In previous STILE points, I presented an overview of the critical business processes that need to be mastered to successfully manage an R&D organization. The first of those processes is strategic planning which establishes the foundation and provides direction to the organization. Indeed, it is the first pillar of the Performance Trilogy®. While developing a winning business strategy in general is a difficult process, a winning R&D strategy is infinitely more challenging.
When developing a strategy in most organizations, innovation is a highly desirable element but not essential for its success. Depending on the industry, R&D budgets range from 0% to 3% of revenues. In R&D organizations (e.g. Bio-pharma, medical products, information technology) innovation is a matter of survival and R&D budgets are often 5% to 10% of revenues. Indeed, there are over 2000 public and private global research institutions whose entire business is R&D. 80% to 100% of their revenues are derived from conducting R&D and providing advice to their government and industrial clients based on sound science. Combine this with the fact that new product life cycles for technology-based companies have been reduced from 7-10 years to 18 months in many cases and it is easy to understand the difficulty in developing a winning strategy based on technology.
Strategic Planning Process
The strategic planning process starts with the development or updating of the organization’s mission, vision and values and finishes with a strategy designed to fulfill its mission and achieve its vision. The mission is usually a variation of developing, deploying and exploiting science and technology to create value for the organization depending on the industry sector. In the case of government research institutions, the mission is often expanded to include recommending policies and commercializing technologies based on sound science to stimulate economic and social development.
Developing a winning strategy first requires a codified process consisting of the 7 steps shown in the figure below.
STEP 1 SELF-ASSESSMENT – A thorough understanding of the organization’s strengths, weaknesses and assets/resources available to it.
STEP 2 COMPETITOR ANALYSIS – The strengths, weaknesses and strategy of competitors’ products and services fighting for the same market space.
STEP 3 CLIENT FEEDBACK – Intelligence from existing clients on their current problems and future opportunities and the value you bring to their organization.
STEP 4 TECHNOLOGY TRENDS – An awareness of competing and emerging technologies that could disrupt the strategy
STEP 5 MARKET ANALYSIS – A thorough knowledge of market and industry trends
STEP 6 STAKEHOLDER REQUIREMENTS – A clear understanding of additional stakeholder requirements which could include regulatory, political and social factors that could positively or negatively affect the organization’s license to operate and its brand image.
STEP 7 STRATEGY SYNTHESIS – Collecting and synthesizing the disparate data and information in steps 1-6 into actionable intelligence on which to make decisions.
Developing a winning strategy is the organizations’ first major challenge requiring in-depth knowledge of both technology and business. This is why scientists or engineers lead most R&D organizations. Even in the case of startup companies led by a business entrepreneur, he/she is usually partners with a chief technology officer to oversee the technology strategy.
Armed with this information, senior management then develops a business strategy consisting of several thrusts designed to allocate its limited resources to protect and exploit its technologies; compete in a favorable market space, and recruit and retain top-level talent. The most important focus of the strategic planning process is making decisions on where to allocate scarce resources. Too many organizations get bogged down on the process and writing the plan and lose sight of the real importance of the planning process which is to make tough decisions about where to allocate resources.
In the next several STILE Points, we will elaborate on each of these 7 steps in the strategic planning process starting with step 1, conducting a self assessment