By Scott Kirsner, CEO and Co-Founder of InnoLead

Is it possible that R&D organizations are weathering the pandemic better than most other parts of Global 1000 companies?

A recent survey that we fielded at InnoLead, supported by qualitative interviews with senior R&D execs, buttresses that idea. It’s possible that amidst the pandemic, and dramatically changing customer behaviors, large organizations know they need to be exploring, experimenting, and building for the future — whether that involves new digital offerings, the metaverse, electric vehicles, or alternative proteins.

Our survey sample was relatively small, but senior. We heard from 78 leaders of R&D and innovation groups, primarily in North America and Europe, but nearly 80% were at the director level or above in their organizations. The vast majority — 75% — work in organizations with 1,000 employees or more. The survey was fielded in November and December 2021 and underwritten by the innovation software firm Wazoku. An overview of the full “Retooling R&D” report is available on our site.

Budgets are growing
Financial support for R&D does not seem to be getting battered by pandemic pressures. Just 8% of our respondents said that in the current fiscal year, their budget had been cut. Half said it had increased, either “significantly” or “somewhat.” At nearly 40% of companies, the budget remained stable.

Survey respondents said that their strongest internal supporters are the CEO, COO, or key business unit chiefs, followed by the board of directors. As one respondent put it, the CEO and board “understand that if we don’t invest in innovation, we die.” We found that the two least supportive functions, according to R&D professionals, were human resources and finance, followed closely by marketing. Bureaucracy, short-term objectives, and lack of alignment were frequently cited as creating friction.

When we asked about the most important R&D and innovation outcomes, in the eyes of senior leadership, three things floated to the top of the list:

• Getting new products, services, or internal tools deployed or into the market
• Monitoring potentially important technologies or science, and
• Finding ways to generate incremental revenue.

Senior leaders want to see continual and clear evidence of business contributions from their R&D groups, not simply “scouting, scanning, and experimenting.”

Areas of common interest
While many survey respondents said that they were active in exploring very industry-specific topics like “magnetic levitation” (transportation industry) or “genotyping and assay development” (agriculture industry), there were a set of themes that are attracting broad interest across industries:

• Artificial intelligence and machine learning
• Sustainability and the circular economy
• Digitization and personalization
• New food ingredients and alternative proteins
• Augmented reality, virtual reality, and the “metaverse.”

“As humans, we have limitations in being able to integrate and synthesize and look at data,” said John Orloff, a venture partner at Agent Capital and former head of R&D at Alexion Pharmaceuticals. “I think AI and machine learning technology will allow us to make better decisions and choices, and give us new insights into how to approach certain diseases.”

Sometimes, these technologies combine — like applying AI to the development of new plant-based proteins. “If you take an area like plant-based protein, we now can see a map to a complete cost reframe on plant-based protein,” said Nigel Hughes, SVP of global R&D at Kellogg’s. “You’ve got soy protein, and you’re improving the cost through AI-driven plant breeding programs. … Our core skill is food design, but how can we track to the accessible price point for those technologies?”

Blockchain, the Internet of Things, data mining, battery technologies, and robotics also were mentioned frequently by respondents.

Open innovation as standard operating procedure
Once considered an experimental tactic, a public relations splash, or perhaps a “last ditch” effort when solutions didn’t emerge internally, open innovation is on its way to becoming standard operating procedure in R&D organizations. We found 45% of respondents turn to external sourcing on a regular basis, and another 40% say they do so sporadically.

“I cannot think of a single product or project that we’re working on in Kimberly-Clark R&D that wasn’t done in some partnership with a third-party partner, whether that’s a supplier or whether that’s a university or whether that’s a startup,” said Pete Dulcamara, Chief Scientist at Kimberly-Clark. “That’s just the way you have to do R&D in today’s world.”

A mere 14% said they haven’t run an open innovation program, or are not sure — and of those, 10% are considering it.

Looking Ahead
Our research did find that R&D organizations are still grappling with the stress of trying to manage a team that is partially remote, and partially in the office. They are feeling the impact of having less direct access to customers because of pandemic-related travel restrictions. They are bringing new suppliers on board when previous ones are unable to deliver materials and ingredients. “Talent attrition is also a reality,” said one survey respondent.

But the work of R&D has always been about pushing through challenges and past doubts. Cordell Hardy, SVP of R&D operations at 3M, said that the job is “primarily perspiration, not inspiration. It’s absolutely necessary to have the grit and dedication; to go all the way through the finish line; to manage all the risks and overcome the failures. It’s been my experience that that’s lot of work.”