Risk & Uncertainty is part and parcel of the World Class R&D enterprise...
We seek blockbuster+
This Focus Area is extremely important in some industries (e.g., pharmaceuticals) and recommendations for Risk & Uncertainty are aimed primarily at these type research settings. Throttle back the recommendations in this section if Risk and Uncertainty is of less concern in your industry. If your pursuits are more predictable, then quantifiable approaches may be appropriate. For unpredictable R&D+
Expand all | Collapse all The answer to risk & uncertainty is not simply to gather more evidence
That would fly in the face of effectiveness in evidence gathering. At the edge of science there’s always room for more evidence. Instead we intend to be great at making decisions in the face of uncertainty: to move ahead confidently in the face of conflicting or partial evidence. We don’t need hard deadlines. We don’t need guidance on how much evidence is enough. In World Class R&D researchers self-regulate the amount of evidence they gather to effectively manage risk and uncertainty.
Focus instead on key risk moments (see Framework above)
This is not tactical risk taking, i.e., deciding whether or not to run the next study. This is risk at the level of major investments. We don’t try to get under the skin on tactical decisions. Manage the key decisions (e.g., start, continue, stop pursuits) and all contributing decisions fall in line. Note that the risks we seek to manage during the moment of shutdown are from lost opportunities. Counter-intuitively, our focus on key moments reduces uncertainty in decision making: commercially viability is often easier to judge than the arcane merits of the underlying science.
Manage the interrelated risks of science and investments in science
Decisions consider the financial viability of the underlying science. Doesn’t matter if just the science is going great. Conversely, if the science is going too slowly, we may be able to adjust the investment profile to allow the project to continue. Both the direction of the science and the sources of funding are variables we can adjust to manage the risk and uncertainty of a pursuit.
The key differentiator in World Class R&D is attention to discontinuous discovery, where risk & uncertainty are neither predictable nor quantifiable
You can’t manage risk through diversification, through risk pools or any other techniques that rely on quantitative techniques. You can’t rate investments by having them pass through quality hurdles+ +
Quantifiable approaches in the Risk Framework are retained for those rare moments when a decision is found at the extremes of predictability I know the obvious winners and losers. It’s that vast unwashed middle crowd where I need help! – Senior R&D Portfolio Manager (~2000). Personal Communication
Despite these assurances, later results for this manager’s firm made it clear the winners and losers were not as obvious as he had claimed. For innovative product development, discontinuous risk management will be the approach for most, if not all, of our R&D investments.
More Core Arguments for Mgt. of Risk & Uncertainty
