Essay: The internal and external human factors of r&d in an organization

The Internal and External human factors of R&D in an organization

Introduction:

Research and development has always been dependent on internal human factors for success. Traditionally companies have invested heavily on building great Research and Development teams in a bid to come up with new technologies and products and outdo the competition. But in the current economic scenario this approach will no longer hold good as the cost of maintaining large laboratories and research staff will not match the resulting profitability. In this report we will look at the traditional role of R&D and look at what is lacking in it. Followed by what can be changed in the system with a case study and a frame work for its implemention.

Traditional R&D: Traditionally R&D activities grew out of a need to maintain and improve production activities, and come up with new product ideas in industries. The investments in R&D were firm specific because the R&D activities were unique to each firm and hence required specialists to be at work. From the technology base created by the internal R&D team firm moved to exploit their accumulated knowledge and develop new products. In time this led to the emergence of large scale R&D laboratories defining the status of the organization.(Chesbrough & Crowther,2006)

Why this won’t work anymore: Why this won’t work anymore: The world has become more competitive and has lead to the reduction in product life cycle with new and better products hitting the market in very short lead times. So there is a need for faster innovation and increased creativity. History has showed us that companies that invest in innovation in terms of people they hire and projects they encourage during tough economic times are those that fare best when the growth returns.

In the wake of economic downturn companies are facing a challenge between maintaining focus and managing costs efficiently and keeping options for growth alive through this lean period. This usually translates into reduced R&D spending and reduced R&D staff. If there is no optimal balance between the two it may lead to loss of potentially groundbreaking and promising initiatives which if pursued would have led to high profitability for the company. (Chesbrough & Garman, 2006)

Another aspect that needs to be considered is the prominent shift from manufacturing-oriented model of business to a model that is more focused on the individual consumer. Low cost and variety were seen as clear winning strategies but that has changed now. Nor is mass customisation the answer as companies like Dell and other Auto manufacturers have realised. C.K. Prahalad and M.S Krishnan talk about the N=1 principle in their book “The New Age of Innovation”. The N=1 principle talks about going beyond mass customisation and understanding the behaviour, needs and skills of individual consumers and co-creating with them a value proposition that is acceptable to them which will invariably be unique. To do this, firms will have to have a different approach to their R&D activities. They will have to look both inside and outside of the organisation for understanding and meeting the customer’s needs and requirements and innovating accordingly.

What changes are to be brought in: This brings us to the concept of collaborative innovation networks and open innovation.

Innovation is not a solo-act but it is a multi player game. It’s about bringing together different people in creative and productive ways inside the organization and also developing links between people of other organizations and building a wider network. It is important to recognize the linkages and connections that exist between different players of the system and use to one’s own advantage, for example getting closer to customers to understand their needs, delivering innovative solutions by working with suppliers, setting up links with collaborators, researchers and experts and even with competitors to build and execute innovative systems. So it is more of a people-people contact.

Collaborative innovation networks: A network can be defined as complicated system of nodes or points of action occupied by customers, individuals, companies, research institutions, universities, governments and so on, to get work done. These networks can be influenced either by the interaction with in the network or through the different positions of the nodal players.

Networks are optimal when the advantages of sharing infrastructure and standards and co-specialization outweigh the disadvantages of network maintenance and governance. (Tidd and Bessant,2008)

Consider the case of P&G. They have created a knowledge sharing solution called the Innovation Net which provides access to 18,000 knowledge workers working in various departments of P&G from R&D to Legal to Information systems. Employees are able to take immediate action when required as the Innovation Net provides a catalogue of employee knowledge and their location. (Haimila,2002)

Collaborative innovation networks can also work well when collaborating with voluntary and charity organizations where the R&D teams work in close contact with the non-profit organization and in turn gain insights that can lead to innovation of new products and services. (Holmes & Smart, 2009)

For example: Yeshasvini a Co-operative Farmers Healthcare Scheme, Karnataka, India

