Issue 16 spring 09

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PDF Downloads This article All articles in issue 016 Create 'My eIQ' Email send via email Contact EIRMA send us a message Diagrams The Siemens ‘Pictures of the Future’ process

NEC has reorganised its R&D into an Intellectual Asset group

Links Corning Corning European Technology Center Microsoft Research CambridgeNEC Evonik UnileverSiemens Pictures of the Future Global innovation rewards surveyRepresentatives’ Round table meeting

eIQ Action Points – Marketing the value of R&D

When the economy slows down, it’s important to have a good answer to this simple question: “So, what have you done for me lately?” This is particularly true for the R&D function, whose role enabling a company’s mid- and long-term prospects can seem less relevant when companies are fighting quarter-by-quarter for survival.

R&D managers are guardians of a company’s future prosperity in an age where short-termism rules

R&D managers know this, and are taking the marketing and promotion of their work within their businesses increasingly seriously. They know they need to be able to demonstrate the value of what they do, and to promote its relevance, in order to protect their work – almost as if they were guardians of a company’s future prosperity in an age where short-termism rules.

For many, the perceived value of the R&D function is strongly linked to its role within the company. Corporate research labs far from headquarters will have a tougher time explaining their value than development groups embedded in business units, unless companies have strongly articulated visions for long-term research.

Engagement

At Corning, for example, a 100-year record in R&D has taught the company the value of investing 10% of sales revenues, year after year, to deliver blockbuster products such as the glass used in the first electric light bulbs, low-loss optical fibres, and processes to make TV tubes. But even in this context, the R&D function still needs nurturing.

“When we talk about the value of innovation it is perception that matters, so we need to talk with the management and keep them excited and engaged with the promise of R&D,” said Dr Dipak Chowdhury, director general of the Corning European Technology Center.

Andrew Herbert, managing director of Microsoft Research Cambridge, agrees that valuing research means explaining it to senior executives.

“Evaluating research by dollar is anyone’s guess: it’s much better to work on trust,” he said. “You should involve the CEO as much as possible to develop that trust. It can take 20 years to build, and you can destroy it very quickly - and that is another risk we take.”

Herbert says he manages Microsoft Research Cambridge, part of the computing giant’s corporate research activity, as a brand, trying to develop good relationships with senior people, treating the rest of the company as a customer, “and doing all the things that business people know about building relationships”.

There are tools for developing relationships and brands in R&D, such as portfolio and staff reviews, and briefings on technologies and competitiveness.

Give the senior management a challenge

“Give the senior management a challenge,” said Herbert. “Use what you have in the lab to open their eyes to new possibilities, new products and new directions.”

Such relationship building can be useful in other ways. Some argue that you should embed senior intellectual property (IP) people within the R&D organisation, as NEC has recently done, so that ownership of IP becomes a stepping stone, rather than a hurdle, on the path to the deployment of research results. Others say that embedding finance people in future business departments can help the corporate finance function understand the risks taken in research, and enable it to compare them to the risks involved in other corporate activities, such as acquisitions.

Strategy and organisation

Some of this may seem obvious. Well-managed companies should have overall strategies for serving their customers; organisations designed to implement those strategies; a clear idea of how the R&D process supports them; and the correct connections between divisions to enable that to happen. Some do.

Dr Bernhard Schleich, from the representative office in Brussels of Evonik Industries, which turns over €14.43bn a year in chemicals, energy and real estate, says innovation management at the company consists of a combination of strategy and an idea-to-profit process.

“The strategy part is to ensure that you have a business case to sell to management and employees for any innovation,” he said. “You have to prove that it fits with the strategy of the company, with your competencies and that it’s big enough in relationship to the rest of the organisation.”

Unilever has also organised itself so that R&D serves its strategies for each market.

According to Nico Overbeeke, director of R&D at Unilever’s Vlaardingen laboratory, the R&D team is meant to use world-class science and technology to deliver innovation in nutrition, hygiene and personal care – the company’s key businesses.

Global category teams define a strategy for each category, within the context of the overall business strategy. The global category teams also hold a portfolio of R&D projects that serve their strategy. This could include global or regional innovations; regional renovations (for example, updating an existing brand); new ways of handling the supply chain; new technology and external innovation. Each portfolio is short-, medium- and long-term and is always based on consumer insight and trends that come out of the global category teams’ understanding of their markets.

