Stop Thinking of R&D as a Cost Center

For years, in almost every Apple announcement, we get to glimpse the greatness possible with creative and innovative R&D teams. From performance improvements to glass cutting techniques to reduce glare. It is evident that these leaps cannot always be known ahead of time and are only possible thanks to innovative work.

If you were to survey tech companies, you would find it hard to find one that claims R&D isn’t one of the significant assets and advantages in their business. However, looking closely, you can see that R&D is often treated, at least partially, as a cost center rather than an innovating force.

How cost centered thinking is manifest

Working with dozens of teams has taught me that there are R&D centers, and then there are R&D centers. While it may have started differently, as the business grows, there’s a tendency to pigeonhole development to comply with whatever Product, Sales, or Marketing deem needed this quarter.

Budgets are decided according to what the CTO might say is required to achieve those goals, and that’s it. While the development of those needs might introduce innovation and novelty to the product, it only happens because of dictations from above.

With the organization now sized to fit precisely the outside requirements, room for creativity, innovation, and serendipity are getting smaller and smaller. With each passing quarter the culture adapts to this mode and before you know it you’ve got an in-sourcing development branch.

This mode of operation ultimately results in an R&D operation that’s busy catching up with demands and being lead, instead of pushing forward on its own, being a trailblazer. I’ve seen companies being “80% done” for literally years, always postponing required innovation and changes to their tech that would have made the first quest a stroll in the park.

The Innovation Center

We can all sensibly agree that it is essential for every business to supply R&D with requirements and direction from the customer-facing parts of the company. The trap lies in making those the sole directives of the team.

As a CTO or VP in charge of R&D, it is up to you to ensure ample budget and time to allow your team to be autonomous and advance the business as well. Apple, mentioned above, is the most well-known example, but I’ve seen this happen in many startups and smaller organizations.

An example would be a startup revamping their request pipeline architectures and vastly improving performance suddenly meant that new business models and offerings were unlocked. Alternatively, the financial institution where a bright mind in R&D decided to spend a couple of days making a datastore available across the organization, effectively breaking up silos and enabling anyone to assess quickly the impact of what they were working on at any moment. And then there’s also the medical startup with a determined VP Engineering that insisted on using a specific solution that made things a bit more expensive in the short term because he saw ahead two quarters and was able to enter a whole new platform in a matter of weeks.

While we can go on and on, the take away seems clear: enable a culture of ownership and responsibility, where anyone in the R&D organization can come up with their ideas for improvement and set aside the needed slack time and budgets to allow for some of these experiments. Like angel investing inside your organization, doing so thoughtfully can bring in significant benefits and disrupt your business.