Mar 2017
Tue, 28 Mar 2017

You Call this Innovation? We Need a New Approach to R&D

Article by Paul Levins
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innoWe all want it!! The need to innovate is at the top of every corporation and every government’s list of things necessary for the creation of opportunity, new industries and jobs. But for all the perpetually appearing, bright and shiny new devices that we refer to as innovations, what are we doing to make innovation itself more efficient, faster and more evenly distributed?

There has been several much talked about  technology launches over the last year, but they were more upgrades than something dramatically new. It prompts a discussion: can we push technological boundaries as rapidly as we once did? While some have perhaps been too pessimistic and are wondering if innovation is even possible in modern consumer tech, or even if we’ve reached peak innovation, what we should be asking is, “how we can innovate better?”

Are we getting more innovative or are we innovating products?

Here’s an example of how discussion has become focused on product iteration rather than innovation itself: news from Apple on plans to build an R&D center in Beijing, released a few weeks before last year’s iPhone 7 launch event, resulted in little coverage. But the iPhone 7 launch sparked a debate about the product that became an echo chamber and took headlines away from an additional, and significant announcement of plans for two more R&D centers, this time in Shenzhen, China and Yokohama, Japan.

At the intersection of those two announcements – new R&D centers designed to bring Apple hardware development closer to manufacturing and software expertise, alongside the release of a refined but perhaps not revolutionary product – the best illustration of a modern phenomenon can be found: the innovation model as we’ve known it is being disrupted.

Four major challenges informing disruption:

1: Show Me The Money

First, it’s extremely difficult to get funding for most long-term R&D projects. Big contributors to this include public company markets and executive liability being forced to focus on short-term results.  This undercuts senior executive’s incentive to take risks with R&D. Unless you work in a huge multi-national with an enormous R&D budget or you have a really far-sighted CEO, true innovation that takes years and might not be commercialized for a decade isn’t going to lead board strategy.

Then, there’s the risk. Corporate balance sheets aren’t made to absorb significant risk in R&D, so if it isn’t a ‘pretty sure’ or proven thing, it’s hard to get the direct investment required. Companies are probably safer letting a smaller player try first and then acquiring them later, even at a premium.

2: Global Hide and Go Seek

Second, effective innovation requires more varied and  specialized skill sets than ever before. R&D has become more complex, and the need for speed makes it harder to predict what kinds of skills and partnerships will yield results. It’s even harder to rapidly ‘buy them in’ to a company. As a result, R&D teams are tough to budget for and even tougher to hire for.

Let’s say you do find a way, how do you manage a diverse group of innovators using your existing leadership team? A single device likely requires a dispersed set of skills across industrial design, software development, networking, display technology, power management, and global standards compliance. That’s a huge range of expertise to manage. Not only is the new product a risk, the process is too! Once a business has worked out the skills it might need, globalization has made it harder to gather the best R&D expertise in one country, one region, or one company. The rise of foreign multinational companies in many countries across Asia and other fast-growth regions, fuelled by accelerating economies, have created geographically spread pools of experts. This makes it that much harder to find experience and talent, resulting in fragmented teams and difficulty in recruiting and managing them.

3: Davids and Goliaths

The third challenge is that it’s often smaller and nimbler companies that can best overcome the first and second barriers (funding and talent). It’s much harder for bigger companies to move quickly towards new ideas and assemble the funding and talent they need – all those elaborate decision making and organizational structures. Small companies can move on a dime, but usually don’t have the network to scale and make a global impact. You then end up with pockets of innovation happening in geographical regions, often customized to one country or industry and that one can’t impact an industry on a global scale.

In global terms, there’s actually a relatively small number of huge, highly capitalized, tip-of-the-pyramid companies like Apple, Google, Microsoft, Samsung, Amazon, GE and Huawei that have the balance sheet to partner or otherwise engage in disruptive R&D. But, even in those companies there are challenges. And what about everyone else? If innovation is so critical, don’t we want as many companies as possible to be able to efficiently aim for transformation, not just a few global giants?

4: Sharing The Love: Networks Vs Crowds

For years, investigations, initiatives, and reports around the world have outlined the need for more open innovation everywhere from IT to farming, healthcare, and manufacturing. It’s *that* mechanism – better delivered – that will create markets and crucially new products, not just ideas, and will make the process more evenly spread. We’re all familiar with how sharing economies are revolutionizing industries: Uber, Facebook, Airbnb amongst others. Well, we need to build a networked innovation sharing economy that allows companies everywhere to access all the resources they need to bring in support from the outside.

Networks are more effective than crowds.  The birth of the Internet created a truly global network where people were able to talk with many in ways not possible before. It allowed for discovery beyond that of which the individual was capable. Critically, a more networked approach to innovation will build partnerships that share risk and aspire to be ‘consistently daring’. The network effect is more likely to better find what companies are looking for than a crowd.  And that’s not only good for a business, it’s great for innovation itself.

Paul Levins is Executive Vice President, Global Head of Partnerships at Xinova, an AmCham member company. Xinova provides a full suite of innovation-related services, capabilities, and global connectivity. 

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