategy / plan because it would make them more accountable (someone can measure performance relative to plan - probably erroneously).  Sometimes organizations are very afraid of failure and this makes executives hedge plans to make sure success can be declared every time.  This has been a very important lesson for me to learn:  In one of my consulting engagements I followed what the executive said literally and tried to come up with a clear strategy.  I was redirected quietly and quickly.  This is not a criticism of executives in any way. Just something all R&D managers must keep in mind.  One has to deliver the right results within the boundaries of existing culture and organization.

Employees pretty consistently vote for their personal gain rather than company strategy.  One example of this behavior is patent protection.  Patents are very very expensive to obtain.  In most cases, patent protection will not generate a positive return on its investment.  Most employees understand this quite well, but still want patents because it makes their resume much stronger.

I think processes and tools need to be flexible enough to allow R&D managers to make practical decisions within organizational realities.  For example, it may not be optimal to rank all R&D opportunities based on pure financial metrics.  R&D investment management is a balancing act - satisfying a plethora of conflicting needs - from near-term market entries to long-term disruptive technologies to skill-set improvements.  We need tools that effective allow R&D managers to make these trades.

Management Innovation

I have had quite a few posts about innovation management.  However, this one is even better - Management Innovation - innovation in the management process.  Prof. Birkinshaw, Prof. Gary Hamel et. al have written an interesting article on how innovation takes place in management:
Management innovation involves the introduction of novelty in an established organization, and as such it represents a particular form of organizational change. In its broadest sense, then, management innovation can be defined as a difference in the form, quality, or state over time of the management activities in an organization, where the change is a novel or unprecedented departure from the past
It is a great article with a history of research into management innovation.  I plan to dig into some of this background in the near future and I will definitely post what I learn.  In the meantime, there are some interesting concepts in this paper worth discussing.

The authors point out that according to prior research, there are four "perspectives" on how management innovation takes place:
  • Institutional Perspective: What institutional conditions give rise to the emergence and diffusion of management innovations?
  • Fashion Perspective: How do aspects of the supply of and demand for new management ideas affect their propagation?
  • Cultural Perspective: How do management innovations shape, and get shaped by, cultural conditions
    inside an organization?
  • Rational Perspective: What is the role of managers in inventing and implementing new management
    practices?
I think this is a very important concept.  If we want to manage R&D into increasingly complex systems in increasingly diverse environment, we will need some strong management innovation.  To achieve this leap in management processes, tools and metrics, we will probably need to encourage and nurture all four types of innovation. 



The authors have also laid out this really cool figure outlining the R&D process and delineating where management innovation could take place:
I think we will probably need to examine processes and tools used for every step in the figure above and determine whether the existing processes are adequate or if we need to come up with something much better.  For example, two organizations co-designing a product at motivation stage might actually see the development completely differently: One as a novel problem because they are developing a new technology (internal change) OR the other as a threat because a competitor is changing the playing-field (external change).  R&D managers will need to bridge this gap and provide a process that lets both organizations work together and communicate effectively.  Interesting times!

Jun 17, 2010

Industry Jolted by EV Engineer Shortage

Here is a short article describing of key skill-set shortages in hybrid / EV automobiles: Industry Jolted by EV Engineer Shortage.  On one hand this is a new skill-set that was not really in existence a decade ago.
The already-tight market for mechatronics engineers just got more competitive with Thursday’s announcement of a proposed joint venture, led by Magna International Inc. founder Frank Stronach, to develop vehicle-electrification technology.
On the other hand, the industry has known about this trend for more than 10 years.  They could have easily trained new engineers if strategic skill-set planning had been in place (or tools existed to forecast skill-set needs for long-term).  As was pointed out in Toyota Way lost on the road to phenomenal worldwide growth, it takes years to get engineers trained to work effectively.  That training and management is even more difficult when new disciplines or technologies are being introduced in the products.  Even so, some people believe that market forces will take care of everything:
Veteran engineer Chris Theodore, whose fingerprints are on the Dodge Viper and Ford GT, also is unfazed.
“There is an imbalance,” Theodore says, referring to the dearth of mechatronics engineers. “There’s more knowledge required.”
But the shortage is temporary, and the impact of EVs on automotive engineering should not be exaggerated.
“The pendulum will swing the other way,” he tells Ward’s. “When all is said and done, we’re in a physical world.”
What do you think?  Does your organization face similar problems?

