Heads of R&D and Their Changing Agendas: The Transformation Toolkit for 2024+

Every industry is on the move. Automakers are transforming from car producers to data centers. Manufacturers are changing from human-dominated shop floors to autonomous systems. The energy industry is on the move from fossil to renewable sources. Information systems move from information carriers to conversational systems. The nature of work itself is transforming, with remote and digital work becoming more prevalent.

These transformations, often collectively referred to as the fourth industrial revolution, are characterized by the rise of the service economy, sustainable energy sources, autonomous robots, genomics, and new-collar workers. These changes in both the demand for and supply of products present new challenges for leaders of Research & Development departments, necessitating the adoption of new tools and practices.

Leading Research & Development: The state-of-play

The Head of Research and Development (R&D) is pivotal in any organization. This position is responsible for driving the development of new products and technologies, overseeing the process of finding new products and production technologies, and ensuring that the company stays ahead in its industry. The primary responsibilities include leading key projects, developing research programs, managing R&D personnel, and fitting the products to customer expectations and regulatory requirements.

A typical job profile for a head of R&D reads like this:

Heads of R & D: A changing profession

In recent years, the head of R&D role has evolved due to several fundamental trends:

1. Digitalization: The integration of digital technologies is transforming R&D processes. Big data analytics, artificial intelligence, and machine learning are increasingly used to enhance research capabilities, improve efficiency, and foster innovation (PwC).
2. Automation: Automation of routine tasks allows R&D teams to focus on more complex problems. Robotics and automated laboratory equipment speed up experiments and reduce human error (McKinsey).
3. Renewable energy sources: The shift towards renewable energy drives R&D in new directions. Developing sustainable technologies and improving the efficiency of renewable energy sources are major R&D focus areas (McKinsey).
4. Sustainability: There is a growing emphasis on sustainable practices. R&D departments are tasked with developing eco-friendly products and processes, reducing the environmental footprint of their activities (EU Research).
5. Remote work: The COVID-19 pandemic accelerated the adoption of remote work. R&D teams leverage digital collaboration tools to maintain productivity and innovation even remotely. (Slack).
6. Supply chain volatility: The increasing frequency and severity of supply chain disruptions have highlighted the need for resilient and flexible supply chains. Heads of R&D must now consider supply chain risks in their strategic planning and develop contingency plans to mitigate them. This involves collaborating closely with procurement and other departments to ensure a steady supply of critical materials and components (BCG).
7. Curing tech debt vs new technology investments: Reducing costs and shortening product development cycle times remain top priorities. This is especially important as many companies undergo digital transformation, work to reduce their technology debt, and explore new technological opportunities (McKinsey).

In addition to these trends posing new demands on R&D practices, R&D leaders also self-report significant changes in their roles. A substantial 82% of R&D leaders report difficulty finding and hiring skilled enterprise talent. Moreover, 90% expect the labor market to remain highly competitive or become even more so in the next 12 months. As a result, half of these leaders feel emotionally drained and believe they are working with inadequate tools to meet the challenges they face.

The job profile for R&D heads is becoming more diverse and moving away from classic tasks such as the pure management of R&D projects. In the future, heads of R&D need to:

• Balance investment between new technology projects & curing the technological debt
• Reducing product development cycle times
• Attracting and retaining critical technical talent
• Selecting technologies that support long-term growth
• Accelerating speed to maturity for technologies in the R&D portfolio
• Understanding the market potential for emerging technologies

6 shifts impacting R&D leaders

1. Strategic leadership and vision

The role of a Head of R&D is becoming increasingly strategic. They must be able to set a clear course for the next five to ten years and actively advocate for these goals. It's essential for leadership to have a vision of where the company is headed and identify which technologies will drive the enterprise forward. These technologies should align with the company’s corporate strategy or serve as a catalyst for its development.

As the future becomes more technologically driven, R&D leaders need to work closely with the technology management team to identify and analyze relevant trends, understanding their implications and impact on the company. This requires anticipating future customer needs and technological advancements and translating these insights into specific product and business model requirements. Securing the necessary budget to achieve these goals will also be a crucial part of the role.

To manage current R&D projects and explore new opportunities effectively, R&D leaders need a comprehensive, easy-to-access view of the entire portfolio. They must stay informed about changes and new developments in real time and understand their impacts on the portfolio.

