The Evolution of Corporate Innovation and R&D | In Practise

The Evolution of Corporate Innovation and R&D

Former Executive Director Innovation at Diversey

Learning outcomes

  • The evolution of innovation and R&D in corporations
  • How large corporations structure innovation teams
  • The relationship between innovation, R&D and sales and marketing
  • Processes for innovation within corporations
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Executive Bio

Robert-Jan Ulhorn

Former Executive Director Innovation at Diversey

Robert-Jan Ulhorn is a chemical engineer by training and has 28 years working in R&D and Innovation teams within large corporations across different geographies. He started his career at Unilever as a scientist in the R&D team and worked there for over 11 years across various roles before becoming the Innovation Leader in Kitchen Hygiene. Robert followed Diversey, a Unilever cleaning solutions business, as it was sold to J&J where he was promoted to lead Innovation. Sealed Air purchased Diversey from J&J in 2011 where Robert became Executive Director in Innovation Management where he was responsible for all new products and services in the Diversey Care unit of Sealed Air. Robert finished his career with Diversey on the Executive Team and now runs his own business consulting corporations on innovation. Read more

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I think a good place to start would be if you could lay out how the R&D function has evolved over the last decade?

It’s very interesting because when I started in R&D, which is now about 30 or so years ago, it was really a function that focussed on technology development. It had some connections with departments like marketing, a little with sales, but mainly marketing. They would hand a subject to R&D and then R&D would come up with the technology that would meet the subject criteria. At the time, it was often described as a sort of ivory tower because they were a bunch of scientists doing something very mysterious to the rest of the world. Especially over the past decade, what we’ve been seeing is people realising that technology is more of an enabler than a goal in and of itself. Therefore, R&D has become a prominent part of the whole cycle of new product design, new service development, whatever you’re doing. So that’s clearly a change. It’s become much more interactive, become much more cross-functional. There’s a lot of discussion between the various departments. It also means that the technical people have learned to deal with the sales and marketing people. I think that for a lot of technical people that’s sometimes quite difficult because marketing people, sales people, think a little bit differently to technical people. In a nutshell, that’s where all the changes have been.

The other thing that’s different is that in the early days, you would sort of go away as a technical functional, as an R&D function. Although there was always a little bit of pressure, you had time to do things and people would wait until you were ready and then they would test what you came up with. Over the course of time, I think a lot of people have realised that that’s probably not the best way to do things because really the first technical concepts are almost never right.

The other thing that we’ve seen is that there is a much shorter cycle of doing something and then testing it in the market. More and more, you also see that people are actually involving customers, consumers, in their development efforts to get very early feedback. There’s the whole agile thing, which actually started in IT, and the whole lean thinking thing that came into R&D as a sort of practise as well. Some are doing this more than others. There have been companies that have taken this to the extreme: instead of doing internal research and internal developments, they’ve sort of outsourced. That’s a trend that has been going on for the past 15 years or so, with various degrees of success. So those are the big changes: much more interaction between the functions in a company, like marketing, sales and even supply chain; much shorter cycles of development with customer and consumer input.

Is this even in the larger companies, the large FMCG businesses, Johnson and Johnson, Unilever for example? Are you still seeing these changes at these large organisations or is it mostly smaller, digital businesses that no doubt use agile and are close to customers?

The big organisations are trying, some more than others. I mentioned open innovation in my space, which is sort of cleaning and hygiene. Procter and Gamble actually was one of the first companies to really start using open innovation. They would post challenges on the internet and invite everybody to come up with a solution to the challenge. And then, there would be a promising solution and they would work with that person, company, whoever it was that came with that solution to develop it further. So they really were very open. Unilever did it a little bit less, although they were also searching for partners, but not to the extent Procter and Gamble did. What you see in those large companies is that it’s slow. Changes are slow in large companies because there are so many stakeholders there that making a decision is often not very fast. There’s a lot of things to think about when you open up about your innovations, because you’re also telling competition what you’re working on. So there’s a lot of anxiety about opening up in that sense. So it was slow. The large corporations experienced that and they also realised that the small companies were fast. A lot of the smaller companies, and you still see this nowadays, were developing rapidly, often to very large sizes. Facebook is the most famous example, of course. But a lot of the companies became big quite fast because they were agile and lean. Over the last 5 to 10 years, what you see is that next to opening up and trying to get people from outside, the larger companies are also trying to have these small companies but inside of their own organisations: set up a venture capital fund for your own people under the umbrella of the large company. You get the possibility to do a sort of startup. That way you get some of the agility of small companies in the large organisations.

How effective do you think that type of structure is for these large organisations?