Codesign - Another increase in R&D management complexity

An article in Nikkei Electronics Asia describes a new trend in consumer electronics: Codesign Begins with Product Implementation.  Codesign is simultaneous development of different subsystems, features and manufacturing process of a product across suppliers leading to cost and performance optimization at a system level.
Digital consumer electronics manufacturers are beginning to adopt codesign in product implementation. They hope to achieve both improved performance and reduced cost by optimizing chips, packages and boards in toto. PC-class performance at the implementation cost of consumer electronics would mean competitiveness sufficient for the global marketplace. Codesign is being implemented full-scale in digital consumer electronics. Until now separate design tasks were optimized individually, but now codesign is being used to improve overall system optimization. This approach makes it possible to cut design margins to the limit and develop products delivering powerful functionality for minimal price. 
With increasing complexity and somewhat nascent processes for cross-cultural cross-organizational R&D management, this can be a very challenging task for managers.  Especially, the biggest bang-for-the-buck for codesign is if it is implemented during concept development phase.  That means that all the different organizations have to align their processes, tools and metrics during the entire R&D pipeline.
Codesign can be applied to a wide range of design phases, but the most important one is concept design. The design enjoys the greatest freedom in the initial design phase, and as a result this is there the greatest optimization is possible. Codesign is entering use now in the conceptual design phase of digital consumer electronics. 
Furthermore, communications between different organizations gets to be even more critical (and difficult). As the article explains with an example of consumer electronics design, not only does design / development need to be synchronized, but also the testing / evaluation as well.  Reliability analysis & risk assessment can also become a nightmare.

There are two axes in codesign, the first of which is the target of the codesign process. There are three targets involved here, namely the chip design and package design (handled by the semiconductor manufacturer), and the board design (handled by the set manufacturer). The second axis is the set of indices used for design evaluation, such as signal integrity† and power integrity†. These indices are essential guides in avoiding product problems, and the goal in codesign is to satisfy all of the simultaneously. 
 However, this trend is likely to not be a passing fad.  As competition becomes global and need to address developing market becomes even greater, innovation will likely move to system level from components.
Better Performance at Lower Cost Digital consumer electronics designers are being pressed to slash margins to the bone, delivering better performance than prior models at the same or lower cost. 'It used to be that we could afford a little cost increase if the product was the smallest one in the world, for example, and we could utilize high-performance boards or components. Not any more. Even if we make the smallest one in the world, the key point now is how cheap the parts are,' complains Makoto Suzuki, Chief Distinguished Engineer, General Manager, EDA Design Technology Solutions Dept., MONO-ZUKURI Technology Div., Production Group, Sony Corp. of Japan. In this situation, continuing the established approach of individual design optimization would result in excessively large margins, and a loss in product competitiveness.

Jun 16, 2010

Security and IP control in R&D outsourcing

Yale Global Online magazine has an interesting article that reinforces strong processes and security in R&D outsourcing: Google’s Lesson: Innovation Has to Be Accompanied by Reliability.  The article distills lessons learned from the Google-China incident and points out that that manufacturing outsourcing will continue, but needs controls for IP:
Outsourcing of manufacturing will continue, but it must do so under much tighter monitoring of the transfer from intellectual property to production.
I was talking with a large US manufacturer moving production lines to China.  Besides IP exposure, the company actually found that they needed new processes to link US R&D to manufacturing.  When the manufacturing was in-house, R&D team members could walk over and see how manufacturing was doing of vice-versa.  None of that was possible when manufacturing was in a different country.
Actually moving production and R&D, not just connecting them virtually, can have a negative impact on security.
Furthermore, R&D outsourcing is different from manufacturing and control of IP is much more difficult.  R&D is essentially a process of manufacturing (creating) knowledge on how to manufacture widgets.  Once the knowledge is with people, it is difficult to remove it.  I have heard of Japanese strategy of keeping key component manufacturing in Japan and thereby protecting their IP.  That will not be possible when R&D or parts of R&D are outsourced.
The lesson for the IT industry is that security has to be a primary concern in the next generation of innovation.

