Best Practices for R&D Decisions 

Hewlett-Packard, Gillette, Merck, 3M, Shell, General Electric, AT&T, DuPont, Procter & Gamble, Motorola, Dow, IBM, Xerox, Intel have extraordinary R&D “hit rates.” There is a strong association between R&D decision quality and a number of “best practices” as documented by Mathesons [Matheson, David and Matheson, Jim (1998) The Smart Organization: Creating value through strategic R&D. HBSP, 1998] in their research on R&D. There are forty-five best practices used routinely by the companies to create decision quality, improve performance, and generate competitive advantage. These can be consolidated within the following nine logical components: 

1. The decision basis
2. Technology strategy
3. Portfolio management
4. Project strategy
5. Organization and process
6. Relationship with internal customers
7. Relationship with external customers
8. R&D culture and values
9. Improving decision quality

Hundreds of R&D organizations in numerous fields were surveyed and interviewed. Industries covered in the benchmarking study – Industrial and specialty chemicals, Petroleum products, Telecommunications, Pharmaceuticals, Electronic and other equipment, Electric and gas utilities, Medical products, Metals and materials, Computers, Food products, Aerospace/ Defense and others. 

To identify organizations involved in R&D to notable extent, nomination system was used, asking participants - about 250 senior people in mostly North American companies to identify R&D organizations- both inside and outside their industries- that in their experience exemplified high-quality R&D decision-making. In-depth interviews were conducted to validate the data and identify the different practices and methods used in different companies in strategic decision-making. Questionnaires were designed to collect data on company performance and the application of the best practices. To validate the results, the study was repeated with different groups, most probably with companies represented by the Quality Director’s Networks of the Industrial Research Institute and companies located in Western Europe. 

The research identifies three important components of right R&D, namely making quality decisions, organizing for decision quality; and improving decision quality. He lists the inclusive sub-components under each of these heads. 

Blueprint for doing the right R&D - 

The category “Making quality decisions” is about making specific decisions well. The basis of decision covers the best practices for each of the elements of decision quality, from framing to commitment. The companies studied, framed their decisions strategically, in terms of technology strategy, portfolio management (balancing short-term and long-term R&D), and project strategy. 

The category “Organizing for decision quality” concerns the supporting structure, organization, and culture required to have a healthy R&D organization. This provides the ability to tee up decisions routinely and brings to bear the right kinds of information, processes, capabilities, and intention, having a strong relationship with both internal and external customers, and defining their R&D culture and values in a particular way. 

Best practices relate to both doing R&D right and doing the right R&D. For example, the use of cross-functional teams. Many R&D organizations routinely use cross-functional teams in their R&D projects. One company benchmarked in the study, was superb in this practice from an operations perspective, but failed to apply it to strategic decisions; i.e. it used cross-functional teams to implement decisions, but not make them. Once this company recognized the oversight, it was a small step to extend the practice to the strategic realm. 

 The category “Improving decision quality” is about learning and improving the decision making process over time. The practices in this component ensure that people in the organization sustain and improve decision quality and adapt to the changing business environment. 

Best Practices 

All the organizations interviewed used all the practices well, but each used a number of them as building blocks for a process that routinely achieves decision quality. The following chart summarizes the sub-components, which collectively makes the best practice in the R&D context. It would be interesting if the R&D departments of companies in our context evaluate their practices as per this benchmark to know where they stand and how best they are faring. The following are the 45 best practices compiled by Mathesons

 

As we know, best practices are not an end in itself. These components could be updated and fine tuned from time to time and may vary slightly according to the situation.

Matheson, David and Matheson, Jim (1998) The Smart Organization:   Creating value through strategic R&D. HBSP, 1998]

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