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R&D And Agile Business Strategies

18th October 2021

Lydia Clowney: 

Let’s start with a high level overview of the topic. What exactly is an agile business structure or strategy? 

Allen Tobin: 

Well, I wish there was a quick one line answer. That’s a great question. And the definition is pretty comprehensive. 

An agile organization structure is characterized by some or all of  these following elements and there’s a whole bunch that goes into this. It’s non-hierarchical, which means it’s more collaborative with a higher degree of autonomy for different subgroups or departments. There’s a sense of responsiveness: There’s fast activity and responses to marketplace and changes in the environment as well as different consumer demands or trends.  

Many people are familiar with command and control and top-down patterns of management, but unlike those models, in an agile business structure, there’s much more collaboration and autonomy among groups and open collaboration with diversity and room for people to contribute in their unique and valuable ways. This is in direct contrast to people being forced to adhere to some of their predefined roles.  

In general, an agile structure allows for more trial and error, experimentation, [and] discovery in terms of different people contributing in very surprising ways and new ideas coming in from all sectors. In many successful organizations, everyone feels like they’re a part of the process.   

There’s certainly a sense of open communication, a high degree of transparency. Rather than nobody knowing who’s in the C-suite and how they’re operating behind closed doors, access to the C-suite and key decision makers can really be key here. It seems like everybody has a voice everyone’s voice is heard and respected in terms of goals. You know, an agile structure’s very long-term focused, but there’s never a loss of focus on providing results. In the short term. Short term experiments are all seen as learning opportunities.   

There’s no real [sense of] failure. The key here is that failure creates additional opportunities. In an agile business, there’s extraordinary value in responding to change. Rigid plans sort of go out the door. Customization is favorite over a standard offerings. You can see how there’s all sorts of different components that go into that definition, but they all seem to be embraced by people that are fast moving, responsive, looking for change, where there’s an open environment for collaboration amongst everybody within the organization. 

Lydia Clowney: 

Now, I see how hard it is to kind of wrap that up into a simple definition. And I think that part of the challenge there is that this isn’t just a methodology or a process. This is kind of a wholesale culture. I imagine you really need that buy-in at the very highest levels in order to really implement what could be a wholesale culture shift for some companies. How do you get that buy-in from say the C-suite? 

Allen Tobin: 

Another great question. The C-suite has to understand the system as a whole. They have to adapt it really catalyze that style of leadership. So it filters down throughout the organization. There has to be that level of experimentation in that failure and the growth from that experimentation, trying and adapting new philosophies and new styles – as you mentioned, it’s a different way of business. That open communication style has to be fostered and nurtured within the organization. Governance is really based by long-term business values and add that patient. So it’s moving away from sort of that rigid focus that corporations typically always had in the ‘80s and ‘90s, and even the early 2000s, [where] everybody is seeking mastery within their respective skills. [In agile,] Everybody’s not afraid to touch what’s going on in other departments. Again, it comes back to that open sense of collaboration. 

Lydia Clowney:  

It seems like it requires a lot of trust in and amongst everyone within the organization as well. You know, even just trust that failure, won’t be punished, that it will be seen as part of that learning process. And part of that, that innovation process. 

Allen Tobin: 

No question about that. You know, when you think about sort of the general traits that an agile business would have, they’re made up of skillful people, self-aware individuals, their leaders are full of inspiration. They inspire others to be part of the process. The organizations continuously learning from mistakes and for different growth patterns. And to have that open style of communication, and again, that focus is on the long-term business value: What can we bring to our clients? 

Lydia Clowney: 

I know agile business methods can be applied to any industry. We largely see them coming up in practice in programming or tech worlds, but as you’re describing the characteristics that it seems like the methodology really could benefit a diverse range of R&D activities and all sorts of industries.  

Before we get really specific about how it applies to R&D in particular, let’s say someone running a business here is the opening, say, to this podcast, [Allen laughs] and they’re thinking how can I make my business more agile? How can I implement this strategy?  

How does a company that maybe has been more rigidly hierarchical in the past? How do they do that? Where do they even begin? 

Allen Tobin:  

You know, that’s a great question. And I think you touched on already, right? You need that buy-in from the C-suite from upper level management. And it has to be something that filters throughout the entire company. So that’s key.  

And then it can really break down the major elements to strategize and develop this agile business environment into four key elements.  