Strategic Skill-set management key to sustainable growth

Washington Post had an article about how growth caused skill-set imbalances at Toyota and may have lead to quality problems - Toyota Way' was lost on road to phenomenal worldwide growth:
 How did Toyota lose its way? The core reason, according to a number of auto-industry experts, is that the carmaker outgrew its human expertise. 'Toyota cannot develop engineers as fast as they can proliferate new models,' said Jeffrey Liker, a professor of engineering at the University of Michigan and author of five recent books on the virtues of the Toyota Way. 'Each engineer is doing more and has more opportunity for error.' Before the avalanche of growth, Toyota took about 10 years to train first-class engineers, Liker said. These engineers and senior managers had time to absorb company values that gave them an intuitive feel for weighing quality demands against cost concerns -- and how to squeeze suppliers on cost without getting inferior parts, said Susan Helper, a professor of economics at Case Western University in Cleveland and an expert on global manufacturing.
As per the article, rapid growth prevented Toyota from allowing the 10 years required for training.  The key question for R&D managers is not whether growth is good (it is required, necessary), nor is it if they can afford to spend 10 years to train engineers (they can not), but how do they use new R&D processes and tools to accelerate training and transfer more knowledge to engineers.

An added dimension is that of complexity - not just from increasing complexity of products but also from inclusion of new technology (electronics, computers etc):
As Toyota's new cars became less mechanical and more dependent on electronics and computers, management's intuitive feel for quality was further diluted, along with its expert understanding of how suppliers made parts, Helper said.
Clearly, traditional training regime will be challenged in this new world of doubling capabilities every 18 months.  It is pretty well known how automotive companies have trouble synchronizing development with electronics such as GPS or entertainment systems.
To cut costs, Toyota "dramatically reduced" crash testing of new car models, according to Koji Endo, a longtime auto analyst and managing director of Advanced Research Japan, a corporate research firm in Tokyo.
"They do virtual testing using computer models, and it is expertly done," Endo said. "But from time to time there are unexpected real-world problems that the computer models do not account for."
This is the final challenge - integrating new and advanced R&D tools into management and making sure that processes to manage risks scale with R&D tools.  As tools such as Finite Element Method (FEM) or Computational Fluid Dynamics (CFD) become even more capable / cheaper (due to computing enhancements), R&D managers will have even more pressure to use numerical models instead of physical.

Not only do managers have to evolve new processes and tools for skill-set management, but they have to align skill-sets with strategic needs.  Exciting times!

Jun 15, 2010

Enemy Lurks in Briefings on Afghan War - PowerPoint

NY times had a quick little post on how PowerPoint can sometimes lead to meaningless briefings:  Enemy Lurks in Briefings on Afghan War - PowerPoint:
"The slide has since bounced around the Internet as an example of a military tool that has spun out of control. Like an insurgency, PowerPoint has crept into the daily lives of military commanders and reached the level of near obsession. The amount of time expended on PowerPoint, the Microsoft presentation program of computer-generated charts, graphs and bullet points, has made it a running joke in the Pentagon and in Iraq and Afghanistan. - Sent using Google Toolbar"
Another place where I have found PowerPoint to cause problems is project reviews.  Not only do R&D teams spend a significant amount of time developing review packages, but also the briefings tend to be so dense that it is rather difficult to identify and focus on issues of importance.  I am sometimes amazed that reviews actually are useful.  Templates can definitely help, but in the end, I am still looking for a meaningful solutions...

Need for cross-organization cross-cultural R&D management

A semiconductor industry focused article in Nikkei Electronics Asia (Semiconductors the Key to the "Green" Society : System-Level Optimization a Must) points out issues of increasing importance to R&D management: Cross-organizational Cross-Cultural R&D Management.
A number of environmentally sound products utilize devices such as solar cells, LED lighting and Li-ion rechargeable batteries, but these devices do not play the crucial roles. The electricity created by energy devices such as solar cells must be transmitted efficiently, and excess electricity stored in energy storage devices. Electricity must then be output from these storage devices without loss to energy-conserving devices for use. System-level performance optimization, linking all of these components without waste, is crucial.
R&D managers will face many new problems in this new environment where many of the "low-hanging fruits" have already been taken and innovation will move from component / process level to product / ecosystem level.  Many of the tools necessary to manage R&D in this environment are not easy to find.  Key challenges include:
  • Communicate across language and cultural boundaries
  • Align goals / objectives / requirements / risks (e.g. in an automotive environment, changing suspension requirements will impact tires and frames)
  • Bubble up risks and ensure they are addressed across vendors
  • Manage investments
  • Protect IP
  • Manage morale and reward innovation
  • Others...
Thoughts?