The Yeshasvini Health Scheme was conceptualized and launched by Narayana Hrudayalaya Hospital, India, in association with the Co-operative Department, Government of Karnataka, India as a social welfare activity. This is a healthcare scheme for the rural masses to access quality healthcare at a nominal amount of Rs 5(i.e less than � 0.10) per month. In the initial stage through an informal study Narayana Hrudayalaya Hospital concluded that it was not the lack of infrastructure, but the lack of paying capacity of the working class and the poor, which was the root cause of the mammoth healthcare problem India faced. This discovery has helped them design their services and product on offer suitably. (http://www.narayanahospitals.com/yeshasvini.html)

Open innovation: Open innovation is a dynamic concept in which there is a free flow of intellectual property, Ideas and most importantly people in and out of an organization. Innovation takes place by people outside the company and co-operation is a way to source the required knowledge and expertise in order for the in house R&D team to generate new ideas and bring them to the market more quickly. Academic researchers play a major role in this setup. Companies sell or license out internally developed technologies and expertise that are not a part of their core business so that they can be well developed and commercialized by others.

Other sources of innovation like User innovation: Here the User is involved in the R&D and plays a crucial role in the development of the product or service. This has become possible owing to the availability of access to easy to use components and tools. Users participate in the R&D innovation process when they want something that is not available in the market and also because they derive pleasure of learning. (Von Hippel,2005) This phenomenon can be observed in the case of the Apple I-Phone where users where invited to create their own applications for a fee and if downloaded by other users received a royalty as well.

Case study: Innocentive

Innocentive started out as the R&D centre for the Eli Lilly group and ended being a separate entitiy by itself. It is now a Massachusetts-based firm which is pioneering an open innovation program. This program helps companies who are clients to identify and find solutions to high-tech R&D problems by using help on the outside.

InnoCentive first works with the client to clearly identify the problem and then it post general description of the problem on its website and invites solution. It has a database of 50.000 Scientists and researchers to call upon to solve the problem. The sheer number of experts on call give the client a good chance of finding a solution sooner than later.

InnoCentive has operations that span a diverse range of industries. They can do this thanks to the large number of scientists from various disciplines they have on call.

Solvers and Seekers.:The client companies looking for solutions are called the seekers and the solution providers are called as the solvers. Many solvers possess skills and knowledge that can be used for different purposes. Hence there is the possibility of finding “out of the box” solution. Usually scientists from relevant backgrounds take up specific problems. There are two advantages to this approach: First Solvers are able to assess the problem immediately thus reducing the time and resources used for initial research and secondly there could be a reasonable probability that the scientist has already come across this problem and has already found a solution. This clearly show the potential benefits in terms of time and money.

Confidentiality is another major aspect InnoCentive has to look into as client companies will not want their treasured secrets to be out in public. They are able to deal with this by posting problems anonymously with the details of the seeker hidden. The field of the research area is also not apparent sometimes. Hence it would be highly unlikely for anybody to exploit the situation.

This initiative presents a win-win situation for both the solvers and seekers as seekers find the solution that they have been looking for without the major investments otherwise required for inhouse R&D thereby broadening their horizons and the solvers can remain in their home regions while contributing to global innovations. This process encourages greater collaboration and openness that will benefit R&D worldwide. (Allio,2004)

How can this be achieved?

Framework: Open Innovation and Collaborative Innovation networks can be achieved by following the below mentioned guidelines:

• Align interests: the effective use of the skills and knowledge that people of both organizations possess should be aligned to the common interest and objective
• Organize for lasting relationships: Collaborations work best when they are long lasting partnerships. This will foster a general sense of trust and understanding between the two collaborators.
• Provide the right professional skills: Effective management of collaborative R&D requires commitment to establish appropriate level of skill of the research staff.
• Establish clear intent: When planning a partnership, the priority is for the partners to explore and agree on what they expect to achieve at the end of the exercise.
• Use standard practices and communicate regularly: to achieve operational effectiveness good practices must be regularly shared at a high enough level and as a part of professional management development.
• Achieve effective management of intellectual property: Effective IP management can facilitate value creation in the open innovation contest and maximize the potential for monetary returns.
• View innovation R&D as a trans-disciplinary activity: Innovation is not a stand-alone concept. It must be combined with skills of employees in developing innovative business models and suitable organizational structures. (www.eua.be/fileadmin/user…/Responsible_Partnering_Guidelines_09.pdf)

Conclusion:

The use of talent and expertise outside the organization brings with it many advantages.