You have to establish guiding principles. You know, what are the goals in this particular case? Let’s say it’s innovation on top of providing a great product to prioritize opportunities. You should develop a roadmap. You put a roadmap in place to guide the actions along the way, making sure that you have visibility and transparency throughout the organization. You can’t keep it to yourself in the C-suite, which goes back to your point, Lydia, which I thought was great: You have to empower your teams and give them the autonomy to operate, to make sure that they can be part of this process and achieve their goals. 

Allen Tobin: 

That sounds great, but what does it mean? Well, you can’t have people sitting around waiting for signatures before they can get moving right on a particular project. You want to give them the ability to say, “Here’s what we’re trying to achieve. Go do it.”  

And so it’s really cutting through that red tape. And obviously the check-ins the collaboration, the communication, those are all key elements and we’ve touched them two or three times already, but that’s really key to an agile environment. You want everybody within the organization to have the ability to have the ability to communicate with others? 

Lydia Clowney:  

What are the roadblocks? Depending on the company, there are going to be roadblocks, maybe attitudinal or philosophical, even what do we see as sort of the main barriers to entry for some of these companies  to implement this kind of strategy? 

Allen Tobin: 

Well, you know, I know one is, probably one that you’re very familiar with, it’s really falling in love what has happened in the past. It’s what we know things are working great. We don’t need to change anything. How does that affect R&D?  

Well, the spirit of innovation really drives the R&D work, no matter how lucrative the credit may be. And if you’re married or you’re so wed to the products and processes, you already have … why are you going to bother discovering new ones? It sort of puts a cap on the innovation there.  

Lydia Clowney: 

Yeah. Inertia is a huge problem in particular, it seems like in some successful companies that, because they’ve had success in the past, they expect that status quo is going to produce the same success in the future. 

Allen Tobin: 

That’s right. And then how do you stimulate that growth and that future innovation. You can’t really be risk averse, right? So the other blocker is risk aversion. You know, COVID really demonstrated many companies realize being risk averse doesn’t necessarily mean avoiding activities, which might in the short term seem risky.  

So when you engage in this sort of discovery, it can lead to more new products, increased revenue, it can lead to an entirely new structure within your organization. And it can allow you to adapt to changing externals, which is really key because it’s not only how you’re operating within the four walls of your business, but how is the environment around you impacting what you do on a daily basis?  

And then we said that communication is key, collaboration is key. Well, what happens if you have poor communication and little collaboration? You’re going to have a difficult time becoming agile business structure, unless you change the way you operate. 

In an agile environment, everyone is part of that process. Your workforce to an extreme degree, putting people in silos… It’s not going to help that process. It’s difficult to operate and be effective when you’re in silos.  

Communication within all the departments is essential for the R&D work itself, it’s results, and then clearly maximizing the R&D credit and let. And let’s be real if your company doesn’t have great and respectful communication throughout the organization, you’re probably running an inefficient organization, even in the comments of circumstances. 

Lydia Clowney: 

Oh my gosh, that’s so true. And I mean, with pandemic – I mean, right? So many of us kind of white collar industries working from home and trying to out a new communication style. So in some ways it seems like there was an extra hurdle that folks had to overcome, but I imagine you could also look at it as an opportunity that it’s forcing these companies that might have been able to kind of stick their head in the sand for a few more years, [with] regard to some of this kind of digital communication or next generation communication to really have to confront it and figure out what are the best way of connecting employees when they’re not together in a physical space. And I imagine that really opens the door too, then you’re not constrained by your geography in the same way and for the best companies. Do you think that that would lead to more collaboration in all sorts of ways. 

Allen Tobin: 

Absolutely. And for the longest time the saying was, “You can’t teach an old dog new tricks.” But here, the old dog has, has to learn new tricks or they’re not going to be able to move forward with other successful organizations. And you mentioned this earlier as well. You know, we have to have that buy-in from the top level, if you don’t have that buy-in, you’re going to struggle and trying to move to an agile environment.  

The leadership has to lead by example and commit the time, energy, and resources needed to make the company more adaptable, as well as innovation itself. You know, they have to welcome reward agile thinkers. That’s important. You don’t want people to be afraid to raise their hand and say, “Hey, I have a great idea that I think could contribute to the growth of our company.” 

They have to stay involved, leadership, they have to remain knowledgeable and fascinated with sort of the latest innovations that are going on in the field. And I think we’re seeing more and more of this. The R&D work itself requires resources, which has to get allocated by leadership and you can’t even get started without the literal buy-in from the C-suite.  