Jun 14, 2010

Alternate approach to aid brainstorming

HBR had an interesting article about brainstorming in My Eureka Moment With Strategy - Roger Martin:
Rather than have them talk about what they thought was true, ask them to specify what would have to be true for the option on the table to be a fantastic choice. It was magic. Clashing views turned into collaboration on really understanding the logic of the options."
Why is it so important? The central reason is that it allows managers to step back from their beliefs and contemplate the possibility that they might not be entirely correct.
I really like this approach and am going to try it out in my next brainstorming meeting.  What has your experience been?

If you think an idea is the wrong way to approach a problem and someone asks you if you think it's the right way, you'll reply "no" and defend that answer against all comers. But if someone asks you to figure out what would have to be true for that approach to work, your frame of thinking changes. No one is asking you to take a stand on the idea, just to focus on what would have to be true for that idea to work. This subtle shift gives people a way to back away from their beliefs and allow exploration by which they give themselves the opportunity to learn something new.

Tatas learn to innovate

 I really enjoyed this article in the Business Standard on innovation management in India -Tatas learn to innovate:
While this is aimed to lift the inhibitions that failure can cause, TGIF realised that several employees are afraid to question conventional wisdom. Thus in the works is a series of seminars called Courage to be Curious and Question. “The Tata Management Training Centre is working on it. This is to tell people how to ask questions without being intrusive and offensive. We will do the pilot in the next two or three months,” says Gopalakrishnan. 
I guess this is an important problem in most corporate cultures - lack of questioning or open debate.  But I found India to have a tendency towards top-down management cultures.  I do believe that the culture is changing.  I talked with the CEO of a large Indian conglomerate and was very impressed with his approach to make sure decisions are as much bottom-up as top down.  It will be interesting to see how Tata achieves the change in culture...

Below was another impressive paragraph.  Tata attempted to define Innovation and baseline initial level of innovation before proceeding with change.
Before any effort to boost innovation, it is essential to know the state of innovation in the company. The treatment will emanate from this. After much deliberation, TGIF has adopted the Innometer developed by Julian Birkinshaw of the London Business School. It measures the innovation process and culture on a scale of zero to five, and can be run on the whole company, a unit or even a small team. So far, about ten Tata Group companies have gone through it. The scores, of course, are confidential. “We are medium to upper-medium. We are not on top. It’s a 5-point scale, and I haven’t seen a 4.9 score. But I have seen scores between 3.6 and 4.3,” says Gopalakrishnan. 
This was another impressive paragraph.  I am not familiar with the Innometer, but I hope to check it out soon and post about it.  Unfortunately, Prof. Birkinshaw's website does not appear to have any material on it.The only page with information I find is from Tata itself.
Another barrier to innovation was that the various Tata companies wouldn’t talk to each other. There was always scope for collaboration, but seldom was it exploited. This was because large group companies like Tata Steel, Tata Chemicals and Indian Hotels Company were run like independent fiefdoms. Ratan Tata, when he became chairman in the early 1990s, eased out powerful chieftains like Rusi Modi, Ajit Kerkar and Darbari Seth. A cohesive group identity was forged, but collaboration still did not happen. So, TGIF decided to set up InnoClusters — groups of companies that could work together in different areas. There are four such clusters: Nanotechnology, plastics & composites, information technology and water. At the moment, the biggest cluster, of ten companies, is around nanotechnology.
Finally, TGIF has setup an innovation market place and they seem to have a good plan for staged implementation...
TGIF has come out with a web-based open innovation initiative called InnoVerse. Employees can post a problem on the intranet, to which anybody can provide a solution. People can bet on ideas with the 1,000 karma points they get. If the idea is accepted, your pile of points goes up. More than that, this will show which solutions are popular. A pilot is being run at the moment. Can all 300,000-odd Tata Group employees access it? “Not all, but most can,” says Tata Quality Management Services Vice-president Ravi Arora. “You must remember that a large chunk of these employees (almost 40 per cent) are from TCS, who are all net-savvy.

