Why more R&D projects do not automatically lead to more innovation

For many R&D Managers and Innovation Leads, a full innovation pipeline appears positive at first glance. There are ideas, commercial opportunities and technical possibilities. Various departments are identifying improvements to existing products, whilst at the same time plans for new propositions are taking shape.

Yet it is precisely this volume that can slow down progress. When too many projects demand attention at the same time, the budget, specialist knowledge and engineering capacity are spread across an ever-increasing number of initiatives. Teams are busy, but the most important projects do not automatically make faster progress.

The challenge, therefore, is not simply to come up with enough good ideas. Equally important is the ability to determine which projects deserve attention now, which can be launched later, and which should be discontinued. Prioritisation is not merely an administrative step in the innovation process. It is a strategic decision about where an organisation should allocate its scarce time, knowledge and investment capacity.

A broad innovation strategy provides little direction

The Boston Consulting Group surveyed 1,003 senior innovation professionals worldwide on the biggest challenges facing innovation, R&D and product development. An unclear or overly broad strategy was cited by 52 per cent as one of the top three challenges. This was followed by rising capital costs at 47 per cent and limited availability of talent at 44 per cent. A risk-averse culture, innovation in isolated silos and poor governance also featured high on the list.

These themes reinforce one another. When the strategy remains broad, almost every project is relevant in some way. Cost savings tie in with efficiency, a new feature with customer value, and a new platform with future growth. However, without more focused choices, there is no common framework for determining which initiative carries the most weight.

This can quickly turn a roadmap into a wish list. Commercial opportunities, customer requests, technical improvements and long-term innovation are all planned side by side, whilst the same engineers, test facilities and development budgets are needed to implement them.

A workable innovation strategy must therefore be specific enough to provide direction. Which customer problems does the organisation wish to solve? In which markets does it wish to stand out? Which technologies and product platforms are essential to achieving this? And which initiatives do not contribute sufficiently to these choices?

When everything is a priority, capacity becomes fragmented

The actual capacity of an R&D organisation is not determined solely by the number of staff available. Specific skills, testing resources, suppliers, decision-making and interdependencies also determine how many projects can be taken forward at the same time.

In particular, a shortage of specialists often poses a bottleneck. The same engineer is needed for several different concepts. A test rig is used by different teams. An expert in materials, electronics or regulatory matters moves back and forth between projects. On paper, all projects are fully staffed, but in practice everyone has to switch roles constantly.

As a result, the effective rate of development slows down. Decisions are left pending, work is interrupted more frequently, and problems are identified later. Furthermore, there is a risk that projects will all make partial progress, whilst none of them receives sufficient focus to reach a decisive milestone.

McKinsey explains that leading organisations therefore not only review their portfolio periodically, but also regularly compare projects and explicitly align the available staff and resources with the chosen priorities. In one case study cited, a manufacturer of speciality chemicals reduced the number of development projects by 40 per cent. This enabled resources to be focused more effectively on the remaining priorities.

Prioritisation is therefore not just about the order on a list. A project is only truly a priority when it is given access to the capacity needed to actually complete the next phase.

An appealing idea does not necessarily make for a strong development project

In the early stages of innovation, revenues, costs and lead times are, by definition, uncertain. As a result, it is tempting to assess projects primarily on the basis of their commercial potential or strategic appeal. However, a roadmap that appears commercially promising may be technically unrealistic.

For example, a concept may depend on a material that has not yet been sufficiently validated. The desired product characteristics may result in high tooling costs or complex assembly. Electronics, mechanics and software can influence one another in ways that only become apparent in an integrated prototype. Certification, supplier capacity and scalability can also significantly affect feasibility.

That is why prioritisation should not merely address the question of how much value a project can deliver. The path towards a reliable and viable product must also be assessed. A smaller project with a clear technical path can create more value than a larger market idea whose key assumptions have not yet been examined.

A fair comparison can only be made when every project is assessed from the same perspectives:

1. Is it in line with the organisation’s strategic direction?
2. Does it solve a relevant and demonstrable customer problem?
3. Is it technically feasible using the technology that is currently available or accessible?
4. Can the product be manufactured reliably and at a reasonable cost?
5. What specialist knowledge, resources and capacity are required?
6. Which uncertainties need to be resolved first?
7. What value does it deliver, and within what timeframe?
8. How does it contribute to the balance of the overall portfolio?

Not every answer needs to be fully known from the outset. However, it must be clear which assumptions are still uncertain and how they can be tested efficiently.

Early validation makes it easier to compare priorities

Many portfolios compare projects that, on paper, are at the same stage, but which, in substance, have very different levels of evidence. One concept is based on customer research and a working prototype. The other consists mainly of an attractive business case and a broad technical assumption.