Really to summarize, I would say, be aware of the common barriers, which I think you’ve touched on a little bit already, Lydia. There’s that fear of change. Well, what did 2020 teach us? It told us that if we stay set in our ways, the world could pass us by. It’s that fear of loss of control. COVID showed us that we may lose control whether we like it or not.  

It’s a reluctance to embrace top-to-bottom change. And I think that’s key. People have been doing things the same way for decades. And change scares people, let’s be frank, and abandon the reward structures, which run counter to teamwork. Putting too much emphasis on individual achievement, it can have a negative effect, a workforce see themselves as individuals, not part of a big unit or organism within that corporate structure. 

Lydia Clowney: 

That summary is great. And it really speaks to me that this is a shift in values and that there are in some ways, a set of core values that accompany an agile strategy. And for a company to really embrace and be successful, implementing an agile strategy, their corporate values may also have to shift to really align there. Particularly that embrace change concept.  

So how does an agile approach make a company more resilient? I mean, talking about a crisis, like COVID, honestly, if I’m, maybe I’m a little bit of a Cassandra here, but I don’t see this as being the last crisis we’re going to encounter. [Laughs.] 

So how does a strategy like this help companies work through crises like this, and really continue doing that R&D work that’s going to produce the next year’s product or process or service or something that they’re, and I guess, are there any differences industry-to-industry? 

Allen Tobin: 

There are and, you know, it’s a great question because you were the most successful companies during and following COVID 19, and they were really the forward thinkers, right? You know, you think about Amazon, which got ahead of the curve, ramped up their employment because they knew that things were going to be busy. You think about the companies that scaled up their e-commerce capabilities as soon as possible. You think about even the smaller startups or even the existing companies. They   pivoted very quickly and started ramping up their production of COVID-related products. Think about all the hand sanitizer and the wipes that were created, right? 

Lydia Clowney: 

Distilleries even, I mean, companies, I would never have expected would be able to make that adjustment where suddenly producing things that were so topical to the situation! 

Allen Tobin: 

That’s amazing, and, you know, someone there or a group of people there had a great idea. And that ability to pivot is really going to make that company successful. During pandemics like COVID-19, or as you’ve mentioned, Cassandra, something’s going to happen in the future. [Lydia laughs.]  

You know, you have to measure which is riskier: to make fast decisions, and try things out, and try to overcome these hurdles, then position yourself and your company in a place to succeed; or to stay the course and do nothing? Sort of that, as you mentioned earlier, ‘head in the sand’ bunker mentality, and hopefully nothing impacts you.  

You can’t maintain a reactive nature when the world is shifting as quickly, dramatically as it did during 2020. That flexibility and that responsiveness [for] those successful companies, with that agile structure, really proved key to their success. 

Lydia Clowney: 

So what about different industries? And I think you mentioned at the start that there were some differences you saw across various industries. Can you speak to any specifics there? 

Allen Tobin: 

Yes, I’ve done. I don’t know if you happen to read that KPMG-sponsored report for innovation leaders. Did you happen to read that because there’s a couple of great quotes.  

Lydia Clowney:  

No, I haven’t, actually… 

Allen Tobin:  

Actually, I have it in front of me and a couple of great quotes there, you know, immediate and telecom. Don’t wait for calamity. It’s a, gambler’s folly to do stuff, right. That’s pretty interesting in the professional services world resources held steady through a pandemic.  

To me, that’s a little bit of a cop-out. I think in the professional services world, the companies that are able to sort of pivot and embrace technology really advanced their revenue more than their counterparts in the food and beverage industry, consumer goods – the commercial side has been through a rollercoaster.  

Absolutely, because as we just mentioned, people were spending money on wipes. And this – in fact, remember the whole toilet paper incident, right? You couldn’t get toilet paper for about three months!   

Lydia Clowney: 

Yeah. That area in particular, seems like it was real feast-or-famine; because, sure, toilet paper, I mean — that was selling like hotcakes! And the hotcakes weren’t even selling! But restaurants, I mean, restaurants were a huge loser.  

Allen Tobin: 

They were a huge loser because they weren’t able to really… You know? I’ll take that back! Not the entire industry because you remember some of the industry was smart enough to start doing curbside delivery. And they were allowing people to order ahead and then you open your trunk and they put the food in the truck. So they stayed afloat.  

I’m not going to say they made more than they normally would, but the companies that did that embrace the technology and they were agile. Now the ones that just sort of closed the blinds? Yeah. They took a big, a big beating. I absolutely agree with that.  

Lydia Clowney: 

That’s a great point.  