Jun 11, 2010

Rewarding Failure

The Kellogg Insights from Kellogg School of Business has an article justifying Bonuses Despite Billion Dollar Bailouts:
Eisfeldt and Rampini’s research suggests that their function is less about the past than the future. Bonuses provide managers with an incentive to be honest about their own performance and about the firm’s prospects earlier rather than later, when shifting capital to more productive managers and more productive uses can have the greatest impact.
Clearly, large bonuses in failing financial institutions is a touchy subject and I would like to stay away from it.  However, there is definitely a case for rewarding failure in R&D.  If all R&D efforts are successful, than the organization is not taking large enough risks and would likely not be able to compete long-term.  Managers need to drive a healthy risk appetite, while managing overall exposure.  Furthermore, if failures are not exposed early, more money is normally wasted in keeping wasteful projects alive.  It also means that the R&D culture is not accepting of failure and that is a dangerous path.

One effective approach to encouraging/managing risk is to tie some fraction of executive compensation to "Wasted Development Effort."  The idea here is to recognize that some R&D should fail and that the executives should be encouraged to talk about it.  If the term wasted development effort does not sound appropriate, consider Technology Path Elimination.  My boss a few years ago came up with this term and it sounds much better: Encouraging R&D organizations to eliminate technology paths that will eventually lead to failure.  Thoughts?

Jun 10, 2010

Key challege for R&D Manages: Manage Complexity

Knowledge@Wharton had an immensely relevant article for R&D management:
Under the Hood of Toyota's Recall: 'A Tremendous Expansion of Complexity. The article is a discussion between Prof Fujimoto and Prof McDuffie about the root causes of Toyota's current troubles.
"MacDuffie: You have studied Toyota and its production system for a long time. Can you tell us what surprised you about the recall crisis, and if there was anything that didn't surprise you? Fujimoto: I was surprised to see that Toyota was the first to be caught in this trap of what we may call complexity problems. Society and the market are making stricter and stricter demands on all the cars and vehicles in the world. So this could happen to anybody. But I was a bit surprised that this happened to Toyota first, because Toyota executives had [issued] a warning about [being] in a very difficult situation regarding complexity. So they knew that this could happen to anybody."
I am not sure if many people recognize this rise in complexity.  As the pace of R&D increases around the world and products get ever more advanced, the demands on R&D teams are increasing exponentially.  Instead of improving cross functional communication, the need for specialization is actually fragmenting the R&D and associated management environment.  Cultural and geographical boundaries introduced by multinational multi-organizational teams further exacerbates this fragmentation.
MacDuffie: And that creates tremendous demands on the designers, right?
Fujimoto: Right, it's a nightmare for the designers. You have to take on all these constraints. It's like solving gigantic simultaneous equations involving structures and functions. For example, with the Prius recall, the problem resulted because Toyota tried to improve fuel efficiency and safety and quietness at the same time through a nice combination of very powerful regenerating brakes, plus the latest antilock brake system, plus the hydraulic braking system.
But the relationship between the three kinds of brakes changed with the new design, and then drivers could have an uneasy experience when there was switching between the different brakes a little bit.... Toyota failed to see this problem in the right way, at least in the beginning.
The key challenge for R&D managers to come up with approaches to manage this complexity effectively.  Since the trend for faster cheaper and more advanced is not going away anytime soon. What has your experience been?

Use of checklists in R&D management

A blog post in the Harvard Business Review talks about "What Sort of Checklist Should You Be Using?"  The post lays out five types of checklists based on Mr. Gawande's work.  I believe two are important to R&D management
3. At a construction site in Boston, Gawande encounters what I'll call a coordination list. You have an extremely complicated endeavor that no one person can fully understand, so you set up procedures that force the various specialists involved to consult each other on a regular basis. Again, this seems like something with all sorts of applications outside of construction (and medicine).
4. Gawande describes several value investment managers who use checklists to make sure they always follow certain steps before putting money into a company. This is a discipline list. In a calm, reasoned state of mind, you set down a list of procedures you want to follow to keep you from making bad decisions later, in the heat of the moment. It seems like these can't really be standardized but, in part because they're not standardized, they can be used almost anywhere.
Add a sixth type which I have found to be extremely important in R&D Management: Review Checklist. This is probably a combination of 3 and 4 with a flavor of risk management and project management.  My experience is that feedback from project reviews is very useful, but extremely difficult to capture.  There is also a lot of variability on types of responses you get from reviewers (based on their backgrounds).  I believe standardized checklists can help improve review effectiveness immensely.  Even so, many firms I have visited do not use them consistently.  Even when the do, they do not capture all aspects of project management in their checklists.  What have you seen?

