RnD vs Sales - who is responsible for growth

By Bogdan Grebenyuk, Product Manager at Thermevo
on May 24, 2018
The price of my mistake – 500k Euro

These past few decades have been a supercharged climax in the innovation scene with so many explosive ideas and dandy products emerging from the figurative caves and shadows of Research and Development masterminds. The span of innovation extends from mechanically folding doors, something bigger like 3D printers with dual extruders working simultaneously, aluminium in construction or something less heard of in the public – polyamide thermal breaks system, which is a part of a modern aluminium window frame. The sheer amount of self - proclaimed entrepreneurs and R&D specialists is at a peak high, going even further and I would like to review an issue that is quite likely possible in the near future.

The Problem

Imagine that R&D has developed a new aluminium system for the fenestration industry without finding the right balance between the Uf value and the price of the components. The window is both implemented with polyamide thermal breaks and a polyamide thermal barrier and it has a very low chance of becoming a thermally broken window, door or façade, but the cost is enormously high, because R&D or the system architects are struggling for each 0.01 in the Uf value without thinking about the price they will pay for the components inside the system, like EPDM rubber gaskets and polyamide strips.
Entrepreneurs and procurement are not involved in the R&D process and activity or it's too late to negotiate about exclusive components when the system is ready.

The Overview

Entrepreneurship and R&D are completely different components and sides of a card, but neither the first, neither the latter could process without each other. You wouldn't be able to play the ace of spades without the backside of the card hiding it. This is an allegory to entrepreneurship being the face of the card, the ace of spades, the introduction and implementation of new goods and R&D being the backside, which accounts for the quality improvement of existing goods and invention production. I have left out the sector that is responsible for production for now, because it is not relevant at this moment, but it contributes to a stable, non trivial, differentiation of labor to entrepreneurship, production and innovation.

In my model, individuals are facing the choice of being entrepreneurs implementing inventions and researchers who produce them. Economy allocation to individuals of the research block produces too many inventions, thus making them a waste, because there will be a shortage of entrepreneurs who could implement them. The lack of communication between the two sectors destabilize the company's growth, though entrepreneurship functionality is not considered the explicit key to growth.

As entrepreneurship and research compete in the allocation of resources, the relation between research sector and growth effort is hump-shaped. When entrepreneurs appropriate too little from innovation, not much of the available resource is allocated to entrepreneurship and returns to R&D are low because of this lack of entrepreneurial skill. When so, innovation should be promoted by encouraging entrepreneurship rather than research.

The Conclusion

Either there are two, three or more sectors in a company, they all should communicate and cooperate to ensure a steady growth of the company. There is a wide variety of methodologies to help evolve collaboration between cross-functioning teams, which are self organized. I suggest you look into AGILE and/or SCRUM process as it promotes a leadership philosophy and project management that benefits teamwork, accountability, discipline, adaption and inspection to deliver a rapid business and overall cooperation growth.

The scarcity of properly trained R&D workers and /or adequate entrepreneurial talent slows down an economy. Based on my given model with modern aluminium windows, where, for some reason, entrepreneurial activity fell short of its calm state level, the research activity is actually going way too high and above the charts, increasing the rate of variety and improvement quality value, but reducing the rates of aggregate quality improvements and making entrepreneurial processes artificially attractive. The overall statement is that without synergy of separate sectors of the company, the outcome is not beneficial. As I have reviewed, without supervision of procurement, entrepreneurs or the production sector, R&D would "waste" investments to invent or improve products that are not adequate socially or produce a product that is inefficient, although at the start of invention, it had a theoretically positive conclusion. For the well-balance and consistent growth rate the effort of collaboration is mandatory.

Alfred Marshall has stated:

They [i.e. the entrepreneurs] "adventure" or "undertake" its risks [i.e. the risks of production]; they bring together the capital and the labour required for the work; they arrange or "engineer" its general plan, and superintend its minor details. Looking at business men from one point of view we may regard them as a highly skilled industrial grade, from another as middlemen intervening between the manual worker and the consumer.

The main point is that it is hazardous to let one sector roam free in a world where cooperation is needed for steady growth and it does not matter whether you are making building materials or improving parts of aluminium window frame.

Choose well managed companies to evade a mistake that could cost you 500k Euros or even more.

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