2. A higher need for high-risk (high-reward) technology investments

With the rapid pace of technological advancement, R&D leaders must increasingly focus on high-risk, high-reward investments. While these investments come with uncertainties, they hold the potential to drive significant breakthroughs and maintain a competitive edge. Heads of R&D need to cultivate a culture that encourages calculated risk-taking and innovation, while implementing mechanisms to evaluate and quickly pivot from failing projects. This will require close collaboration with financial departments to secure adequate funding and with cross-functional teams to integrate these technologies into the company’s broader strategy.

3. Prioritizing employee wellbeing and on-the-job training

As the role of R&D evolves, there will be a greater emphasis on the well-being and development of employees. Heads of R&D must prioritize creating a supportive work environment that promotes mental and physical health, as well as professional growth. This includes implementing regular on-the-job training programs to ensure skills stay current with the latest technological advancements. Additionally, the use of assistants and support staff will become more common, helping to manage administrative tasks and allowing R&D leaders to focus on strategic initiatives and employee engagement.

4. Conducting comprehensive horizon scans

R&D leaders will need to engage in more comprehensive horizon scanning to stay ahead of emerging trends and potential disruptions. This involves systematically exploring and analyzing external developments across various industries, technologies, and markets. By understanding the broader landscape, heads of R&D can identify opportunities for innovation and potential threats to their business. This proactive approach requires a combination of data analytics, market research, and collaboration with external experts and stakeholders to gather diverse perspectives and insights.

5. Rapid decision-making is essential

The accelerating pace of technological change and market dynamics necessitates rapid decision-making by R&D leaders. Delays in making critical decisions can result in missed opportunities and falling behind competitors. Heads of R&D must develop processes and frameworks that enable quick, informed decisions, even with incomplete information. This includes empowering teams to act autonomously within defined parameters and leveraging real-time data and analytics to guide choices. Effective communication and a clear vision are essential to ensure that fast decisions align with the company’s overall strategic goals.

6. Embracing automation for survival

Automation will play a crucial role in the future of R&D. Leaders must embrace automation technologies to streamline processes, reduce costs, and increase efficiency. This includes automating routine tasks, data analysis, and even aspects of experimental research. By doing so, R&D teams can focus more on creative problem-solving and innovation. Heads of R&D need to stay informed about the latest automation tools and integrate them into their workflows. Those who successfully leverage automation will be better positioned to adapt to changing demands and maintain a competitive advantage.

How to organize global R & D

Managing R&D in a multinational company is a key strategic decision. Finding the right balance between home-grown R&D activities and establishing satellite R&D centers can significantly impact a company’s innovativeness, cost structure, and agility.

The decision to globalize or localize R&D is multifaceted. It requires a careful analysis of various factors, including talent availability, market proximity, cost efficiency, IP protection, strategic control, regulatory compliance, and cultural synergy. By weighing these considerations, companies can craft a tailored R&D strategy that maximizes innovation potential and sustains competitive advantage in the global market.

In the early stages of globalizing R&D, lower costs were the primary reason for relocating R&D activities away from the home base. However, in recent years, other factors have become more significant. These include the density of talent, accessibility to key markets (such as through strategic partnerships with Contract Research Organizations), and a shortage of digital competencies. Each decision to organize global R&D involves weighing several factors that either favor decentralizing R&D across multiple global locations or centralizing it in the home country.

Factors favoring decentralized global R&D

1. Access to talent pools: One of the primary drivers for globalizing R&D is the ability to tap into diverse and specialized talent pools. Different regions of the world boast unique strengths in various scientific and engineering disciplines. For instance, Silicon Valley is renowned for its tech expertise, while Germany excels in automotive engineering. By establishing R&D centers in these regions, companies can leverage local expertise and foster innovation through diverse perspectives.

2. Proximity to key markets: Globalizing R&D can also provide strategic proximity to key markets. This allows companies to tailor products and solutions to meet local needs and preferences more effectively. For example, a consumer electronics company might establish an R&D center in Asia to better understand and cater to the fast-growing markets in China and India. This proximity not only accelerates market entry but also enhances the relevance of the innovations developed.

