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Managing Innovation and R&D

“Managing Innovation and R&D”

No company wants to stagnate, no matter how good business might be today. Get ideas on how to stimulate your R&D team into the right creative groove, without wasting time on unprofitable ventures.


An effective research and development team — one that produces innovative ideas, revenue-generating products, service packages and methods — is crucial to any emerging-growth business. Yet it takes a combination of elements and a different approach by business leaders to foster a team that will consistently push innovation. It isn’t always expensive or even time-consuming to create innovative ideas, but it does require innovative leadership.

In this Quick-Read you will find:

  • Management methods to develop and encourage a productive R&D team.
  • Three ways to determine which projects are worth R&D.
  • R&D team-building tips.


To create innovative production methods, products or service strategies you must have innovative thinkers. Often, corporate structure stifles creativity in the workplace by rewarding conformity over creativity. Mistakes are viewed as expensive liabilities often threatening our jobs.

Yet an innovative, productive R&D department is one that is allowed to work with a certain degree of autonomy. Failures are celebrated, not condemned. Collaboration, sometimes even with the competition, is encouraged; and the value of knowledge and process outweigh concerns about the bottom line.

Management methods to develop and encourage a productive R&D team

  • Hire right. The best researchers and innovative thinkers are usually scientists; yet a doctorate only proves that they are educated, not necessarily innovative. Innovators experiment, ask questions, take risks and push limits. They are free thinkers who would rather invent than follow strict production requirements. These are the people who will create your most innovative products or services.
  • Create an atmosphere. Foster communication and idea exchanges. Encourage dialogue among the researchers. Offer time and encouragement to staff members working on a "pet project." Innovative ideas come from innovative people regardless of what department they’re in. Allow your researchers freedom to explore.
  • Keep extra money available for development. Build flexibility into your research budget so that you can pursue interesting unforeseen opportunities. Strict budgets allocated for specific projects may stifle your researchers. Have a system that allows you to evaluate projects and allocate additional funds midstream.
  • Set flexible deadlines. In the beginning, researchers need time. Don’t request definitive answers in a specific window of time. Let work begin, then ask researchers when they will know if it’s possible to achieve the desired goal. Timing fluctuates from industry to industry. Development of pharmaceuticals takes 5 to 10 years, while software development and production can happen in months. True innovation will come faster without the imposition of strict boundaries. Hasty deadlines lead only to inferior products.
  • Celebrate mistakes. Science and development are usually a result of trial and error. If researchers are afraid to make mistakes, they are less likely to try the seemingly outlandish prospect that could be the next breakthrough. Respect and encourage mistakes as part of the process.
  • Collaborate with the competition. R&D departments have much to gain from talking through ideas and problems with other researchers. As a company, you get access to more experts and spread the cost; as a scientist you never have all the answers. Encourage your researchers to seek answers from other sources and attend conferences.

Three tips to determine when to invest in R&D

  1. Start with strategic questions. Is this a problem that can be solved? Is there a product that can better meet customer needs? How do my R&D expenditures compare to those of others in my industry listed in the National Science Foundation’s annual "Research and Development in Industry?" Should I be spending more or less on R&D than my competitors? What will the benefits be? With the strategic questions answered, managers are likely to buy into the costs and time needed for its development.
  2. Conduct some informal research. Talk to the potential clients when an innovative product is proposed. Talk to the people who will be using the equipment or actually building the product. Do they see the need and potential value? If you know what your clients want and you identify what is missing in the marketplace, you are closer to developing the innovative product or service.
  3. Evaluate risks. Once you determine that R&D is needed to produce an innovative product or service, consider the costs and benefits. If you invest in R&D now, when will the innovation start paying off? If you don’t develop a new product or service, what is the future of your business? R&D involves risk taking. Evaluate the potential payoff and consider the costs if you don’t push forward. Allocate resources in stages.

Team-building tips

You’ve answered the strategic questions, created room in the budget, now who will do the research? Do you have an internal department or creative staff members, or should you hire outside contractors?

If the project is a long-term process, such as developing a new technology or platform, which could take years, develop an internal team of inventors and have them seek outside contractors at various times in the process. Free your researchers from other work, don’t limit their role by job description or tight corporate rules. Set up a management structure that offers autonomy to explore and experiment.