“The key for marketing [the value of] R&D is the inclusion of R&D people in the category teams, which raises awareness in the business of the total R&D portfolio and gives R&D a better place within the organisation,” said Overbeeke. “Putting values on R&D projects also helps people within the organisation who want numbers.”

Botaro Hirosaki, senior executive vice president and member of the board of NEC, is so convinced of the value of closely coupling R&D and marketing insight, as Unilever has in its global category teams, that he has completely restructured the way the Japanese ICT giant does its R&D.

“The business unit people were saying that the technology coming from central research was just technology not a business, so I decided to completely reform R&D to increase its contribution to the business units,” he said.

His first step has been to combine R&D and the group managing the company’s intellectual property (IP) in an ‘intellectual asset’ function, moving IP management away from the business legal team and closer to the R&D teams.

The next step has been to bring marketing into the R&D function. Hirosaki argues that increased competition through globalisation, and the ease with which digital products can become commodities, calls for a new approach. Differentiating technology breakthroughs are strongly protected, but made available for partners to work with through open interfaces and standardisation.

We need to move to an approach where we have a continuous engagement with marketing and sales

“This means more open innovation and a move towards concurrent R&D, with R&D and marketing done hand in hand,” he said. “We need to move away from a linear approach, where research links to development, production and sales, to an approach where we have a continuous engagement with marketing and sales.”

Core contributors

Corporate research has declined as companies look for more immediate returns on their R&D investment, and turn to academic partners for their fundamental science. Those corporate labs that do remain are protecting their positions by demonstrating the core contributions they make.

According to Chowdhury at Corning, what matters in selling R&D is productivity, measured by quality, as defined by publications, patents of awards; impact, in terms of its ability to find new products and attributes, enhancements and cost reductions; and efficiency, measured by the cost of innovation.

The company’s long track record also helps.

“We know that almost every decade we’ll have a new thing coming out, and that typically we work on something big for 14 years,” he said. “So the company has a tolerance for big long-term innovations and is able to manage the tension inherent within innovation, as well as regarding risk-taking as OK.”

Herbert at Microsoft Research Cambridge explains that his group works almost as if they were academics, with similar freedoms to research their interests and publish their results, because it is independent of the product development groups.

“But we have a vision to advance the state-of-the-art, and then transfer technologies to Microsoft businesses, through the product groups, incubation groups, licensing and start-ups,” he said. “Microsoft usually sells to intermediaries, such as independent software vendors, so we see a role in the labs not only for generating technology for Microsoft but also for that ecosystem.”

Although this may all sound a little leisurely, with researchers following their instincts until they come across something that they can pass on for implementation, the open nature of the research means that the work is done in competition with the fast-paced world of academic ICT research. The group’s freedom also makes it agile.

“Microsoft Research is free enough to be able to respond very quickly to changing circumstances, for example the need for search on the Web to support advertising revenues,” said Herbert. When that requirement emerged after Google started to make money from search, the Microsoft Research labs spent a year pulling together everything they knew about it to create Microsoft’s first search engine and search-advertising platform.

“We have won the company’s trust through building new products and businesses for it,” said Herbert.

Being useful

Siemens has found another way to make the value of its R&D efforts explicit within the organisation: it has created an approach to mapping the future that has become highly valued both within and outside the company.

The company spends €3.4bn on R&D a year, employing 32,500 R&D staff across 150 locations.

The company’s strategy is to be a trendsetter in its core businesses of industry, energy, and healthcare. Each business has a development organisation, and shares a corporate technology group, which employs 2500 people. Its goal is to create economic value for the company by building a portfolio of customer and future-oriented competencies.

To make this work, Siemens has a strategic marketing operation, which sets visions and goals, decides on the technology portfolio and manages R&D partnerships. It also has an operational role, in account management and customer relations; and a communications role.

One of the key things the team does is to develop ‘Pictures of the Future’, regular documents that describe a shared vision for particular parts of the business. The approach has been such a success that ‘Pictures of the Future’ has become a Siemens brand in its own right.

“We want a consensus scenario created within and outside the company,” said Heinrich Stuckenschneider, vice president of corporate technology, strategic marketing at Siemens. “We develop it by looking out at the world, gathering the information, creating a consensus for each sector and then working back from eight, ten and 15-year time horizons to what should happen now.”