When these projects are assessed in the same way, the choice may appear objective, but in reality different levels of uncertainty are being compared. An accurate turnover forecast does not in itself make a technically unproven concept predictable.

Early validation helps to highlight that difference. A feasibility study, proof of principle, materials test, architectural study or initial manufacturability analysis may be sufficient to confirm or refute a key assumption. The aim at this stage is not to fully develop the product. The aim is to gather better information for the next decision with a limited investment.

This shifts the focus from a discussion based on conviction to a process based on evidence. Projects with strong results can be accelerated in a targeted manner. Projects with manageable risks are given a new research question. Initiatives whose core objective proves unfeasible can be halted before they tie up capacity for the long term.

Exclusion criteria are just as important as selection criteria

Organisations often devote a great deal of attention to launching projects, but considerably less to bringing them to a close. A project is approved on the basis of an expected market, an internal sponsor and an initial budget. After that, it becomes increasingly difficult to stop it.

This is partly because teams have already invested time, expertise and reputation in the initiative. New information is then used to defend the existing course of action, even though the original assumptions may no longer hold true. Furthermore, influential clients may make exceptions for projects in which they are personally deeply involved.

McKinsey describes how portfolios can consequently develop a long tail of initiatives with low expected returns. These projects take capacity away from more promising initiatives. In a real-life example, one manufacturer even appointed an independent manager to systematically document all ongoing projects and recurring causes of inefficiency, failure and limited market opportunities.

Appropriate criteria for halting the project are therefore established in advance. What technical performance must have been demonstrated by a certain point? Which customer requirement must be confirmed? What maximum cost, investment or lead time is acceptable? And what changes in the market, regulations or strategy would require a reassessment?

In this context, stopping a project does not automatically mean that it has failed. If an early test shows that an idea is not feasible or does not offer sufficient value, the project has, in fact, provided important information at a relatively low cost. Failure only occurs when flawed assumptions are left unchallenged for too long and continue to tie up resources on a structural basis.

Not every good project needs to start right away

A careful assessment of the portfolio offers more options than simply carrying on or stopping. An initiative may be valuable, but may not fit with current capacity, timing or strategic focus. In that case, it is better to postpone it deliberately than to get the project off to a half-hearted start.

This distinction is important because an overloaded pipeline often stems from a desire not to miss out on opportunities. By opening every attractive initiative at the outset, it remains formally on the books. At the same time, expectations are raised amongst management, commercial teams and developers, whilst the necessary resources are lacking.

A credible roadmap therefore sets out which projects are being actively implemented, which require further validation first, which are being deliberately put on hold, and which have been discontinued. Projects that have been postponed should also be accompanied by a clear reason for their reconsideration, such as the release of capacity, the achievement of a revenue target, or the availability of a new technology.

This ensures that an opportunity is retained without it immediately affecting implementation.

A bigger budget does not automatically solve a lack of focus

When projects fall behind schedule, additional funding or extra capacity may seem like a logical solution. This may be necessary, but only once it is clear which projects are truly a priority. Otherwise, the same fragmentation will simply continue on a larger scale.

A recent McKinsey study of 1,017 senior managers shows that almost half of them state that only a quarter or fewer of innovation projects reach the market on time. At the same time, by critically reviewing their portfolios, companies were able to free up 12 to 20 per cent of their innovation or R&D budget for better-performing projects.

So the greatest gains do not always come from investing more. Often, scope is created first by reassessing existing investments. Additional capacity can then be deployed in a targeted manner to help promising projects move through critical development phases more quickly.

External expertise can add value in two ways. Firstly, specialist knowledge can help to investigate technical uncertainties more quickly. Secondly, flexible development capacity can prevent a major project from being delayed because internal experts are spread too thinly across too many tasks. An external partner does not replace the portfolio strategy, but it can ensure that decisions are based on technical facts at an earlier stage and that selected projects actually make progress.

Focus calls for better decisions, not less ambition

A smaller number of active projects does not mean that an organisation is any less innovative. On the contrary. By concentrating resources, validating assumptions at an early stage and reassessing projects in good time, more scope is created for the initiatives that can really make a difference.

In this context, commercial value, technical feasibility and manufacturing readiness must be linked from the outset. A project deserves priority not simply because the idea is appealing, but because there is a credible path from customer need to a working, manufacturable and scalable product.

PEZY helps organisations to map out that path at an early stage. By bringing together product design, engineering, plastics expertise, prototyping and industrialisation, critical assumptions can be examined at an earlier stage. This creates a more solid foundation for deciding whether to accelerate, adjust, postpone or halt a project.

The key question is therefore not how many innovation projects an organisation can launch. The more important question is which projects offer sufficient value and evidence to warrant the available staff, resources and attention.