Skip to content



In step 3 we assume there is a steady arrival of promising projects already in place.  The established client relationship allows the identification of good ideas and the internal environment is built to allow sufficient Snowballing effort to transform great ideas into attractive projects. Now the ball falls into the hands of the innovation committee.                   



What should innovation committees do?

Innovation committees basically play four roles:

  1. Choose good projects
  2. Craft a portfolio for the future
  3. Shape up R&D
  4. Build a fluid innovation process

These four levels of competence actually  build over time and ultimately embed into each other.  Yet there is an approximate sequence to them.  For instance, it is preferable to become competent in craftily choosing best projects before building an expensive portfolio of risky ventures. This might appear obvious, but there are plenty of common pitfalls for the unaware in this first step.

In the same line, a look at how to build a portfolio for the future comes before answering the question of how best to manage the R&D department, because we need to know about the outlook of markets and who will be our future customers before we set R&D priorities.  The future is about making choices on markets, edge technologies, and competitive advantages, which in turn all influence the innovation drive and R&D priorities.  The last stage is about building a robust innovation process within the organisation. The aim at this point is to ensure a steady flow of good ideas given the expected attrition rate of projects in execution, by tweaking the organisation.  This is hard work, but the payoff is immediate.


Choosing projects sounds simple, but then an awful lot of companies end up working on the wrong projects.  When we informally surveyed over 20 R&D tax credit experts and asked what % of their clients’ audited projects were really connected to the market needs, typical answers hit the 20 to 30% range, only. No one has ever given us an answer above 50%.  Now that leaves us with a very conservative estimate of 25-50% of projects that should either be reviewed, modified, stopped or redeployed.   We somehow highly suspect in this present case, that an informal survey does turn out to be more informative than a formal one. But it would be great to hear your comments on this topic.

By all means several explanations usually account for the lack of correlation between the R&D effort and commercial success, but we will highlight three frequent ones:

  • Sometimes the original idea came from a creative mind, most likely unconnected to the market place.  The owner of the idea quickly comes to cherish his pet project  and somehow the idea never gets really tested in the market with real customers. The project usually ends as a technical object, that is the product that fails to sell.  By the way, this illusion often happens to vice-presidents of large companies entrenched in their offices.
  • The project evaluation relies on a set of rigid and predefined questions.  Thus the risk-benefit analysis is generally poorly estimated as benefits get inflated and critical risks remain hidden. Most of the time the big risks lurk into the areas that are left unquestioned or unexplored.  Finding the right questions is the challenge.  As a result many projects manage to dodge hard questioning and escape from dissenting voices.
  • R&D effort usually focuses on product features and performance. In the last 20 years customers have increasingly required a bundle of products and services.  Now they request a rich experience to be included as well in the bundle.  Service and experience often fall off the checklist in choosing projects and are way down in the list of R&D priorities.


A balanced portfolio looks into three horizons:

  1. Short term projects that build around the current business.  They are often continuous improvement projects that will affect the bottom line within the next 12-24 months.  Technical expertise and project management skills are commonly at hands.
  2. Medium term projects represent new business development initiatives, lying in the periphery of the existing business areas, such as new products and services.  Risk is a little higher, but the odds of developing the top line within 2-4 years look good.
  3. Third are technology projects that are the seeds of future business development.  They have higher risk-pay off ratios and are managed with different criteria and different sorts of scientific managers.

Building the portfolio is one thing, but monitoring it brings another set of issues:  persistent mistakes.  Human nature comes out of the shadows when a project skids off.  The hardest decision for a committee is to decide what to do with a project that is failing.  Knowing when a project has failed, battles against a host of personal issues, emotions and intents.  Stopping and redeploying goes against the grain of vested interests, even if it is the right thing to do.

Who should sit on the innovation process?  Experience and vision count on those committees. After all we are talking about crafting the future of the organisation.  We need people with good market knowledge, technology wisdom and a capacity to envision the future.   Yet the common 30:30 rule also adds perspective:  30% of membership should be under 30.  After all they are the future!


R&D heads are under pressure. R&D budgets have more than doubled worldwide, but R&D productivity has lagged across the board.  No wonder Asia has collected a score of multinational R&D centers: When it is hard to predict R&D output, betting on costs that are a third of industrialised nations is an amazing productivity hedge.  You can either triple the number of engineers for the same budget, or cut your R&D budget by at least 50%.  Locals make the same calculations: the Beijing Genomics Institute has 4000 personnel doing research!

Oddly R&D departments often run sub-cultures inside their organisations.  This is the terrain of project management and project protection.  At the end of the day, the interesting question to ask is about what happens inside R&D when a project fails?  If the project is a play on the board of snakes and ladders, failure rings like a significant stigma in the slippery game of project politics. There is a different culture when R&D projects are expected to make mistakes in the right directions and space is created to take on failures as learning experiences.  These projects usually win the races. This small cultural difference carries  huge implications.

As a matter of fact the role of the Chief Technology Officer is steadily shifting from a traditional gatekeeper of a project department to that of the guardian of the company’s technology edge in the marketplace.  Not all R&D heads can make the switch.  The new CTO mindset must deal with two considerations:  1. how to tightly line up R&D with the prevailing commercial realities,  and 2. to assess how openly should the organisation play with potential partners to keep the ‘edge’ technology out there and to accelerate from lab to market (open innovation).


Clients are moving targets, and market segments appear and disappear fast.  Today innovation ought to be an integral part of any commercial strategies.   As Peter Drucker said:  ‘Marketing and innovation are the only two essential functions of a company’.   Building a competence in innovation requires three parts:  1.Insights & tools , 2. Process, 3. Culture.  Insights are about the best ‘how to innovate’ tools to do the right things. Without knowing the ‘how to innovate’ part, it is hard to design an effective innovation process internally.  Process is the series of steps you are going to adopt and put into place to make innovation happen within your walls.

Culture is about setting the right incentives and conditions to make your innovation process work. It is about nurturing innovation to the point where client focus is part and parcel of the company culture.  It is about removing blockages that impede the flow of ideas. It is about balancing the pressures of cost cutting and productivity, with the organisational slack demanded to transform great ideas into promising projects.  It is about reinstating the passion into work.

And at the end of the day it is about creating turbulence for your competitors.


André Du Sault, MBA (LBS), MPA (Harvard)

DS&H develops practical innovation tools since 2008.  We  have trained more than 250 executives on the best innovation practices.

Previous blogs:

Innovation Step 1:  The suggestion box: a bag of gold nuggets or crackerjacks?

Innovation Step 2:  From a hunch to a blueprint: How to improve a good idea that will rally organizational support

Posted in Innovation & organisation, Management ideas, Strategy & globalisation.

0 Responses

Stay in touch with the conversation, subscribe to the RSS feed for comments on this post.

Some HTML is OK

or, reply to this post via trackback.