R&D and marketing typically come at product development from different angles, and R&D’s “things” approach is often at odds with marketing’s “people” focus. In companies where R&D is very powerful, marketers can sometimes be heard complaining about products that are hard to understand and use. Where marketing is more in charge, R&D’s complaints tend to be about a lack of imagination, of too many incremental innovations.
So when it comes to new-product development, which function should have greater influence with the senior management team, R&D or marketing?
Researchers have strong feelings about this. First, a comment from Ruth Maria Stock, a professor of marking, innovation, and HR at Technische Universität Darmstadt in Germany, and PhD candidate Ines Reiferscheid, also at Technische Universität Darmstadt. Their recent research on this subject got me thinking about it.
This is a crucial dilemma for many companies. In the ideal firm, R&D and marketing inform and counterbalance each other, with R&D providing brilliant technical solutions and marketers injecting equally brilliant creative ideas and customer insights into the new-product-development process. It’s sort of like the human brain—the left side and the right side are supposed to work together in perfect harmony.
But that doesn’t usually happen. Just as some people seem to be more left-brained and others more right-brained, certain companies favor the R&D lobe, some the marketing lobe of the corporate brain. And sometimes the power shifts back and forth.
Our research shows that especially in highly competitive industries, executives should resist making R&D too dominant in order to dazzle customers with a steady stream of new products and the latest technologies. Studies have shown that offering cutting-edge products isn’t enough to increase a firm’s performance. You need marketing’s input.
Microsoft discovered that after it eliminated the “Start” button in Windows 8. Consumers found the new technology so much more cumbersome that Microsoft restored the button in Windows 8.1.
Every company makes missteps like these. But our research shows that the problem of R&D dominance can sometimes go even deeper. Overly powerful and visible R&D units can have a chilling effect on marketers, marginalizing their inputs and demotivating them. The consequence: Firms’ newly developed products provide less value for their customers, and sales drop.
Our advice for senior corporate leaders: Beware of giving R&D too much power. Allow marketing to contribute—and contribute visibly—to your firm’s newly developed products.
Next, a very different point of view from Ram Mudambi, a professor and the Perelman Senior Research Fellow in Strategic Management at the Fox School of Business of Temple University, and Tim Swift, an associate professor in management at St. Joseph’s University. They’ve studied the role of strategic innovation in corporate performance.
The answer to the question depends on where a company is in its cycle of exploitation and exploration. When a company’s products are fresh to the marketplace, a dominant marketing department can help the company exploit them, boosting sales and building up the brand. But over the long term, marketing doesn’t drive company performance—breakthrough innovation does. If your existing products are mature, the returns on them and on incremental innovations to those products will inevitably fall and margins will shrink, no matter how good your marketing. At some point, you’re going to need radical innovation to get your company back in the game.
Our research shows that certain companies have a knack for knowing when to stop exploiting their existing products and start refocusing on exploring for new ideas, either through ramped-up R&D or a quest for entirely new business models. Those that make this switch increase their performance after the transition.
But because searching for new ideas requires a significant investment, and thus a diversion of resources from lucrative short-term revenue sources, corporate leaders are often thwarted by powerful forces in their attempts to shift into exploration mode. Marketing, even in forward-looking companies, is often one of those powerful forces.
That’s because marketing is all about reinforcing and extending the existing brand. No disrespect to marketers, but they’re unable to imagine, much less measure, consumer responses to breakthrough products and business models that don’t yet exist. If marketing continues to dominate even when products are mature, you’ll get relentless pressure for incremental innovations that are ultimately pointless, and too little support for the hunt for radical ideas.
Companies often need what we call “boundary spanners” to bridge the gap between R&D and the managers who are focused on short-term returns.
A number of corporate leaders excel at overcoming corporate inertia and adopting radical ideas. John Chambers is one. In his early years as CEO of Cisco, the company dominated the market for low-cost internet routers, but once that business became commoditized, it switched to home network solutions. That’s a commodity business now too, and—surprise—Cisco isn’t in it anymore. The company is now into multimedia web conferencing, which represents at least its third major episode of exploration. In fact, if you look at the company’s R&D spending, you can see three distinct peaks, each apparently corresponding to a period of intense exploration. Cisco also appears to be very good at acquiring small companies that are developing radical ideas: It has acquired about one company a month over the past decade. Integrating acquisitions is one of its core competencies.
Sometimes Cisco has been punished on Wall Street for poor earnings performance. Indeed, it’s probably not a coincidence that companies with good track records of making timely transitions from exploitation to exploration tend not to have stellar stock performance. They’re not the media darlings.
But in the long run, they develop new visions for the future—a role that is far beyond the abilities of marketing. These new visions lead to innovations that support superior performance. Such firms are still churning out profits long after their media-darling competitors are gone.Go to Source