Consider R&D as a business within the business

People in R&D often lack the necessary introspection and the methods to evaluate, promote and establish the work of R&D as a value driver. As such, R&D is treated as a mere cost center. If you want to better identify, understand and communicate the value of R&D work, pretend for a moment that R&D is a separate organization with its own viable business model wrapped around desirable and distinct value propositions. Then, act on the insights of this thought experiment.

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Sitting in R&D, far away from customers, preoccupied with solving problems of a technical nature, and guaranteed a salary, it’s easy to forget that R&D must continuously demonstrate the value it creates. Let us try a thought experiment to that purpose.

Imagine that your company were to spin off its R&D as a separate business, with you as its leader. How do you make that business viable? How do you ensure that it becomes a preferred service supplier or co-development partner for companies like your current employer?

Think about these customers and influencers within their organizations. Who are the economic buyers, users and beneficiaries of the services, insights and solutions you provide? Who affects the purchasing decision? What does each of those groups of people care for, the most? What do they hope to achieve, to gain, and to avoid? Which of those can you assist with?

Now think of the value you aim to create. Directly, how are your customers better off after you have delivered? How are you enhancing their competitiveness? Is it only about tangible money value, or also about intangible benefits, such as brand recognition, or higher customer satisfaction? Indirectly, how are your customer’s customers better off? And how are you different to your competitors? Are you offering a me-too commodity cheaper or faster, or an innovation at a premium? How do you communicate that value? And how do you attract further customers?

Consider all activities contributing to that value; prioritize them; connect those depending on each other. Each has a marginal contribution, as well as a marginal cost impact. Which activities are key to creating value? Which could you do without, without significantly impacting results? Which ones create value not because of what you do, but because of how you do it?

Now look at the required competencies. Which areas of excellence make you stand out among the competition, thus allowing you to be preferred and/or command a higher price? Which of your bread-and-butter competencies does it still make sense to keep in-house? Which should you never, ever outsource or automate? Which resources are required, and which ones are lacking? What would it take to build them up and sustain them? On the flip side, which activities and resources could you partner for at sensible cost, for satisfactory quality? And at which price and risk levels?

Finally, consider the return-on-investment that your customers are willing to go for. What price are they willing to pay for the value you are demonstrably providing? What and you charging for, and how? Effort? Insights? Value? “Insurance”? What is it worth to them? Compare expected costs and revenues; will you be profitable or will you simply break even?

Snap back to reality; see yourself as running a business-within-a-business. What do the insights of your thought experiment spell out for how you work for your employer? And what are the next steps to improve?