Predictions for R&D

Predicting the future in an ambiguous world is inherently risky. My track record in 2011 was mixed. The primary prediction was that companies would loosen up spending in R&D while constraining growth in headcount and other fixed costs. That was spot on with what actually happened in most industries. What I got wrong was the response to that squeeze. My assumption was that progressive executives would explore alternative product development models and new approaches to utilizing external expertise. While I am often too optimistic about how fast these things will happen, I also believe that people were finally expecting things to get back to normal, so they were not as motivated to explore new and radical solutions.

As the economic environment continues in an extended period of uncertainty, I believe that we will see accelerated adoption of innovative R&D models. In 2012, I expect to see even greater spending in R&D and product development in those industries where the underlying business is growing moderately (seems like just about everywhere outside of housing and construction). If hiring and headcount growth continue to be constrained, then I predict that we will see more:

  • Corporate Venture Investing – Working and investing outside the company to identify new ideas rather than remaining exclusively focused inside the four walls.
  • Private Expert Networks – Expanding available brainpower in product development by accessing external expertise with low fixed costs that are discretionary in nature.
  • Reverse Innovation– Developing new products in and for emerging markets at value price points that are also attractive in the developed world.
  • Social Product Innovation – Taking advantage of the power of social computing platforms to transform the way products are developed by increasing collaboration both inside and outside of company R&D departments.

If these tactics are broadly adopted, my predictions for 2011 will finally have come true a little later than I originally anticipated.