Project Dilemma  

In the fast-paced world of business, innovation is the engine that drives differentiation and growth. However, many organizations find themselves stuck in a cycle of incremental improvements, favoring “safe” projects that promise near-term returns but do little to push the envelope. These projects often stem from customer requests and aim for near-term returns, effectively maintaining existing market share rather than expanding it. To placate current customers on the product roadmap, many companies do not invest enough in bold product innovations that can further differentiate them from competitors and result in higher ROI. In fact, McKinsey research shows that incremental projects comprise over half the R&D investment in most organizations. This tendency stifles true innovation and leaves companies vulnerable as their space evolves.  

To break free from this cycle, R&D leaders must shift their focus from mere maintenance to groundbreaking projects that can redefine markets. This is where strategic portfolio management tools come into play, offering solutions to manage and optimize R&D investments for transformational growth. 

The Risks of Playing It Safe 

Focusing solely on core business innovation can enable a company to coast—until the industry suddenly outpaces it. Viewing risk as something to be avoided rather than managed can unintentionally be reinforced by how business cases are measured. For instance, transformational projects often face a higher internal-rate-of-return (IRR) hurdle than incremental R&D. Even after factoring in the probability of success, this higher hurdle reduces the chances of securing funding for transformative initiatives, skewing the pipeline towards core-centric projects that do little to impact the business long term.  

As organizations mature, traditional means of organic growth, such as geographic expansion and entry into untapped market segments, diminish. Innovation-driven growth becomes increasingly crucial. To succeed, companies need to develop R&D strategies that treat R&D not as a cost center but as a potential growth engine. 

Crossing the Chasm: Embracing Transformational Innovation 

Geoffrey Moore’s “Crossing the Chasm” offers valuable insights into the challenges of adopting innovative technologies and ideas that still ring true today. According to Moore, there is a significant gap between early adopters and the early majority, often referred to as the “chasm.” Many companies fall into the trap of incrementalism because they fail to cross this chasm, sticking with safe projects that appeal to early adopters but never reaching the broader market. 

Key takeaways from Moore’s work include: 

• The Technology Adoption Life Cycle: Innovators and early adopters are willing to take risks on new ideas, but the early majority requires more proof of value. Incremental projects tend to cater to the early majority’s cautious nature, while transformational projects can help bridge the gap. 
• The Importance of Visionaries: Visionary leaders are crucial in driving transformational innovation. They see the potential beyond current market needs and push for projects that can redefine the industry. 
• Building a Complete Product: To cross the chasm, companies need to develop a complete product that addresses the specific needs and pain points of the early majority. This requires a shift from focusing on core, incremental improvements to bold innovations that offer comprehensive solutions. 

A New Approach to Innovation: Using Strategic Portfolio Management to Manage R&D Investments 

1. Gain a Better Balance of Visionary and Incremental Projects
When organizations see the full picture of all R&D projects in their portfolio, they can start to optimize to allow more visionary projects to gain budget and resources. Organizations can balance their portfolio between incremental and transformational projects. By providing detailed insights and analytics, leaders can make informed decisions about where to allocate resources for maximum impact and ensure the majority stake of projects are truly visionary.

2. Align R&D with Strategic Goals
A complete view can help ensure R&D investments are aligned with the company’s long-term strategic objectives rather than short-term targets. This alignment encourages a focus on projects that drive true differentiation and growth. 

3. Assess Risk Management While Embracing Rewards
Sophisticated risk management tools help organizations to assess and manage the risks associated with transformational projects. By doing so, companies can embrace innovation with a clear understanding of potential challenges and rewards.

4. Enhance Collaboration and Visibility
By creating a single view of all projects, from R&D, to Marketing, to Engineering, strategic portfolio management platforms foster collaboration across different business units and provide visibility into the R&D pipeline for all departments. This transparency ensures that all stakeholders are informed and aligned, facilitating a unified approach to innovation.

5. Real-time Reporting and Analytics
With real-time reporting and analytics, R&D leaders can monitor the progress of projects continuously. This capability ensures that any issues can be addressed promptly, and adjustments can be made to keep projects on track. 

Conclusion 

To truly differentiate in today’s competitive landscape, R&D leaders must look beyond incremental projects and embrace bold, transformational initiatives. By shifting the focus from short-term gains to long-term innovation, organizations can drive significant growth and stay ahead of industry trends. Tools like OnePlan provide the strategic framework and insights needed to optimize R&D investments, manage risks, and align projects with overarching business goals. By leveraging such platforms, companies can transform their R&D departments from cost centers into powerful engines of growth and innovation. As Geoffrey Moore suggests, crossing the chasm requires vision, risk-taking, and a commitment to developing complete products that meet the broader market’s needs. With the right approach and tools, R&D leaders can lead their organizations to sustained success and differentiation.