For example, Siemens did a ‘Pictures of the Future’ exercise that considered its power transmission and distribution business in the year 2020. It suggested that there would be smart energy distribution grids; more low or no-carbon generation; partnerships with ICT companies to run power plants; and lower transmission losses.

“So we then asked - how would that scenario impact things such as megacities? One answer is that the car may become an agent for selling and buying energy, stadiums might be clad with solar cells, and so. The answers come from the technology side but we are very aware that technology is not everything.”

‘Pictures of the Future’ is now so well regarded that Siemens sells its insights to external companies through consultancy, as well as to internal divisions. Stuckenschneider argues that since Siemens’ divisions are allowed to buy what they need wherever they want, and many buy the corporate technology department’s work, it must be generating value for the company.

Self-promotion

Although efforts such as Siemens’ ‘Pictures of the Future’ have helped establish the value of the corporate technology office through its utility, there’s no harm in giving perception a helping hand by engaging in a little self-promotion.

At Microsoft Research Cambridge, Herbert has established a sales team, including hiring a head of internal marketing who looks out for opportunities to insert technology from the labs into the Microsoft product groups. Microsoft Research also runs other marketing activities, such as a regular three-day internal trade show to introduce its technology and people to the rest of the business.

R&D should try to understand other functions within the business, and should also challenge them to engage with its work

“We need to have people who can do that kind of business development and internal marketing for us,” Herbert said. He argues that R&D should try to understand other functions within the business, and should also challenge them to engage with its work.

Trying to set a value for R&D can also become part of the mechanism for promoting it. For example, originality can be measured by peer review; significance by citations, software downloads and the number of users of products; and rigour through peer review.

“But we also look for the esteem in which the work is held,” said Herbert, “demonstrated by things such as awards and reputation, which are measured by PR and influence metrics. There’s also the environmental aspect to our measures of the value of research, looking at the morale of the group through an employee poll, and the depth of our recruiting pipeline [number of job applications on hand].

“That tells you what the message on the street is about whether you’re an exciting place to work or not.”

Culture and environment

It’s widely recognised that it’s the people who make or break an R&D group or an innovation strategy. It is vital to market the value of R&D back to the people who are doing it, so they feel respected, motivated and continue to engage with their work.

Evonik uses a combination of prizes and public recognition to keep their staff excited about what they are doing. For example, the company runs a Christmas Colloquium that hands out €40,000 awards to teams doing exceptional work. There is also a ‘not invented here’ award, for employees or teams who have taken a research idea from one section of the business and implemented it somewhere else in the organisation. What’s interesting about that award is that it rewards both the person who found the work and the person who donated it, to encourage the necessary technology transfer.

A ‘not invented here’ award rewards both the person who found the work and the person who donated it

“The most important thing is the people who work in R&D,” said Schleich. “In order to get them to do their best you have to have a good innovation culture and you need ‘lighthouse’ projects that can be seen from everywhere within the company.”

Evonik makes key projects more visible by putting them in Project Houses, separate facilities for up to 30 people working on a project of up to 3 years’ duration.

R&D facilities architect David Leon also reckons that the quality of the place where people work is another signal about how an organisation perceives the value of its R&D.

“You can quickly tell if a research centre is exciting and a good place to work or whether it’s completely oppressed,” he said. “Those people who work in dull brown labs need to go and look at best practice.”

Conclusions

The abstract value of R&D is that it demonstrates that your company has a plan for the future, and is prepared to invest in it. When that kind of long-range vision is not enough, there are plenty of ways of ensuring that R&D is valued in the short term as well. Making strong relationships with senior managers helps ensure that their strategic decisions define a role for R&D. It’s useful for strategy teams to include the R&D function, so that its work is aligned with their goals and can draw on their marketing insights. Making other functions part of the R&D team, so that the finance group can understand the risks in their own terms, and the IP team can see how they could enable technology transfer, is also useful. Doing something that the rest of the business values highly, such as the Siemens ‘Pictures of the Future’ work, can also help market the R&D function. If all else fails, try a little self-promotion.

Of course, it’s important not to take this too far. Herbert advises “promising low and delivering high, so that they’re dazzled when we deliver”.

Jacques Joosten, director of corporate technology at the DSM Innovation Center, points out that it is difficult to claim the value of the businesses stemming from R&D, because you need everyone in the value chain to contribute.

“You should not try to monopolise the value, because that undermines your credibility,” he said. And credibility, like trust, is built slowly but destroyed quickly.

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