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April 29, 2014

Go Hybrid: Combine Growth with Cost Efficiencies

Posted by BG Srinivas (View Profile | View All Posts) at 8:02 AM

The business world can't really get over the fact that Apple, a perennial winner of countless innovation awards, spends just about 3 percent of its annual sales on research & development. (The average for consumer electronics firms is 6.5 percent.) Wasn't it supposed to be expensive to be innovative?

The fact uncovered by recent studies - that there's little correlation between R&D spending and a company's financial performance could be a tough pill to swallow across much of the corporate world. That's because a long-held assumption is that in order to grow, an enterprise can perhaps sideline operational concerns like efficiencies but must focus like crazy on developing new products.

But companies are now finding ways to grow all while closely watching the bottom line. Nowhere can you see this new paradigm more profoundly playing out than in the pharmaceutical sector. As recently as one decade ago, giant companies like Astra Zeneca and Bristol Myers Squibb would have guarded their R&D pipelines from each other. They would have made sure that their in-house laboratories had the funding to create the next blockbuster drug. It didn't matter that both companies might be working on a similar product. Today, however, it's not uncommon to see once fierce Big Pharma rivals pooling their resources and sharing scientific research. These enterprises have learned to operate more efficiently by working towards common goals. Co-creation with partners and with the competition is the emerging reality of the day.

We're entering a new era in which organizations place a great deal of importance on becoming hybrid innovators. To be sure, the act of becoming such isn't new. Companies like Procter & Gamble, for instance, have long been astute at assessing just how each and every one of its R&D dollars translates into value for the consumer. If they can't establish a direct and efficient link to the customer, these companies are not shy about pulling back on R&D spending. Simply floating an expensive R&D program under a banner of innovation isn't good enough anymore. Not to shareholders and not to customers.

Think about how the automotive industry has transformed itself in the past few years. This was a sector in which the very use of the term "hybrid" was reserved for a special kind of dual-fuel car. Automakers would create concepts to display at industry shows, but very seldom did they bring those models to market. Today, that very practice of developing innovative automotive concepts is tightly connected to the sales & marketing arm of those companies. If an organization devotes resources to dreaming up the car of tomorrow, then it wants those innovations to efficiently make it to the showroom floor. So, it becomes a saleable reality.

There's something marvelously efficient about using technology in new ways to make this happen. Be it through automation, autonomics or cognitive platforms. Drawing on the best of new world efficiencies to bring new ideas to life. An enterprise begins to show its real innovation chops when it's able to monetize and profit from R&D effort that deliver customer-centric results. And a multifocal approach that factors in efficiency, agility, potential for impact and customer relevance, into the making of the idea, makes for a winning game plan.

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