Industry X

Spinning the R&D flywheel

March 30, 2021

RESEARCH REPORT

In brief

Today’s technology companies face enormous pressure to deliver the 30 to 40 percent growth expected by investors.
They’re hampered by new and growing challenges such as the “Tech Fail Zone”, sustainability, unmanaged debt, and the “techlash”.
We identified four steps companies can take to overcome challenges and move to the next level of growth.
Taken together, these steps drive the R&D4C model, where C is a closed loop on the commercialization of company and customer value.

The steep path to success

The path to growth for technology companies is getting steeper every day. And it’s becoming harder to build sustainable companies that keep both investors and the market happy. Bigger challenges like whole industry digitization, smart everything, income distribution, energy, healthcare, and the environment are quickly forcing tech companies to “innovate or die”. But it’s not all bad news.

As our research notes, technology companies can take four steps to help adapt to this ever-changing era. By focusing on these, technology companies of all sizes can overcome the hurdles they face and avoid the trap of hamster-wheel product development.

Investments in product development that do not deliver value to the customer are wasted.

First, companies must escape the “Tech Fail Zone”. This refers to technology business ideas and products that fail to make the leap from early adopters to mainstream adoption. To escape the Tech Fail Zone, companies must cross the adoption gap by way of outcome-driven approaches. They should use the incubation period to understand customer needs, get customers to test their product, refine the product following feedback, and so on.

The second step technology companies should take is to mature the organization to maintain effectiveness. The goal here is to sustain growth through multiple business models and enable each new business to operate with the minimum central principles and support needed. Operating across different growth zones requires different skill sets to best manage the requirements of each zone.

Pay down value debt before it puts you out of business.

After this is done, companies can focus on the third step: pay down value debt before it puts you out of business. An accumulation of debt will create a drag on growth. Businesses have to be aware of where and how they’re building debt. More important: they need to know when and how they’re going to pay it down.

This is not a situation that companies can lobby their way out of or paper over the cracks with slick PR.

The fourth and final step technology companies should take is to navigate the “techlash”. Most major tech companies today face public scrutiny of their role and position in society. They need to be hypervigilant of how their business models are perceived and the potentially harmful externalities they create. To succeed, they must pave a new path of responsible innovation in partnerships with their broader stakeholder group, i.e. everyone.

How to guarantee growth

By taking the four steps outline above, technology companies can move to the next level of growth through innovation. Carefully analyzing the business will help companies to spot pitfalls and take the right actions to overcome them. To further drive success, we recommend companies implement the following initiatives:

Drive your entire organization to an R&D4C model, where C is a closed loop on the commercialization of company and customer value.
Extract more 4C value by training the organization in business R&D. This will drive the process from incubation to commercialization.
Introduce a cross-functional portfolio planning process that uses data-driven insights to define where the money is best spent to fuel your growth engine.
Establish an ongoing responsible debt reduction program, fund it, empower it and measure its success. Remember, while debt isn’t necessarily a bad thing, unmanaged debt will kill your company.
Segment your organization into different operating blueprints for incubation, growth/scale, and sustain. Incubate and grow like a venture capitalist firm—scale and sustain like a private equity firm.