When things go wrong: The smart organisation

Consultants and researchers David and Jim Matheson identify research and development (R&D) as a key area of decision making for business success.  R&D decisions affect any areas where innovation (rather than improvement) is required.  This principally means creating and marketing new products and services, but also includes designing the new processes and systems that will make them possible.  'Processes' could mean manufacturing processes, but it could also refer to strategically critical aspects of the business, such as its decision making processes.

Essentially, R&D is about ensuring that the business moves forward.  As we have seen, potential strategic risk downsides include

• failing to innovate,
• failing to achieve renewal, or
• putting processes in place that fail to allow for the right kind of development.

The Mathesons suggest three levels of 'smart' R&D:

Technology strategy:

• How will you support existing products, generate new ones and develop radically new ones?
• Will technology be developed or supplied from inside or outside the business?
• What skills are required?

Portfolio strategy:

• Which R&D projects will be funded?
• Which will not?
• How will resources be allocated so that they provide the best R&D value?
• How will you balance short-term business needs with long-term renewal?

Project strategy:

• How will you ensure that each individual project delivers maximum value?
• How could commercial concerns (as well as technical, budget and timescale issues) be brought in?

Nine principles of smart R&D

They also propose nine principles of smart R&D, or the attributes that businesses need in order to be capable of making strategic decisions:

• Value creation culture:  the business has a purpose that everyone understands; this purpose is the test of whether strategies and actions will deliver value for the business and its customers.
• Creating alternatives:  for each decision, there must be a good set of competing alternatives; these must be created if they don't exist or aren't apparent, and carefully evaluated
• Continual learning:  change is certain, and everyone must learn from new situations and information rather than feeling threatened by it.
• Embracing uncertainty:  since there are no facts about the future, everyone must learn to live with and recognize uncertainty, measure and evaluate it, and understand what they are doing.
• Outside-in strategic perspective:  rather than thinking about where the business is and then where it should be going (inside-out), consider the big picture first and work back to the business (outside-in)
• Systems thinking:  use tools and techniques (such as the decision tree) to simplify the complexities involved in strategic decisions as far as possible and enable insights (but not so far that objectivity is lost)
• Open information flow:  any type of information may be important, so information needs to flow, unrestricted, to all parts fo the business, the habit of hoarding information as a source of power must be driven out.
• Alignment and empowerment:  rather than micro-managing every action through 'command and control' systems, aim to involve people in decision making through participation, while building alignment through common understanding of goals
• Disciplined decision making:  build processes that recognise the need for strategic decisions to be made before it is too late; then apply systematic, disciplined processes to making those decisions.

The Smart Organisation: by David and Jim Matheson