• The skill and R&D developed outside can be leveraged for commercial benefit,
• The reach and capability for new ideas and technologies gets extended,
• Internal capabilities can be refocused on finding, screening and managing implementation,
• Improved payback on the internal R&D through licensing and sale of unused intellectual property
• It motivates the internal R&D team to act on ideas and technology with a greater sense of urgency
• Opportunity to conduct strategic experiments with fewer risks and fewer resources.

But there are some disadvantages also associated with the process.

• People and R&D are the real asset of any organization. But by outsourcing the R&D there is a danger of losing one’s very own competitive advantage.
• There are extra costs associated with managing external partners
• There could a lack of control over the external R&D team
• It could lead to loss of flexibility and over dependence on external R&D for any technological advances
• The management of the process of innovation become complex with the existence of external players
• Finally there is also the risk of leakage of Intellectual property which the external partners can use to become competitors in future

Considering all the above mentioned points it appears that to be able to achieve the goal of open innovation and collaborative innovation networks will be no simple task. It will require great skill to manage a heterogeneous and worldwide network of internal and external R&D teams without losing competitive advantages and vital internal core competencies in the process. Continuous monitoring and constant assessment will be the only way forward for the future.

References:

About InnoCentive (online) Available at:http://www.innocentive.com/crowd-sourcing-news/innocentive-at-a-glance/

Allio, R.J. (2004), “CEO interview: the InnoCentive model of open innovation”, Strategy & Leadership, ISSN: 1087-8572, Vol. 32 No.4, pp.4-9.

Bessant,J. and Tidd,J., 2008. Managing Innovation. 4th ed. England: John Wiley & Sons Ltd.

Chesbrough, H.; Garman, A.2009 “HowOpenInnovation Can Help You Cope in Lean Times”. Harvard Business Review, Dec2009, Vol. 87 Issue 12, p68-76, Database: Business Source Premier

Chesbrough, H and Crowther A. 2006: “Beyond high tech: early adopters of open innovation in other industries”. R&D Management. Oxford, UK:Blackwell Publishing Ltd

Chesbrough,H.2006. “Open Innovation, The new Imperative for creating and profiting from Technology”. Harvard Business School Press, Boston, Massachusetts.

Desmond,N 2004. The social dynamics of diverse and closed networks. Human systems management. IOS press. Available online at Business Source Premier

Haimila,S, 2002. Procter & Gamble pampers R&D. (online) Available at http://www.kmworld.com/Articles/News/KM-In-Practice/Procter-&-Gamble-pampers-R&D-8498.aspx

Holmes,S and Smart,P., 2009 R&D Management 39,4,2009. Oxford, UK:Blackwell Publishing Ltd 2009

Joining forces in a world of Open Innovation:Guildlines for collaborative research and knowledge transfer between science and industry. Available at: www.eua.be/fileadmin/user…/Responsible_Partnering_Guidelines_09.pdf

Narayana Hospitals (online) Available at: http://www.narayanahospitals.com/yeshasvini.html

Organisation for Economic co-operation and Development Open Innovation in Global Networks Available at: http://www.oecd.org/document/43/0,3343,en_2649_33703_41441387_1_1_1_1,00.htmlPrahalad,C.K and Krishnan,M.S,2008. The new age of Innovation. New York: The Mcgraw-Hill companies.

Von Hippel, Eric (2005),Democratizing Innovation, MIT Press, (online) Available at: http://web.mit.edu/evhippel/www/books.htm