Jun 9, 2010

Invention vs. Innovation

The article "Innovation is key to prosperity" from Canada (The Star) does not have a lot of useful information, but it does actually make a claim that there is too much money being spent on invention and too little on innovation:
The Canadian government puts too much emphasis on invention, and not enough on innovation – even though the latter drives economic prosperity, according to a new report from a competitiveness think-tank. Government policy tends to support inventions at the expense of improvements in existing products or processes that would provide value to consumers, says the provincially funded Institute for Competitiveness and Prosperity."
The article makes amazing claims:  Innovation needs to be improvement of existing products.  "Business Innovation" can be the real driver of innovation and not science and technology.
“Obviously, we need science-based discovery as a foundation for innovation. But our prosperity is the result of business innovation that adds value to our day-to-day lives,” said Roger Martin, chair of the institute.

“Without greater emphasis on true innovation, we will continue to spend billions of dollars funding invention and get little innovation to show for it.”
I have found definition of innovation to be a pretty regular problem R&D management.  How one defines innovation will decide how much money is being spent on innovative projects and how much on the others? How does your organization measure innovation?

BCG Innovation Study

The management consulting firm BCG has a very informative annual Innovation survey.  The results of the sixth survey were published recently.  The study provides very informative results and may help with benchmarking your organization.

The fraction of executives being satisfied with the return on their R&D investment went up from 43% in 2008 to 52% in 2009.  I wonder what has caused the change. May be because the budgets have been cut enough to drive the return or the executives are working harder to drive focus

Another interesting result is that everyone believes that innovation should be measured rigorously and less than 50% of the organizations actually do so. I have found that measuring innovation requires defining what is innovation.  Many of the companies I have worked with have no clear definition of what is innovation and how it is different from R&D in general.
What is your experience?

Jun 8, 2010

2010 Global R&D funding forecast at greater than $1.1 Trillion

R&D magazine produces an annual Study on global R&D funding forecast that is full of great information.  In 2010 R&D spending is going to exceed $1.1T globally (flat from 2008).  US continues to lead at almost 35% of the global R&D budgets, but the share seems to be flat to declining.  Finland and Sweden lead the world in number of scientists/engineers per million people. 

Almost 75% of the organizations have changed R&D plans because of the recession and a similar fraction has actually reduced focus on R&D.

Lots of interesting data.  Check it out...

Disruptive and sustaining innovation

Inder Sandhu, SVP of Strategy and Planning at Cisco has written an article in Forbes about new product platform development and product improvement.  The idea is that an organization needs to focus on developing new product platforms while generating revenues from incremental improvements to existing platforms.  He calls it Disruptive and Sustaining Innovation.

But doing both isn't easy. Start-ups often prefer the dogged pursuit of the next big idea. And large companies are often reluctant to invest in disruptive innovation, feeling constricted by their commitments to existing customers, pressure from investors for short-term results or even fear of upsetting existing revenue streams.
But when companies do both, the payoff can be great. Two complementary options, in this case sustaining and disruptive innovation, can amplify one another many times over. When Cisco makes an advance in one form of innovation, it usually gains a benefit in the other. And that is the true power of doing both.
Clearly, author has a great point and R&D managers need to effectively balance R&D investments across disruptive and sustaining projects.  There are also other axes that  factor in: Early stage or mature, discriminating vs sustaining, skill-set enhancing vs. feature developing etc. However, the right balance is often difficult to find and tools to visualize and effectively guide the R&D portfolio are nonexistent.


I am not sure if I would necessarily call adding features to an existing product innovation.  However, definition of innovation it self is some what confusing.  Clearly, one can make disruptive innovations in production of an existing product and there by gaining a new advantage in the market place (see the earlier post about R&D at 3M).  However, calling all R&D innovation may hinder effective R&D portfolio balancing.

Jun 7, 2010

Why are companies still struggling with cross functional core teams?

