Why R&D Is Not Business Model Innovation

Added on by Kavi Guppta.

In this post we'll quickly explain how traditional Research & Development (R&D) is limited in its ability to understand if new business ideas will result in value to the customer, and value to the company. We've also included some links to key posts that take a deeper dive into this topic.

Our readers and users often ask us if R&D is the right place for business model innovation. We believe that traditional R&D doesn't do nearly enough to help companies discover future growth engines. 

While traditional R&D has uncovered successful products and services for some companies, the process by which organizations reduce risk and uncertainty around new ideas and explore potential value propositions and business models is still not systematic enough. 

Large companies often assume that business innovation means allocating a large budget to R&D. Much of that money goes into understanding if the company can solve a tech problem: can we build the technology we have envisioned? Will it be costly or difficult to produce? 

Traditional R&D rarely tests the market enough to know if what the company hopes to build will be valuable to customers. Will there be customer acceptance for the problem being solved? Can we build a value proposition and business model that's scalable? Can we prove it? 

It's important to step outside of that bubble. The solution you are excited about may solve a challenging problem, but you'll want to find out whether or not anyone cares about what you are building. 

Read more in Can We Do It vs Should We Do It.

Kodak was a pretty innovative company, but its emphasis on product innovation and R&D did not stop the company from going bankrupt. Despite inventing the core technology that's used in digital cameras today, Kodak's technology innovation wasn't enough for the company to figure out a business model that could be a central piece to its future growth strategy. 

The habit of focusing entirely on a technical problem through traditional R&D is what large companies believe will be the remedy for disruption. The reality is that companies have to focus on an ambidextrous culture. They have to improve the existing business model, while also inventing new ones. This invention culture lives alongside the improve culture, and will seriously focus on figuring out the right value propositions and business models. 

Read more in Why Your Company Might Be About To Have A Kodak Moment.

Companies can research market acceptance around a new business idea without building anything at all. Customer interviews can create a dialogue with your audience and uncover what matters to them. Cheap and fast experiments with customers can help teams gather the jobs, pains, and gains a customer might feel or desire through hypothetical products that may not even exist.

Medtronic, one of the world's largest medical technology development companies, was trained on how to use our tools. The team at Medtronic then hosted customer-collaboration workshops to understand what types of jobs, pains, and gains mattered to their customers by using the Value Proposition Canvas. This in turn helped Medtronic to focus on areas of the business that would create real value, and move away from assuming what customers would want. 

These exercises within teams and with customers allowed Medtronic to learn what to focus on without having a physical product to show.

Read more in Strategyzer & Medtronic: Redefining Customer-centric Innovation.


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