3. Cost efficiency: Cost considerations play a significant role in the decision to globalize R&D. Establishing R&D operations in countries with lower operational costs can lead to significant savings. This is particularly relevant for labor-intensive research activities. Countries like India and China offer a cost-effective environment for R&D, enabling companies to maximize their research investments.

4. Collaboration and partnerships: Global R&D networks facilitate collaboration with local universities, research institutions, and industry partners. These collaborations can enhance the innovation process through shared knowledge, resources, and expertise. For instance, pharmaceutical companies often partner with research institutions in countries known for their advancements in biotechnology, leading to breakthrough innovations.

Factors favoring centralized global R&D

1. Intellectual property protection: Maintaining R&D operations within the home country can offer stronger intellectual property (IP) protection. Countries have varying degrees of IP enforcement, and some regions may pose risks related to IP theft or infringement. For industries heavily reliant on proprietary technologies, such as pharmaceuticals and advanced manufacturing, the security of IP can be a compelling reason to centralize R&D at home.

2. Strategic control and coordination: Centralizing R&D in the home country allows for greater strategic control and coordination. It ensures that the R&D activities are closely aligned with the company's core objectives and culture. This alignment is crucial for maintaining a unified direction and preventing the fragmentation of research efforts. Centralized R&D also simplifies management oversight and resource allocation.

3. Regulatory compliance: Operating within the home country ensures compliance with local regulations and standards. This is particularly important for industries such as pharmaceuticals, medical devices, and aerospace, where regulatory requirements are stringent and vary significantly across regions. Centralized R&D can streamline the process of meeting regulatory standards and facilitate quicker approval cycles.

4. Cultural and communication synergy: R&D activities often require seamless communication and collaboration among multidisciplinary teams. Cultural and language barriers can hinder effective communication and project execution. By keeping R&D close to the corporate headquarters, companies can foster better cultural and communication synergy, enhancing the efficiency and effectiveness of the research process.

Generally, separating research and development among different sites is usually less ideal. McKinsey research found that with each additional development site for a given software product, productivity fell by about 14 percent. The difference between one site and three sites amounts to a 37 percent decline in productivity. Increased coordination costs are the primary reason for the fall in productivity. Heads of R&D, therefore, need to decide wisely if or when and how to split their R&D teams.

Future tools for R&D leaders

In an era of rapid technological advancements, R&D leaders need tools that provide real-time updates on relevant innovations and breakthroughs. An automatic alerting system can continuously monitor scientific publications, patents, market trends, and competitor activities, delivering timely notifications on significant developments. This system ensures that R&D leaders are always informed about the latest technologies and can quickly assess their potential impact on the company's strategic goals. By integrating AI and machine learning, the alerting system can also filter and prioritize information based on relevance and urgency.

Collaboration and access to diverse expertise are crucial for successful R&D. A robust networking system can facilitate connections with internal and external experts, including industry professionals, academic researchers, and cross-functional team members. This system can feature expert directories, forums for knowledge exchange, and platforms for collaborative projects. By leveraging this network, R&D leaders can gather insights, seek advice, and co-develop innovative solutions, enhancing the company's R&D capabilities and fostering a culture of open innovation.

To make informed decisions, R&D leaders require comprehensive visibility into ongoing projects and performance metrics. Interactive dashboards offer real-time data visualization, integrating information from various sources such as project management tools, financial systems, and market analysis platforms. These dashboards can be customized to display key performance indicators, project timelines, resource allocation, and risk assessments. By having an up-to-date overview of their portfolio, heads of R&D can quickly identify issues, track progress, and make data-driven decisions to steer projects effectively.

Managing a diverse range of R&D initiatives requires a systematic approach to evaluating and prioritizing opportunities. An opportunity and project investment portfolio tool can help R&D leaders assess potential projects based on factors such as strategic alignment, potential impact, resource requirements, and risk. This tool can facilitate scenario analysis, allowing leaders to explore different investment strategies and their implications. By maintaining a balanced portfolio, heads of R&D can ensure that resources are allocated to projects with the highest potential for success and strategic value.

