Do CEOs really know what they want from R&D?

Results of another industry survey – this one from Diamond – are actually the opposite of the IBM survey (CEOs want more creativity). This survey shows that as the economy tumbled, companies were more focused on gaining market share rather than exploring white spaces and coming up with innovative products.

Looking for ways to recover from the recession, 57% of the companies surveyed by Diamond Management & Technology Consultants, Inc. plan to pursue a market penetration strategy that risks driving price competition and threatening profitability.

Innovation, often promoted as a panacea for surviving a downturn, is cited as a primary objective of only 16% of the respondents. And despite the economic climate, few companies (15%) see cost reduction (15%) and margin improvement (9%) as their primary objectives.

The other interesting finding of this study was that beyond the workforce there was little agreement amongst executives on what made them competitive!

Senior executives were asked what they believe are their companies’ top strengths and weaknesses. Most see their people as their major competitive strength–61% rated it first or second. But beyond that, there was surprisingly little consensus about what capabilities keep their companies competitive. Only 14% cited the “ability to deliver” on corporate programs and other initiatives as a top strength. Furthermore, customer understanding (10%) and market understanding (10%) ranked unexpectedly low as major strengths, given all the money companies invest in customer research and data analytics.

The press release then goes on to talk about Diamond’s service offerings and their value. The lesson for me was about how little do these high level surveys actually produce. In my experience, both innovation and incremental development are required. Companies need to penetrate markets and enter new white spaces. The actual task of achieving that requires hard work by R&D managers. It is very difficult to get to that level of detail in a survey.

Why don’t businesses experiment more

In a very interesting column in the Harvard Business Review, Dan Ariely writes about why organizations are willing to listen to experts and consultants but not do some experiments themselves and find the best answer:

I think this irrational behavior stems from two sources. One is the nature of experiments themselves. As the people at the consumer goods firm pointed out, experiments require short-term losses for long-term gains. Companies (and people) are notoriously bad at making those trade-offs. Second, there’s the false sense of security that heeding experts provides. When we pay consultants, we get an answer from them and not a list of experiments to conduct. We tend to value answers over questions because answers allow us to take action, while questions mean that we need to keep thinking. Never mind that asking good questions and gathering evidence usually guides us to better answers.

This is a very interesting observation. I have often wondered why people higher such highly paid consultants. One point that Dan does not make is an ability to CYA – the consequences of failure are much lesser if someone else (an outside expert) made the decision. I guess people are recognizing this:

Despite the fact that it goes against how business works, experimentation is making headway at some companies. Scott Cook, the founder of Intuit, tells me he’s trying to create a culture of experimentation in which failing is perfectly fine. Whatever happens, he tells his staff, you’re doing right because you’ve created evidence, which is better than anyone’s intuition. He says the organization is buzzing with experiments.