Too often, R&D’s transformational intentions turn into an incremental reality. Despite increasing the amount of spending directed to transformational innovation projects by 42% over the past three years, most R&D executives still report that these projects get “traded off” (i.e., delayed, killed, or scoped down – see chart 1).
R&D teams often end up having to redirect their focus under intense pressure from business managers to support near-term, incremental projects. In response, R&D teams commonly try to protect transformational projects in the same way they secure initial funding for these projects — by trying to show how valuable they are to the business.
But business partners don’t need more faith in transformational projects; they need help avoiding the bad choices they consistently make about incremental projects.
Chart 1: Losing out to the short-term n=54 Source: CEB 2015 R&D Portfolio Management Survey
Note: CTO = chief technology officer, typically the head of R&D.
Two Things to Try
CEB analysis backs this point up. It shows attempts to strengthen the business’s belief in the value of transformational projects are significantly less effective at minimizing trade-offs and improving portfolio health than approaches aimed at helping the business avoid bad project decisions about incremental projects. Two steps will help R&D teams improve portfolio health.
Guide the business away from poor incremental projects by filling in their critical information gaps: Too often the business lacks critical information that would otherwise help it understand that many of the projects it requests are not worth what they will cost.
To minimize the number of low-value projects that slip through, R&D must supply the business with contextual information that validates the full costs and benefits of incremental projects requested.
Limit the resources R&D dedicates to incremental work by strengthening project resourcing rules: An even more effective strategy for improving portfolio health is to limit the business’s ability to default to incremental work by limiting the resources R&D dedicates to it.
This strategy requires more than simply limiting the budget or people dedicated to these projects; it requires setting up new project resourcing rules in advance that R&D can stick to under pressure.