The concept of cross-functional core teams have been around for decades. The belief is that a diversified team will be able to make better collective decisions and move projects faster by taking parallel, but coordinated functional paths. Most companies have embraced the concept and run development project teams with members from Marketing, Quality, R&D, Operations, etc. A closer look reveals, however, that these companies have the form but not function. It continues to amaze me how even multi-billion dollar technology companies struggle with it. Functional areas are highly siloed with each not knowing what they need to produce for other functions to do the work. Why are we still struggling with this?

R&D at 3M

WSJ has interviewed 3M CEO Mr. Buckley in the article At 3M, Innovation Comes in Tweaks and Snips. Even though the article title is about innovation, the actual interview has some excellent points about effective R&D management, skill-set management and motivation.
  • Senior leaders can reinvigorate an area just by making sure the team knows and feels that the area is important to them:

    "Mr. Buckley: I remember my meeting with Chris Holmes [who heads 3M's abrasives business]. I had been in the company maybe a month. During a business review I said, 'Tell me what is going on in abrasives. What innovations are we doing?' Chris said we were doing this and that, but abrasives [were] not considered sexy. I said, 'Why not? I think abrasives are sexy. Why can't abrasives be sexy?' I think it's those simple comments to people who have been convinced over a period of years that they are unimportant. Chris was utterly inspired by that. 
  • Innovation and outside the box thinking is not cheap.  Creativity requires significant commitment of resources and recognition at C level

    WSJ: How else do you get your people to be creative? Mr. Buckley: Everybody wants to find out how to can creativity. You can't. Creativity comes from freedom, not control. We let all the people in the R&D community spend 15% of their time researching whatever they like.
  • Innovation is not always targeted towards a brand new market.  It can be a new way to manufacture a product to give the company a competitive advantage.

    Mr. Buckley: It was finding ways to simplify how you make the lowest-cost high-performance respirator possible.
    We often think innovation is making a breakthrough at the top of the pyramid. That's often not where the hardest challenges are. The hardest challenges are often: How do I make a breakthrough for next to nothing?
  • R&D management improvement is not conducive to Six Sigma like processes.  R&D is discontinuous and requires management insight

    I don't know because it isn't a process. [The quality-improvement process] Six Sigma's worked wonderfully in our factories, but we tried it in our labs and it doesn't work. It's obvious why. The creative process, whether it is with me or anybody else,is a discontinuous process. You can't say if I put more money in it I am going to get more out.
  • Hands-on senior management that walks the lab has enormous value -both in motivation and in efficiency/results.

    WSJ: How often do you go to the labs?
    Mr. Buckley: It's dangerous when I go over. I'm told, "Every time George goes over to the labs he gets a new idea for a new product." I probably go once every two weeks.

Ideation Tools for Your Mobile


ZDNet has a list of ideation and idea management tools for different mobile tools. Some of them are even free.  I think it is great that we can capture ideas any where and queue them up for discussion.
The new clients all come as part of the innovation management platform provided by Spigit, Kindling, and just yesterday, Imaginatik, Each let’s you suggest and evaluate ideas, but in slightly different ways. 
...
Brightidea Mobile Back in February, BrightIdea announced it’s mobile client for the iPhone and iPad as well as Android devices. With BrightIdea Mobile, users can view, post, comment, vote, and share ideas. They can also  use Brightidea’s corporate micro-blogging feature  to post and follow activity within their innovation community.
I find interesting how Innovation has become a favorite buzz word.  The title of the article "4 Innovation Management Tools for Your Mobile." I think there is a great deal of hard work between discussing ideas and developing innovative new products.  I guess in my book, innovation is 99% perspiration and 1% inspiration!

Jun 6, 2010

Frugal Engineering

In the same theme as Reverse Innovation and may be Borderless Innovation, Strategy + Business has an article on The Importance of Frugal Engineering.

The central tenet behind every frugal engineering decision is maximizing value to the customer while minimizing nonessential costs. The term frugal engineering was coined in 2006 by Renault Chief Executive Carlos Ghosn to describe the competency of Indian engineers in developing products like Tata Motors’ Nano, the pint-sized, low-cost automobile.

Typically, when a well-established automaker designs and builds an inexpensive car, the company’s thinking is biased by decades of practices and procedures, and by its relationships with employees, customers, and suppliers. The approach reuses existing designs and relies on existing components. In essence, these companies start with a more expensive car and focus on ways to make it cheaper. That may count as a form of cost cutting, but it is not frugal engineering.

