R&D budgets are large, with some of the top R&D intensive companies spending $680 billion (£536 billion) in 2016. Yet a recent report by Forbes revealed that most product launches fail at 80% and only 4% get a return on investment. How can companies succeed with R&D projects when the odds are stacked against them?
Research has shown that one surprisingly simple strategy can reduce the failure rate of R&D. What's the secret? Improve collaboration.
Collaboration is key because it enables sharing of information at the early stages of a project. This helps teams communicate which projects to focus on rather than spending time and resources focusing on different objectives.
What makes collaboration so difficult?
A report by IBM identified organisational structures and processes as barriers to collaboration. Scientists enjoy autonomy and individuality in their research. Traditional systems that discourage constructive criticisms make it difficult for scientists working on different therapies to communicate with each other which makes the problem worse. Unclear and misunderstood goals across the organisations creates an individualistic mentality which overlooks the importance of collaboration.
Furthermore, the report revealed that the segmented structure of the discovery process doesn’t encourage scientists to look beyond their own projects and deters them from focusing on the goals of R&D as a whole. The lengthy managerial processes for resource allocation makes it difficult to arrange resources across different areas of R&D. As a result, fewer ideas reach management which creates an individualistic mentality and discourages collaboration.
What are the benefits of R&D collaboration?
Improved innovation and efficiency are a product of R&D collaboration
A study by Hoegl investigated the collaboration between R&D teams in the European automotive industry. He hypothesised that the level of inter-team collaboration in projects influences the team’s ability to work on time and within budget.
The results revealed that there was a positive correlation between inter-team coordination, project commitment and team work quality. Therefore, if businesses create processes to improve collaboration within R&D, they are more likely to achieve high quality products within the set time frame because of better communication between R&D.
R&D collaboration is also important for better innovation as it reduces product development lifecycle by allowing higher emphasis on quality of products to ensure higher revenue. A report by IBM Institute of Business Value reveals that internal collaboration is the key to improved innovation. The report further explains that, internal collaborations generate quantifiable business results such as reduced discovery and development time, lower costs and increased product revenue.
R&D collaboration creates an environment of well-informed employees
Lack of collaboration inevitably results in less communication which is an issue that affects R&D teams that are geographically separated. Many large organisations have multiple R&D centres scattered across the globe which can make it difficult to share information and prioritise.
Studies have revealed that those companies that have internal linkages across the different departments have improved integration and knowledge absorption and therefore stronger links in an organisation. Furthermore, collaboration of inventors increases the absorption of external knowledge at dispersed locations, facilitates the transfer of knowledge internally and improves innovation.
Other research has revealed that collaborating at the early stages of research enables sharing of knowledge and creates an environment of well-informed employees. This sharing of knowledge allows a targeted approach and increases the chances of breakthrough discovery to drive value for the company.
This is important for larger companies where the research function is in a different location to development. Lack of communication and long distance could disrupt the flow of a project, and reduce the frequency of knowledge sharing between employees. This could lead to important conversations about projects and R&D goals, getting less priority.
Collaboration gaps lead to longer R&D processes and higher costs
It’s important for R&D to collaborate because when there is a lack of communication between them, it can lead to longer R&D cycles and higher costs. A study by Paul et al revealed that R&D in the pharmaceuticals industry has a longer cycle due to collaboration gaps and other factors such as regulatory processes which leads to additional costs. In this industry, drug discovery accounts for 33% of total cost per New Molecular Entity (NME), clinical development is 63% and submission to launch costs 5% of overall expenditure per NME. And because R&D processes are longer, these costs add up to high capitalised costs of $1.778 billion (£1.40 billion).
Collaboration can help R&D reduce costs at the early stages of development by reducing the R&D lifecycle. As this study reveals, most of the R&D budget is spent on discovery and clinical development. By collaborating more at this stage, R&D can effectively communicate R&D objectives and spend less time and money focusing on areas that aren’t profitable. Ultimately by spending time on targeted projects, R&D can ensure better quality products with a higher return on investment.