Does Success in Tech Ventures Follow from Better R&D? Think AgainPublished: July 14, 2004 in Knowledge@Wharton
The paper notes that coping with growth often means a transition in the management skills that are most needed, and may imply a transition in management itself. “All the techniques of effective change management come into play here, as the organization goes through a series of often-wrenching changes in people, processes and systems,” note the authors. “The goal during this phase of the venturing process is no longer creating a new business, but building a proven commercial proposition into a solid new piece of the firm. Effective venture managers thus begin to focus on standardization, quality and reliability. The right people for this task are able to define a set of core key priorities and manage the details of the business.”
Competitive success for technology-based companies increasingly depends on speed to market and speed to profits, according to the paper, which had its beginnings in a 37-venture study of successful and failed startups involved with a major financial institution. The initial survey was followed by a five-company, 35-venture study of the process through which new ventures lead to new competencies for established organizations.
“To succeed, companies need business-building programs in which technologies generated in the labs are rapidly converted into deployable capabilities and (are) speedily commercialized and diffused into new markets,” say the authors. “Rather than having technology developed in ‘silos’ in which R hands off to D, D hands off to market development, which in turn hands off to business development, companies need innovation programs focused on moving evolving technology through the commercialization cycle as a continuous chain of inter-related processes,” the authors point out.
Essentially, they suggest removing researchers from their individual silos, and integrating them within a team that comprises multiple disciplines. The result should be a kind of orchestra of technological talent with an empowered technology manager serving as the conductor.
Levels of Roles in Business-building Programs
The model they offer describes nine major roles for a technology development manager, encompassing three major sets of activities: pipeline-building (or the identification and screening of opportunities), market entry (or the introduction of fruitful opportunities into the market) and take-off (managing the actual launch of the new projects) that are addressed at three levels of challenge: venturing (or entrepreneurial-oriented activities directed toward building new businesses), championing (ensuring that sufficient resources are allocated to the new business development) and heat-shielding (establishing a corporate climate that encourages new business development).
Although the three stages are described sequentially, the authors acknowledge that they often do not unfold in an orderly, linear way. Thus, they say, a thriving business-building program would be likely to experience multiple specific ventures at each stage.
MacMillan and McGrath use a matrix to illustrate their concepts. The three sets of activities can be thought of as columns in a grid, while the three sets of challenges are represented by three levels, or rows, that stretch across each column to form nine points of intersection. At each juncture, the responsibilities of the technology manager are explained in detail.
Championing Challenges and Tough-love Selection
“Perhaps the most painful, but highest level, of need is pruning out projects that won’t work,” says MacMillan. “It’s tough for an organization to do this, especially since the majority of projects are likely to fail.” Still, he says, managers are paid to make difficult decisions.
“Creating an innovation-friendly climate poses two challenges,” note MacMillan and McGrath. “The first is to construct a heat-shield by building a climate of positive acceptance of the legitimacy of your program throughout the rest of the organization. You need to demonstrate to the players in your company that the firm as a whole is committed to business building. The second climate-building challenge is to delineate a powerful, compelling and coherent direction for your business-building program to follow and build commitment in your technology program."
Putting Concepts into Practice
But even as they offer a framework to address a competitive disadvantage of American companies, the researchers acknowledge that many businesses just don’t get the idea. “The biggest obstacle is that top C-level management must understand this is about more than creating a new venture,” says MacMillan. “This technological management program calls out for innovation that goes beyond the R&D labs.”
Too often, he says, management initially gets excited about the program, but then loses interest in the long-term details of managing a portfolio of projects. Instead, top management needs to stand by the technical manager for the long term. “Companies love to announce they’re launching an effort like this,” he observes. “But then they go right back to focusing on calculating costs to four decimal places and ignore the broader management issues.”
A few companies, however, appear to be demonstrating a long-term commitment to the integration of technology and its markets. MacMillan says that Aventis Pharmaceuticals is one of them.
At Aventis, a Drug Innovation and Approval (DI&A) Global Regulatory Approvals and Marketing Support department uses data from globally conducted clinical programs for simultaneous submission and rapid registration in multiple countries. In addition, a Global Drug Development Center concept promotes continuous interaction between the Clinical, Regulatory and Marketing teams to speed product launches once regulatory approval is obtained. According to the company, the process is integrated with a “Value Net” approach designed to "bypass the traditional sequential-based drug development,” and to instead encourage a “net-like” structure, where activities are performed simultaneously or in varying configurations based on the type of data available.
The company notes that this approach “ties together R&D and other knowledge-based parties into a virtual network that promotes simultaneous hypothesis generation, testing and evaluation, encourages rapid cycles, and narrows choices based on the information gathered.”
MacMillan adds that Procter & Gamble, General Electric under Jack Welch, and DuPont also demonstrated a commitment to market-based technological innovation. “At DuPont, venture teams we are working with have adopted a variation on this idea, specifying first ‘no go’ criteria in their screening process, then providing guidance as to what they call ‘where and how’ growth should be built,” the paper notes. “The DuPont groups have incorporated these principles in scoring documents, which help make the criteria explicit so that they are well understood, and so that different projects can be examined in a consistent way. Note that it isn’t the scorecard that is the magic — it is the thought process lying behind it, the discussion of ventures’ features that it precipitates, and its consistent use that creates results.”