Instead, frugal engineering is an overarching philosophy that enables a true “clean sheet” approach to product development. Cost discipline is an intrinsic part of the process, but rather than simply cutting existing costs, frugal engineering seeks to avoid needless costs in the first place. It recognizes that merely removing features from existing products to sell them cheaper in emerging markets is a losing game. That’s because emerging-market customers have unique needs that usually aren’t addressed by mature-market products, and because the cost base of developed world products, even when stripped down, remains too high to allow competitive prices and reasonable profits in the developing world.
Clearly, going after new markets and new customer demographic can be better achieved with a clean sheet approach.  Of course there is also a cost associated!  It is expensive to start with a clean sheet.  Each R&D organization will need to balance between disruptive and sustaining R&D.  The article suggests three main ingredients for disruptive projects:
  1. Cross-functional teams
  2. Non-traditional supply-chain
  3. Top-down support
I think I would add one of my own: Processes, tools and Metrics to ensure disruptive projects do not disrupt all the R&D.  What do you think

Jun 5, 2010

Akio Toyoda - Toyota's plan to repair its public image - washingtonpost.com

In an article in the Washington Post,  Mr. Akio Toyoda laid out
Toyota's plan to repair its public image.  Within this article, he lays out four steps to fix the R&D and quality processes (Review existing ops; Improve quality control; Listen to customers; Share data):
First, I have launched a top-to-bottom review of our global operations to ensure that problems of this magnitude do not happen again and that we not only meet but exceed the high safety standards that have defined our long history. As part of this, we will establish an Automotive Center of Quality Excellence in the United States, where a team of our top engineers will focus on strengthening our quality management and quality control across North America. 
Second, to ensure that our quality-control operations are in line with best industry practices, we will ask a blue-ribbon safety advisory group composed of respected outside experts in quality management to independently review our operations and make sure that we have eliminated any deficiencies in our processes. The findings of these experts will be made available to the public, as will Toyota's responses to these findings. 
Third, we fully understand that we need to more aggressively investigate complaints we hear directly from consumers and move more quickly to address any safety issues we identify. That is what we are doing by addressing customer concerns about the Prius and Lexus HS250h anti-lock brake systems. 
We also are putting in place steps to do a better job within Toyota of sharing important quality and safety information across our global operations. This shortcoming contributed to the current situation. With respect to sticking accelerator pedals, we failed to connect the dots between problems in Europe and problems in the United States because the European situation related primarily to right-hand-drive vehicles
It is an interesting plan, however, I am not sure how easy it is to implement.  There are fundamental cultural traits that drive behavior (both R&D culture and national/ethnic culture).  I once consulted with a Japanese multinational with operations in the US.  There was significant conflict between the two operations and the engineers in the US felt powerless to do anything to customize products for local demand.  I have heard about how difficult it was for the Japanese to understand the US pick-up truck market.
Reviews are only useful if there is a concrete plan and metrics to implement the changes identified.  Quality control has to be tied to R&D in the first place to actually deliver.  In a multiorganizational complex automotive development, it is extremely difficult to get a handle on all the R&D and communicate it effectively to quality.  Finally, it is easy to say that we will share information, but very difficult to do.  More information is not necessarily better - one needs ability to drill down to the necessary information and context for what the information means.
How would you try to change R&D management to drive change?

Jun 2, 2010

Impact of IT on R&D management

MIT Sloan Review has an article on "The Four Ways IT Is Revolutionizing Innovation."  The factors according to the article are:
Measurement, experimentation, sharing and replication.
Of these factors, sharing and replication are clearly universal drivers enabled by IT.  Most industries are benefiting from improved sharing and replication of information across R&D organizations.  The impact of other two is not universal.

The examples given in the article are mainly Internet and networking companies.  Clearly, they have the luxury of using IT for measurement and experimentation.  A lot of their data is easily available and IT can really support experimentation. 

In many other industries (high-tech, electronics, bio-tech, aerospace and automotive, etc.), IT does not actually measure R&D results or aid experimentation.  In fact, a lot of the challenges in managing R&D stem from the difficulty in measuring R&D results and finding ways to experiment with R&D processes/tools to improve efficiency.  Any thoughts?