I think it's a bit early to tell. What you will see is that there is still some risk averse behaviour in those very large organisations which makes a lot of sense because everybody is competing for the investment money that is available. I think that that is still hindering these sorts of venture funds. But there are examples where it has been very successful. I think on a large scale it still has to prove itself, let me put it that way.

Do you still see some of the major pressures internally at the large businesses? I think they classify it as a sustaining technology innovation versus disruptive innovation. The management at large companies don't really want to spend money on technology that can disrupt their core business even if their smaller businesses are innovating and gaining traction. Do you still see pressures in these large businesses that drive certain types of innovation?

Yes, I do. I think almost every larger organisation thinks they should innovate. They mostly think of these breakthrough innovations, sort of Apple iPad type innovations. I think that's what most managers think of when they are thinking of innovation. Then they find that that doesn't actually happen very often. Then there is some disappointment when two years later they still don't have a breakthrough innovation. There is a lot of pressure on departments that do innovation to deliver more and more. The general opinion is that you must innovate as a company otherwise you will fall behind and you will become obsolete at some point in time. There is also the belief that technology and also business is moving faster and faster, so what is okay today might be obsolete tomorrow. For a lot of managers, that is reason to invest in innovation. In general, I think there is a difference between markets and the pace of innovation that you need. In smartphones, of course, the pace of innovation is fast. Especially at the beginning, it was very fast. But, if you're in detergents, the pace of innovation is far slower. Although you see that companies tend to generalise and say, “We need innovation. We need a breakthrough,” they often overestimate the impact of innovation in their market segment. So they should really look at the impact of innovation in their market segment. For example, in the professional hygiene segment that I have been working in for a number of years, more than 70% of people were happy with the solutions that they had. They didn't have a lot of issues so they won't jump up and down for new innovations. Whilst, if you are in smartphones for example, in a year’s time, the public will want some new type of gadget. The pace of innovation in professional hygiene should be very different from the pace of innovation in smartphones.

Just taking a step back then, looking at the structure and the responsibilities of the R&D function, back in your time, what were your key responsibilities when you were running one of these functions?

The key responsibilities in leading an innovation department lie in setting up the innovation portfolio together with marketing, so making sure you were working on the right projects. The second was to deliver the project on time and within budget, so just the project management aspect of it. And then, because of that, the third responsibility was to bring in a certain amount of money for the company: we had financial targets as well. Those were the main responsibilities.

Is that within the R&D function for or is that the R&D function itself?

That depends very much on where you are. There are companies that actually put the innovation department directly underneath the CEO of the company, so they don't put it in a function. There are companies that put it in marketing. There are companies that put it in R&D. Those are basically the three choices that you have. It can work. Though if you put it under R&D, then marketing - because they have a big say in what to do as well, they’re an important part of innovating - marketing will say, “We will want to have some management capabilities as well.” If you put it in marketing, then R&D will say the same thing as well. That's why at a certain point they separated it from a function like R&D and marketing and put it in a project management office, normally directly under the CEO. In my view, that's the best model.

You will have project managers that run the innovation project. By the way, running an innovation project is different to running a building project for example because there are much higher uncertainties. And you have to plan for those uncertainties somehow. So that’s a job in itself. You supplement the project manager with members from R&D, from marketing, from sales, from supply chain, from legal, from finance. I think all companies do it like this today, but you put all of the functions in there to make sure that everything is covered and everybody knows what’s happening in that project. What you see is that you end up getting a lot of technical people together and some technical people become managers in this structure of innovation and that that is something you’ve not been prepared for in university or whatever you’ve been doing before.

So you actually have a mix of people with different expertise (technical, marketing, legal, everything) in this innovation team, which then works directly with marketing, R&D or directly beneath the CEO?

Yes, so you have a project manager that has a team of those people that come out of these functions. The project manager normally reports to a project management office manager (or innovation manager or director, whatever you want to call it) who is often directly reporting to the CEO.

So what are the tensions between the R&D team and the innovation team like?

Well, in this structure, the R&D team again becomes responsible for delivering the technical enabler to make sure that the innovation can go to market. So they go back to their core function of delivering technology however they want to do it. They can develop something themselves, they can liaise with partners, they can buy in technology etc. But that’s again their core function.

It has become much more interactive if you put teams like this together, you have the interaction within the team. So they make sure that marketing, sales, finance, etc, that all those angles are covered. When you have team meetings, let’s say every two weeks or so, then the team can see what is done technically but they can also see what is done in terms of marketing. The sales people can see if they can sell this, etc, etc. That brings the dialogue from the various functions into the team, which is very important for the development of innovation.

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The Evolution of Corporate Innovation and R&D

October 1, 2019

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