December 5, 2005

Winning Against Big R&D Spenders

Are you the owner or manager of a company that competes with larger companies fielding R&D budgets that are at least 10 times bigger than your best ever revenue attainment? Do you find yourself awake late at night obsessing about taking your company to the next level of growth against these bigger companies?

Have no fear...there's good news. Booz Allen just published a study of the Top 1000 biggest R&D spenders in
Strategy and Business Magazine, in an article called: Money Isn't Everything (registration required). They expose the conventional wisdom of big budgets guaranteeing competitive innovation as being wrong:

"From any perspective, the conventional wisdom has been exposed as false. There is no easy way to achieve sustained innovation success. You can't spend your way to prosperity."

The notion of investing smart money wins out versus the spending of dumb money. In fact Booz Allen goes on to say:

"But for corporations competing in the free market, excess or ineffective spending is a drain on shareholder returns that saps the resources available for future innovation. Leaders of those companies should ask themselves the question, Are we focusing on the right projects and pursuing them with adequate resources and admirable efficiency?"

So a lot of your big competitors will have higher failure rates when it comes to innovation. How do you increase your innovation success rate? The fix is to focus on the right projects or ideas.

Here's what to do:

  1. Take Inventory: Create a list of all projects your business or group is working on. Add in the perceived or forecasted benefits/results, people/resources. A spreadsheet will do nicely for this work.
  2. Make an Assessment: Do you have too many or too few projects? Are some projects over/under resourced? Are there projects that are stalled? How many projects does each person work on?
  3. Do a Comparison: Compare the list of projects against your business goals and strategies? Are any projects not aligned with goals/strategies?
  4. Stack Rank: Once assessed and compared, stack rank your list of projects. Sort by most favorable to least favorable.
  5. Be Ruthless: Kill all the projects in the bottom third of the list. Shift resources from killed projects to the remaining ones. Make sure each project has the right people, tools and support;

If you do this every six months your business will be in great shape and extremely competitive.

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