Innovating Within R&D
By: Mandisa Turner, Entrepreneur-in-Residence and Stephanie Schott, Head of Product Development, at Bionic, part of Accenture Interactive
Research and development (R&D) is the traditional source of organizational growth and innovation. But then why is it that even as companies have invested more and more in R&D, their ROI has dropped 65% over the last 30 years?
The problem with R&D
The concept of research and development as a single business function comes from none other than Thomas Edison, who built the first corporate R&D lab at his Edison General Electric Company (now known as GE). He envisioned how powerful it could be to weave together two previously separate groups of employees: the researchers who came up with new ideas and the inventors who turned those ideas into tangible business value. Getting them to work in tandem turned GE into such an innovation powerhouse that for 50 years, it generated more patents than any other American company. That success motivated other companies to build their own R&D labs.
But today, meaningful innovations that move the needle on stock prices are focused less on incremental changes to current products and services than on moving into entirely new markets. Consider how Facebook’s rebranding as Meta, including plans to move beyond social media, drove a 10% increase in the company’s stock price, or how Amazon’s introduction of its Amazon Care telehealth play shook stocks across the healthcare industry.
These visionary advances come from identifying and satisfying unmet customer needs, an approach that doesn’t start with research. In fact, traditional R&D, with its dedication to innovation for its own sake, often invents new things for which business can’t always find a need or a customer. So brilliant inventions get left on the shelf, and the time and money the company has poured into them goes to waste.
Three steps to changing R&D’s mindset
To recoup their investment in R&D and restore its role as a center for innovation, companies need to give it a more commercial point of view by guiding it with three questions: Who is your customer? What do they want? And how are you uniquely positioned to address it?
We have developed a three-step process for answering that question:
- Begin with a problem. Instead of starting with a solution and looking for a problem it can solve, start with a problem consumers are having and what prevents them from solving it before you start to unpack technical feasibility.
- Assess your organization’s proprietary gifts (i.e. unique technologies and capabilities). For example, one significant player in the razor market has cutting-edge shaving technologies. But another has identified consumers who care less about the details of their razors than about always having one when they need it, which has let them claim a meaningful slice of the market with a subscription model for buying razors by mail.
- Test new value propositions. Use your proprietary gifts to create new technologies (or find new ways to apply existing ones) that address the consumer need, then test them on consumers to see which are most viable.
But moving away from a “solution in search of a problem” approach to R&D also requires broader organizational changes.
Changing the organizational structure
One company we worked with wanted its organization-wide R&D function to increase its focus on commercial impact and monetization. After interviewing the company’s scientists to identify the issues and build trust for change, we introduced key R&D leaders to leaders at other organizations that had adopted a systematic approach to innovation by leveraging existing capabilities. This helped to build partnerships and alignment between R&D and business, which allowed us to create three teams to model how to focus on consumer potential earlier in the innovation process and run lean experiments to test commercial assumptions.
Today, the company is organized not by technology, but by consumer challenges. Its R&D scientists have the tools and methods to understand those challenges and iterate rapidly and cost-effectively on potential solutions. This process has already birthed several early-stage consumer products, including one that is cross-category.
Going beyond the obvious
A global behemoth with enormous and well-established lines of business doesn’t need to be nimble to profit. However, one such company that we worked with recognized that by focusing on its existing products, it was overlooking opportunities in unexplored markets. The company had already identified unmet consumer demand in three key areas that weren’t related to their core products but were adjacent to them. Bionic brought an entrepreneurial “outsider perspective” to the R&D team to lead them through idea generation, ethnographic research, market research, and brainstorming. Over just six months, Bionic and the R&D team generated more than a dozen possible products, then validated them through rapid, iterative experiments to narrow them down to three potential products.
Bionic’s support allowed R&D to present what the company’s business decision-makers called the best internal pitches they’d seen in years. The new approach won R&D approval for not just one, but all three of the prospective products — and several times more funding than they had requested.
Working in reverse
The same focus on commercial potential can also work for companies seeking new opportunities to further monetize an existing technology. We started this process with one company by working with their scientists to determine the technology’s core concept and how consumers interact with it. That allowed us to brainstorm all the potential consumer problems it could address. By developing product prototypes and conducting qualitative interviews, Bionic and the R&D team pinpointed one viable solution using the company’s technology to solve a discrete problem for a specific market. We also suggested that this solution could be what we call a beachhead solution: one that so clearly articulates the benefits of a technology that consumers will understand its value proposition no matter where it later appears. For example, Febreze technology has been so successful as an odor-eliminating spray that consumers know what to expect from other products, like detergent or trash bags, that bear the Febreze brand.
The keys to change
Making this shift requires new mindsets at the leadership level:
You shift your mindset to think outside-in — finding a problem to solve before developing a solution. What internal and external enablers will let you apply your organization’s unique capabilities to address the problem? Remember, consumers aren’t necessarily looking for a perfect solution, just one that works better than anything they currently have.
You need to embrace productive failure. R&D is packed with intelligent high achievers who hate to fail and will do anything to avoid it. You need to persuade them that you would rather they test a potential solution and fail rapidly than invest heavily in a technology that has no commercial application. One way to do this is to incentivize collective success rather than individual performance, actually celebrating failures as opportunities to redirect resources toward more promising projects.
And finally, you need to break the addiction to being right. Orienting R&D away from “can we do this?” and toward “is this worth doing?” requires a willingness to generate evidence from in-market testing and let go of processes, products, and services that show less potential than anticipated. At Bionic, we call this “Do vs. Say” — looking at what consumers actually do in a realistic situation, as opposed to what they say they would do in a focus group.
Reclaiming the power of R&D
An R&D function that thinks more about what consumers want is better able to align with the business side. That increases the chances that business decision-makers will be enthusiastic about a project and help bring it to fruition. That, in turn, boosts R&D’s ROI, which will help restore it to its position as the core driver of innovation and growth.
If you are interested in learning more, please visit us at www.onbionic.com and reach out anytime to hello@onbionic.com
