The R&D professional who had just completed the R&D business simulation had a strange look on his
face. When I asked if he was ok, he simply said, “If I knew then what I just learned, I would have saved the company hundreds of millions of dollars. Wow, I get it now.”
He was referring to an experience he just completed utilizing a customized business simulation workshop which was focused on teaching R&D professionals business acumen skills. In the simulation, small teams take over the role of Executive Vice President, R&D for a global consumer packaged goods company and have the opportunity to relaunch a cleaning product used on and inside home cleaning robots. Oh, and the year is 2030 so people don’t think the business simulation is unrealistic. Some of the decisions learners are required to make include the configuration of the cleaning fluids including their packaging, form, viscosity, fragrance, rust repellent levels, color, and much more. In the relaunch they must think about capital investments, market potential, and of course competitive analysis. There are different case studies within the business simulation that focus on different segments and challenges such as how to relaunch the brand for a completely online customer segment or for consumers who shop exclusively in big box stores like BigMart (the simulation world’s equivalent of Costco.)
As part of the workshop session debriefing, I asked participants to share their learning and insights and one of them started the conversation by saying, “This is so important. I really think having business acumen skills is as important as the money we are spending on R&D. Without these new skills, we are going to make huge mistakes.
Based on our focus group, I am pleased to share a summary of the top five reasons why Business Acumen for R&D professionals is so important:
Understand the big picture
The first thing that was pointed out is how having Business Acumen skills help to understand the big picture. The big picture represents the overall business ecosystem and how all of the players play and compete in a market. Seeing the big picture helps R&D professionals ask the right questions and come up with the best, targeted solutions.
Calculate long-term positive cash flow
Money in an organization is not free and most R&D professionals don’t understand that. There is a cost to capital and a focus on cash flow. Having stronger business skills helps R&D professionals to conduct richer analysis and calculate the long-term cash flow on their portfolio of products and continued investment.
Strategy and Positioning
When new product development can cost millions of dollars, having clear strategy and positioning to the right customers can mean the difference between success and failure. By having a disciplined strategy and positioning the value proposition correctly, R&D professionals can make the best investment decisions that match the needs of their targeted customers.
Segmentation (focus)
The next reason these skills are so important to the R&D professional is because it teaches segmentation; the ability to divide a market into subsections that contain different characteristics. For example, two-income homes in the south may own more than one home cleaning robot and therefore they would a target market for the super deluxe version of the product.
Optimize Invested Capital
Invested capital is the lifeblood of an organization. It’s the amount of money investors and bankers have put into the business and they expect a return for the use of their money. One of the key metrics is the return (profit) that is given back to the shareholders in the form of earning checks, dividends, and stock buybacks.
