Posts Tagged ‘Measuring Innovation’

Differentiating R&D vs Innovation – A Conceptual Framework

December 24, 2010

While Research & Development (R&D) and Innovation has always been at the core of success for any organization since ages – until some time back it has been somehow considered like an ‘assumed’ thing. However in the recent years – as competition for almost all businesses heats up and hence the immediate need to start differentiating becomes more acute – the hue and cry about R&D and/or Innovation about/within any organization has taken a new proportion. In most of the organizations I have been working with or dealt with – I see that the Leaders are constantly thinking and talking about driving and pushing R&D/Innovation within the organization; the Mid-Management are required to think about implementing and extracting value through R&D/Innovation; and the Rank-and-File individuals are responsible for execution. Yet, one of a common challenge I have seen in almost all these organizations is across the board lack of clear definition of what R&D and Innovation means and how it differentiates from each other. Needless to say even I have had my share of confusions and misunderstandings – and have often been guilty of using/understanding these terms in an incorrect fashion.

I recently came across one of the key finding from Boston Consulting Organization Survey about measuring Innovation (PDF link – a year old survey) – that per the feedback from the Executives only 32% of organizations were satisfied with their own Innovation results. The same survey also says that this percentage is in fact falling over the years. While I do take such surveys with a pinch of salt – I think that these satisfaction numbers are telling. Having seen in many organizations, I somehow think that this lack of proper understanding/definition of R&D/Innovation could be one of a big contributor to such poor measurements.

Depending on where one reads and whom they talk to – there are different opinions and perceptions about what R&D and/or Innovation means. IMO, none of them are completely correct or wrong. The opinions about them are formed based on what works for any particular organization. For my own sake, in order to have a clear guidance on how I think and perceive R&D and/or Innovation – I have created a conceptual framework in my mind about how I perceive both these activities. For the sake of discussion in this blog – let us refer to this framework as my own “Manish Rathi’s R&D/Innovation Framework”  or MRRDIF in short.

While conceptualizing MRRDIF – my guiding thoughts were driven from what I had read on Wikipedia about Invention and Innovation –

“R&D is about taking cash and converting it into Inventions; Innovation is about taking these Inventions and converting it into cash”.

Per me, the picture below captures the steps and work-flow which forms the core essence of  MRRDIF. As it can be seen, the process is about first creating Inventions through the approach of R&D after accumulating/assessing multiple types of inputs. Second is to convert these Inventions into specific Value for the organization – which IMO should be measurable in financial terms – using the approach of Innovation. The key to remember in this is that Invention by itself does not have any Value.

R&D Vs. Innovation

R&D vs. Innovation - Conceptual Framework (click on the picture for enlarged view)

An important point to remember in my MRRDIF approach is that I do not consider Innovation as an outcome. For me Innovation is simply a form of approach/process which converts Invention into tangible and measurable Value. In simplistic terms – generated Value is the outcome!

A bit more about the key blocks in this MRRDIF approach –

  • Organization Mission and Vision = As a thumb rule – I have always felt that the R&D/Innovation strategy in modern day organizations should be guided by what the core Organization’s Vision/Mission is. I do realize that this point is debatable and there are several examples of successful Inventions/Innovations which somehow were not in line with what the core initial organization’s mission/vision was. However, more often than not, such cases are very very few. Aligning the R&D/Innovation process with the organization’s mission/vision just makes it easy to manage and get better buy-in/acceptability from a long-term perspective.
  • Market Inputs = Traditionally, taking the market inputs has always been an after-thought and has possibly worked for solo inventors in the past such as Thomas Edison or the Wright Brothers. However, in an organization setting requiring collaborative effort for reaching to an Invention – the investments and risks are higher. In today’s world an Invention has to conjoin itself to a valid and unfulfilled market pain point. IMHO, an Invention without the validation based on market inputs can possibly give the organization only a sense of intellectual safety – but that may not translate into financial rewards.
  • Technology/Services Inputs = While this point is self-explanatory – the key in this to assess and validate both internal and external dependencies. For example – I am sure Thomas Edison had a dependency on electricity (external dependency) when he invented the light bulb.
  • Invention = Invention is typically considered to be an embodiment of something new. While the picture above may imply that it takes some effort to convert an Invention into something of value – there are several occasions where this effort is minimalistic. Again such scenarios are typically on the lower side.
  • Execution = This is the block where MRRDIF differs substantially from what has been the typical perceptions of what Innovation means. For me, Execution here is about gaining the acceptance in society, profitability, and market performance expectations of the Invention. This is about the process of deriving Value associated with an Invention.
  • Value = As alluded to above – Value in any measurable form is the ultimate pinnacle of the whole R&D and Innovation process which has been described above. This is the stage where the Invention/Idea has been successfully exploited resulting in tangible outcome for the organization and resulting in some form of commercial returns.

The significance of the ‘$’ signs and its associated colors (red and green) besides the ‘R&D‘ and ‘Innovation‘ process blocks is along the lines of what the Wikipedia statement meant above. R&D is going to consume cash (red) and Innovation is about generating cash (green). The key is keep the ‘red‘ $ smaller than the ‘green‘ $!

As I conclude on this blog post – I would like to repeat that MRRDIF is more tuned towards helping in trying to formalize a definition of R&D and/or Innovation. Like it has to me till-date, my hope is that this framework would help in taking steps towards setting up a measurable R&D and Innovation program.

Any thoughts/comments are welcome.