The R&D Balancing Act: Exploit or Explore?
Newswise — Research and Development:for many companies, it’s the creative core, the birthplace of innovation, but for organizations who know how to ride the wave, it may also be the budget to cut.
In 2015, the Harvard Business Review highlighted research by Tim Swift, Ph.D., associate professor of management at Saint Joseph’s University in Philadelphia, Pennsylvania and colleagues, showing that under the right circumstances, drastic cuts in R&D spending can actually yield more innovation.
“The reason for this unique finding is that high-performing, innovative firms engage in ‘sequential ambidexterity,’” says Swift, meaning that the companies cycle between exploiting existing, commercially valuable innovations and exploring new ideas to remain competitive. The research found that firms that successfully practice this balance actually produce extensive exploitative innovation right after a big cut in R&D.
A forthcoming article in the Strategic Management Journal by Swift reveals that this is not the whole story, however. While it’s true that high-performing firms generate superior performance by cycling between the two phases over time, Swift’s new research shows that this practice is quite hazardous.
“The skills required to pursue exploitation are opposed to those needed to pursue exploration,” says Swift. “Firms that move from one form of innovation to the other put so much stress on the organization that the likelihood of organizational failure rises significantly.”
So, what can companies do to maximize innovation and profit while staying afloat in these dangerous waters?
Swift identifies qualities and strategies of firms most able to survive the leap including:• Investment in R&D-based learning to better determine when it’s time to explore• Ability to incorporate new discoveries to produce new forms of commercially valuable innovation• Resistance to make R&D spending decisions solely to improve short-term earnings• Understanding of the market and willingness to move through phases of innovation as the market demands, regardless of short-term earnings performance
In addition to a doctorate in strategic management, Swift has 14 years of experience in senior management positions in the telecommunications and high-tech industries. His research focus is on strategic management, and technology and innovation management.
Swift can be reached for comment at [email protected] or by contacting University Communications at 610-660-1222.
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