Drive innovation by unlocking middle management
For many companies across a variety of industries, the rate of product innovation is a major driver of competitiveness and shareholder value. When high levels of R&D spending and new innovation strategies do not turn into product wins, leaders will naturally question how innovation is spawned, cultivated and commercialized. While idea generation and marketing are crucial, one important way to increasing innovation may lie with the R&D process itself. New research on the drug industry from the consultancy Booz & Co. suggests that midlevel managers may hold the key to improving the odds of innovation success.
Despite dramatically rising R&D spending over the past decade, drug companies have little to show for it. Moreover, increased pharma consolidation has saddled large firms with bloated R&D departments that suffer from cumbersome bureaucracies and diseconomies of scale. A variety of process, structure and collaboration strategies have been tried to improve R&D productivity – the ratio of R&D inputs to product outputs. Unfortunately, most of these initiatives have not met expectations. Not surprisingly, one industry leader dubbed the past 10 years the “lost decade.”
Booz studied R&D productivity in 15 leading academic-based pharmaceutical firms. The study concluded that breakthrough innovation and problem solving occurs when individual scientists connect their own subject matter expertise to similar work being undertaken by their peers. One example of this was when Albert Einstein credited the discovery of his theory of relativity to his discussions with his peer, the engineer Michele Besso.
Typically, organizations attempt to generate rich scientific interactions by executive decree, through traditional networking activities or by changes in their management systems, such as new measurement tools or reward schemes. Unfortunately, these strategies often fail to meet expectations, for a variety of reasons. For example, in large companies the R&D leaders who set priorities and control resources are often too far away from the action: the most creative scientists; high potential opportunities in technology adjacencies and; the mechanisms that generate deep and regular collaboration. Furthermore, even the most cutting-edge innovation strategies will suffer if the people implementing and managing them can not (or do not) exert the right kind of leadership. I’ve witnessed these subtle organizational barriers in such diverse industries as consumer goods, software, telecom, aerospace and healthcare.
According to Booze, firms should focus on elevating the performance of middle managers in order to trigger serendipity-based innovation. This key group has the mandate and ability to identify, connect and manage the crucial interactions between scientists, product developers and customers. Business leaders can optimize middle management performance through a variety of measures, such as:
Enable and empower midlevel leaders
- Remove overlapping roles and responsibilities to avoid duplication and political strife while ensuring key activities are being executed;
- Ensure senior, middle and project managers have the appropriate authority and autonomy to avoid decision making paralysis;
Optimize information rights and collaboration
- Given that information fuels innovation efforts, companies must ensure the right people have full access to the necessary data including customer access;
- Empower key midlevel managers as ‘connectors’ to bridge different R&D programs, teams and partners in order to share knowledge and foster collaboration;
Enhance the function
- Require middle managers to possess sufficient domain expertise and management skills so that they can add – not subtract – business value as well maintain sufficient credibility with the R&D teams;
- Create opportunities for middle managers to think and act innovatively themselves by making innovation part of their role and measurement system.
Improving middle management productivity is a tall order for any organization, but especially for those in dynamic, knowledge-intensive sectors. To be successful, senior leaders will need to adopt an innovation approach that combines talent management, organizational design and cultural tweaking.
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