From Factory R&D to Entrepreneurial R&D

We take innovation out of academia and smaller firms, and develop it into commercial products. As such we need a ‘process’ that is fast, low-cost and quick to kill innovation that will not lead to profitable products. We take the innovative prototype+ and commercially develop it by passing it through a series of standardized, routinized processes, each with ‘hurdles’ or go/go-no decision points. If the prototype ‘fits’ within our processes, if it passes through the ‘eye of the needle’, then it is allowed to continue to the next process, and toward being a commercial product. Those that don’t fit are rejected. We build a commercialization+ factory.

We take very complex research procedures and routinize them so almost any good researcher with a little training can perform them. We take all the procedures used in R&D and string them out in a production line. We’ll be very fast and efficient at trying many different combinations and permutations of alternates across the production line. We’ll get very good at ‘the how’, and focus our superior management talents on ‘the what.’ Management picks the innovation. Project teams push the innovation through the production (commercialization) process until they are rejected or they succeed.

This plays to the core competency of our project managers. They are very good at organizing, assigning, and scheduling of tasks. They understand enough of the science to avoid obvious mistakes. They know when to make exceptions. They are very good at cajoling, bargaining and horse trading to get the resources they need for their project. If you know where you’re going, then we have the managers that can get you there.

If you don’t know where you’re going, if part of the commercialization process is to define the direction, then this routinized approach doesn’t work as well. You need space for curiosity, revisiting past assumptions, inspiration, and ah-ha moments. You need the ability to quickly assess the commercial importance of new insights and new directions. You need to be able to act (i.e., to spend money) on directions contrary to the original intentions for the innovation.

There is a lot more basic science in industrial R&D than most non-researchers would care to acknowledge. Basic science means you don’t know all the answers. You have to run studies just to be able to ask the right questions. Time-lines and directions are vague. Funding needs and progress are erratic. The final commercial value of the research is only dimly visible. We use standardized study procedures but in a non-standard way. We need cleverness in both our science and in our management of the science.

This plays to a core gap in our management competencies+. We’re looking for entrepreneurs. These are individuals who always keep their eyes on the commercial target, but are fully aware that the original target is only an excuse to get started. Once we’re in the marketplace we begin to more fully understand the needs of our customers. This is a need that is never fully visible or appreciated from within the confines of our research building walls.

It’s only through the interaction of the market with our products that we gain an actionable understanding of what it is we need to build into future products. Products give us the excuse we need to be talking with our customers in a way that is authentic and meaningful. Anything less is pure speculation. This is entrepreneurial R&D. We try out an approach in the marketplace and if it works, great. If not we try something else. But all our attempts are informed by discussions with those that buy our products.

Today we lack the c-level expertise required for entrepreneurial R&D. Most c-level officials can only grasp factory R&D. They believe the answer is to survive and wait for that next great wave of innovation to sweep over their industry; when they’ll be able to operate once more using a factory R&D approach. They are followers.

The receptor concept: pharmacology's big idea allowed the pharmaceutical industry to successfully follow a factory R&D approach during the decade of the 90’s – it has run out of steam. It has been close to fifteen years and the next ‘big idea’ has not yet materialized. The industry is hemorrhaging money. Other industries have similar stories.

With factory R&D I wait for someone else to prove the concept and then I show up to undercut them in speed, cost or quality. With entrepreneurial R&D I prove the concept and I reap the early rewards. Both approaches have succeeded in the past.1 The belief at World Class R&D is we are in a business cycle that calls for the entrepreneurial R&D approach to generate and prove new ‘big ideas’. These may pave the way for that next wave of factory R&D, but today there is no sign of anyone driving the paving machine.

Editors Picks for October, 2010

Further Reading