If hiring an outside contractor, assess whether the company is stable; check references, and make sure its work processes are compatible. Then discuss goals and management. Who will control the process and the time line? Set up a management structure and implement a broad nondisclosure clause to limit some of the confidentiality risks. Remember the key to innovation is collaboration and the sharing of accumulative expertise from other scientists.


Research and development is key to the success of GoAhead Software, a firm in Bellevue, Wash., that makes SelfReliant products, a line of service availability software. CEO Michael O’Brien describes the product line as "an immune system" in the computer that keeps the Internet and the wireless infrastructure up and running for manufacturers, including Intel and Motorola.

To cost-effectively stimulate creativity in R&D, O’Brien and his team use the "spiral development model," a process in which much of the R&D happens in front of prospective customers.

"You can use the classic waterfall development model where you have a product concept, develop all the requirements, design it, implement it, test and ship it," O’Brien says. "But if you’re in a new market that needs a lot of creativity, sometimes that doesn’t work. You have to get requirements right with far less validation. If something’s not quite right, you have to invest more time and more money [to fix it]."

That’s where the spiral model, which GoAhead used for its SelfReliant products, comes in. First, the R&D team develops a concept, th
en creates a presentation that gives a feel for what the product will do. Next, they take that to "one of your least damaging customers" for a reaction. "Say, ‘If we build this would you be interested?’ They’ll either say ‘Great!’ or ‘It would be good if it was like this.’ You’ll get valuable information," O’Brien says.

Based on client input, the team revises the product and takes it to the next client and then the next, spiraling up until there is a fine-tuned product to present to one of the company’s most important prospects. "You’re developing ideas in sync with your customers. We get one or two gems from no matter who it is on the spiral," O’Brien reports. "You have to invest, but it stops you from going down the road blind. It’s very effective because you’re working with the best in the industry and getting their requirements." You’re also building likely buyers because you’re including input from each customer in the final design, O’Brien notes.

DO IT [top]

  1. Ask your clients/customers what they want. Encourage them to be creative. If there is one thing that would make their lives easier, their businesses more effective, what would it be?
  2. Imagine what product, service or distribution system would change your industry. Write it down. Does it exist? Do you have the technology, knowledge or systems to create a new product or service? What would it take to build a research and development team to respond with a solution in the form of a new product or innovative method?
  3. Consider whether the solutions to these questions align with your corporate mission, your business plans and goals, and the future of your business. By providing a solution to these questions, would your corporation gain a competitive edge?
  4. Look for creative thinkers in-house. Talk to your staff or your existing R&D team. Solicit their feedback on the void your company is trying to fill.
  5. Commit to the project. If you decide to develop a new project, set the objective, budget, assemble the team and get out of the way. Let the creative process take over.



The Smart Organization: Creating Value Through Strategic R&D by David Matheson and Jim Matheson (Harvard Business School, 1998).

Achieving Planned Innovation: A Proven System for Creating Successful New Products and Services, 3rd edition, by Frank R. Bacon and Thomas W. Butler (Free Press, 1998).


"Going for Broke" by Edward O. Welles, Inc. magazine, June 1998. A cautionary tale illustrating the risk of letting R&D become more important than business. "The R&D Trap" sidebar near the end of the lengthy article offers advice on R&D budget control.

"Failure Is An Option" by Pat Dillon, Fast Company, February/March 1999. Another cautionary tale of an R&D company that developed one big product whose market disappeared.

"Managing Innovation in Product Development: An Entrepreneurs’ Guide" by Steven Gordon, EntreWorld.org, October 1997.

"Getting It Done" by Paul Roberts, Fast Company, June 2000.

"Technology: What We Do." Description of the U.S. Small Business Administration’s Small Business Innovation Research and Small Business Technology Transfer programs, which link companies to government agencies that will fund R&D projects to develop products in their fields of interest.

Article Contributors

Writer: Polly Campbell and Kathy Furore

Consultants: Russ George, owner of Ocean Carbon Sciences Inc. and a scientist, inventor and research and development contractor, was interviewed for this article.