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R&D 2.0: Is Our View of R&D Obsolete?

Posted June 14, 2013 & filed under Job Search

R&D 2.0: Is Our View of R&D Obsolete?

In a recent Q&A session, Bill Clinton cited R&D in manufacturing as a major part of what makes it a “job multiplier.” 90% of patents come from manufacturing and that means jobs for engineers, skilled manufacturers, and quality assurance technicians. For years now, R&D has primarily been the plow that, when wielded effectively, furrows deeper into the rich soil of innovation.  So, the question is: are we using R&D departments the right way? An article published in the Harvard Business Reviews suggests not.

A New Point of View?

According to author Anne Marie Knott, businesses have long struggled with the best way to quantify the measurable success of effective R&D departments. As a budgetary item that is expensed rather than capitalized, R&D often quickly ends up in a precarious position on the chopping block. When R&D is cut, profits may see a spurious boost for the first few quarters but in the long run take a major hit. The good news is that our misevaluation can be corrected with a simple shift in our point of view.

Knott proposes a new measurement system called the research quotient (or RQ for short). These alternate metrics evaluate R&D expenditures based on a company’s current R&D costs in relation to the competition, how those changes affect the company’s bottom line, and the company’s current market value. The end result is a score that resembles an IQ number. If you apply this metric to the expenditures reported by Fortune 500s during the 2010 fiscal year, you get a shocking possibility: that these companies underspent by about $1 trillion!

Sure, some businesses & manufacturers may be short changing themselves by cutting programs that don’t show immediate dollars & cents but is R&D the only answer?

Innovation without Borders

Dumping truckloads of money into R&D departments should not be the only way manufacturers innovate. As Booz & Company, which publishes the annual “Global Innovation 1000” list, consistently hammers home, innovation needs to stem from more than just a cloistered group hidden away in an isolated laboratory. Every department of any progressive manufacturer should be working towards innovation – from the line level employee all the way on up to CIO. That may not necessarily be an easy process but it is an essential one.

Managers will have to loosen their vice grip on projects and lower the barriers that once divided their workforce into compartmentalized groups. New systems & practices, for both R&D and general innovation, will need to be put into place.

So, where will change come from next? Swing back on Tuesday to find out in the next installment of our ongoing series: R&D 2.0.

by James Walsh

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