For most organizations, the R&D pipeline represents the aspirations and goals of the company. As such, it is typically the sole source of future product developments and potential innovation, as most organizations do not fully realize the potential of external innovation to complement their research efforts. Given this reality, pipeline management is a crucial organizational process that needs to be managed, measured, and optimized in order to generate consistent returns.
As teams have limited resources and a plethora of opportunities, R&D teams need to balance long-term uncertainty, short-term gains, and the scope of innovation in order to develop a pipeline that meets organizational needs while allowing for enough risk to create truly breakthrough innovations. With the crucial role that R&D plays within the future of the organization, here are a number of tactical and strategic actions teams can take to improve their odds of success.
1. Added Value and Value Creation
For teams to succeed in managing R&D pipelines, they need a strategic, and systematic approach to identifying valuable opportunities and their place in the pipeline mix. As such, there are three overarching goals objective teams need to balance: strategic alignment, strategic balance, and return maximization.
In other words, projects have to fit the long-term vision for the product and business, maintain a healthy balance within the current mix of R&D projects, and have a reasonable potential for further development and commercialization. As these values can often be subjective, developing KPIs around their strategic contribution, value, and return potential is key to allowing teams to make objective decisions around their R&D pipelines. KPIs can be set for expected versus actual time for development, potential difficulty, complexity, and metrics for product improvement or uptake. Given the unique R&D focus of each organization, KPIs need to align with internal goals and expectations to be meaningful.
Most importantly, teams need to align their value around the internal and external stakeholders. Using methods such as eNPV or the Efficient Frontier approach can help teams focus their efforts to explicitly maximize their portfolio return and ensure that commercialization remains a key component of their work.
2. Analytics, Reporting, and Risk Assessment
For processes to be optimized, they must first be measured and understood. Alongside developing organization and team-focused KPIs, teams need to ensure that their reporting and decision-making guides are clear, simple to understand, and consistent. Using effective visual displays like risk-return grids helps convey information and allows decision-makers to easily process crucial team data. Assigning consistent values to processes allows those processes to be measured, optimized, and projected. Key decision-makers are frequently not research-oriented, so aligning projections, timelines, and terminology to the internal business cycles and metrics enables a better understanding of R&D’s value contribution.
Reporting and risk assessment shouldn’t only focus on internal factors. Identifying external risks, such as resource cost, is necessary in order to uncover other vulnerabilities that cannot be fully hedged against by internal processes. Furthermore, reporting should also focus on internal blocks and bottlenecks, and clearly identify them within their reporting processes; having consistent and transparent reporting processes around negative aspects conveys trust and enables executive buy-in on how to move past or manage potential bottlenecks.
3. Managing Decision Behaviors
For teams to make effective decisions, consistency and discipline in the management processes are key. Achieving stakeholder buy-in on the various parts of the process helps keep expectations in check and ensures that it is followed reliably when assessing decisions. This is crucial for managing decision-making, as this enables a straightforward and knowledge-based process that limits the impact of favoritism or bias.
In all parts of decision-making, having a transparent process helps enable team buy-in on various aspects of the process and ensures that all decisions are supported. For long-term success, teams need to understand the reasoning behind decisions to ensure that their tactical actions match the strategic needs of the organization. Furthermore, this enables R&D management to be a consistent, measurable process that can be optimized and adjusted in order to maximize the potential returns from the pipeline.
4. Strategic Information and Alignment
In order to achieve organizational alignment on R&D and innovation imperatives, teams need to make a consistent effort to convey the information to the organization at large. Teams need to guide and understand the greater business strategy and consistently communicate how their actions fit within the larger framework. This helps ensure that actions are aligned and enable a clearer understanding of the impact that any particular project has on the organization.
More importantly, this creates a bottom-up effort of identifying gaps between current actions and the strategic goals, which enables teams to improve the strategic alignment of ongoing projects. This is especially important for organizations with open innovation efforts, as communicating strategic goals can help activate the company’s workforce as a scouting team and increase the reach of their innovation network.