Clear and detailed roadmaps are essential for translating strategic goals into actionable plans. These roadmaps outline the steps required to achieve specific objectives, including timelines, milestones, and resource allocation. Roadmaps can be created for various levels of planning, from high-level strategic initiatives to individual project plans. By providing a visual representation of the execution plan, roadmaps help align teams, track progress, and ensure that everyone is working towards the same goals. They also facilitate communication with stakeholders, providing a clear overview of how R&D activities contribute to the company's overall strategy.

Effective knowledge management is critical for R&D success. A collaborative and easy-to-search knowledge system allows teams to document, share, and access information effortlessly. This system can include features like centralized document repositories, searchable databases, and collaboration tools such as wikis and discussion boards. By making knowledge readily available, R&D leaders can ensure that valuable insights and lessons learned are not lost and can be leveraged for future projects. This fosters a culture of continuous learning and innovation, enabling teams to build on previous successes and avoid repeating past mistakes.

To manage the development process efficiently, R&D leaders need structured workflows that guide projects through different phases, from ideation to commercialization. Clear phase-gate workflows define the criteria and decision points for advancing projects, ensuring that only the most viable initiatives proceed to the next phase. These workflows can include defined checkpoints for evaluation, resource allocation, and risk assessment. By implementing phase-gate processes, R&D leaders can improve project management, reduce time-to-market, and increase the likelihood of successful outcomes. This structured approach also facilitates transparency and accountability, enabling better oversight and control of R&D activities.

 Note: This infographic is clickable 

Leading (digital) transformation from R&D

Heads of R&D are increasingly tasked with guiding their departments through digital transformation. As technological experts, they are often expected to lead the digital transformation of the entire company. However, managing a digital transformation differs significantly from overseeing traditional technology projects.

To begin, heads of R&D need to understand the ambition behind the transformation. Identifying this ambition will help them craft a digitalization roadmap. This involves determining the scope of the transformation: Is it aimed at enhancing operational efficiency? Who will be involved, and what is the current state of the company? This process is similar to developing an innovation strategy. While an innovation strategy outlines key investment areas to fulfill the company's ambitions, a digital transformation strategy does the same by pinpointing the right levels and areas of investment for the coming months or years.

Once the ambition is defined, it’s crucial to break it down into concrete focus areas. These prioritized areas are the most likely to help achieve the transformation goals. Focus areas can include current production processes, employee management, or any manual activities that can be digitized for greater efficiency. These focus areas will guide the identification of initiatives to digitalize processes or enhance existing digital processes. It's helpful to prepare a list of possible initiatives under each focus area.

The next step is to develop the digital transformation roadmap by assessing the feasibility, urgency, and need of each initiative.

• Need: Determine if there is a genuine need for the initiative. Assess whether the target audience faces a problem that the business can solve and the strength of their desire for a solution.
• Urgency: Evaluate how quickly the solution needs to be deployed. If addressing the need is critical for the business, the urgency is higher.
• Feasibility: Assess the ability to produce and deliver the solution cost-effectively. Each initiative is resource-constrained, so only those that are realistic to implement should be planned.

Combining these assessments results in a concrete digital transformation roadmap.

With a roadmap in hand, the next step is to involve other stakeholders and secure buy-in for the plans. To gain support, present evidence that convinces upper management to trust and invest in the plans. Ideally, the evaluations of each initiative will provide sufficient evidence. The most persuasive arguments are the potential gains of each initiative, such as cost savings, new earnings, or positive effects on employees, the company's image, or strategic priorities.

Once the plan is approved, project teams need to be allocated, and resources must be secured to bring the project concepts to implementation. It’s crucial to ensure that projects are executed as planned and to involve future users early on to gather feedback. This iterative approach will prepare for a larger rollout with maximum acceptance.

Transforming R&D with an Innovation OS

Now that you understand the evolving priorities of heads of R&D, it’s time to update your processes to meet these new challenges. The ITONICS Innovation Operating System (OS) supports global R&D teams by providing a unified platform to manage their activities. Each team can operate independently, yet all activities are easily accessible in one place. Customizable tools including radars, Kanban boards, roadmaps, and dashboards, along with AI-powered capabilities, equip each team with the resources they need to achieve their goals.

To learn more about putting your innovation toolbox into practice and upgrading your innovation capabilities with the #1 Innovation OS, get in touch with our innovation experts for a free demo.