Allen Tobin: 

The quote from the healthcare industry, we’ve shown that we can innovate rapidly. We have a very tactical mindset. 

Well, that’s great. Now let’s take the engineering and construction industry who we know weren’t agile, you know, the results they were overall very negative because initiatives have been placed on hold until some sense of normalcy returned. And I don’t know if there was anything else that they could do, but perhaps during that downtime may have been time where they could have, you know, if they had their revenues where they could have focused perhaps a little more on R&D or do something instead of sitting around.  

But I think what happened within an industry is you just had a lot of layoffs because the work wasn’t there and you had a lot of raw materials and textiles not being used because nobody was hiring. So a lot of different results from different industries. For sure. 

Lydia Clowney: 

Yeah. I think supply chain was a real issue for some of those physical, good, heavy industries as well. So that’s continuing to be a problem for engineering, for construction, certainly for some manufacturers as well. I know the car market right now is crazy… 

But you know? I said car market, car manufacturers. And that actually kind of leads me into another question. Car manufacturers don’t typically use an agile strategy in my experience. They absolutely have their own strategy. Can you talk a little bit about what are some other methodologies, how they differ from what we’ve just been talking about, about the agile method? 

Allen Tobin: 

Sure. You know, it’s very specific in the auto industry. they typically use the APQP, right? Which is the advanced product quality planning strategy. It’s primarily in that one industry, there are three major phases with some sub-phases, but those three major phases are: development, industrialization, and product launch.  

The key targets, the KPIs here are to secure the quality of a new product or its development to ensure that only products have a high level of maturity make it to the production phase. And they turn around and rinse and spit and repeat, right? They repeat this process in any order.  

There are specific aspects of APQP, which are great, right? Design robustness, there’s significant design testing. That’s going on specification compliance. You talk about production process, design, production capacity. You get into packaging. You get into product testing operators, training plan… There are all these different aspects. 

And you know, I mentioned there are some sub-phases, you know, the sub-phases can be further defined as planning, defined program, product design, process design, product, and process validation. That’s your QC.  

And then the launch assessment and corrective action. So what does all that mean? Well, it’s very successful for R&D for the auto industry. The focus is clearly lending itself well to R&D work its product and quality-focused. You talk about the standardized development process. So it translates that many R&D projects, which from an R&D perspective is great because it’s easy to track and it’s easy to quantify.  

So you have high-quality R&D tax credit claims in this field. Really one ‘however,’ though, is it’s built on designing quality products for customer satisfaction and that all of these projects are going to qualify, right? Because just building to a piece customer satisfaction, similar to the cosmetic changes, they don’t always necessarily qualify for the credit.  

There are some flaws in it as well: It’s really hard to see how this can be rolled out into other industries, but it has been very successful within the auto industry. 

Lydia Clowney: 

It seems like it really works well for the auto industry, maybe because it’s so expensive to actually start producing, say a car. And so investing so much on the outset of design is a way of mitigating that risk. They’d rather pour resources into getting it right that first time, instead of maybe the agile methodology for say a software company where the idea is fail fast and draft some code and see how many holes you can punch in it. 

Allen Tobin: 

Totally agree. I mean, the goal in that industry, right, is to have of zero flaws by the time we get to production. So there’s definitely a robust process that goes in. It does lend itself well to claiming an R&D credit, but I’m just not sure how well it translates into other industries, as you mentioned. 

Lydia Clowney: 

I was just going to say, well, my brain was kind of going on this path of, “Well, you know, the auto industry, it’s much more risky. If they put out a part and it’s not perfect, there could be horrible implications.”  

But now that I’m actually saying that I feel like a lie in my mouth almost because some of the things we’ve seen recently with regard to software have creating huge catastrophes, even just the hacking of the Colonial pipeline… 

Allen Tobin:  

Right. 

Lydia Clowney:  

Things like that. So maybe I’m talking myself out of that position. 

Allen Tobin: 

Yeah. You know, there’s, there’s other things out there too, you know, you have the sort of the clan culture, right? Which is based on mentorship and teamwork. There’s flexibility, there’s focus. It’s sort of a family style corporate culture. Nut what happens as you get larger, you try to put more structure within your organization. So it’s difficult to maintain as a company grows, but in a clan culture, lower level of employees – if there even are such a thing in the clan culture – they have a very large voice.  

So that’s something that works with some organizations. And then you have your ‘ad-hoc-racy’ culture, right? Which is very risk and innovation focused. And you know, the obvious [point] is this is where everybody just starts raising their hand, “I got a great idea!” “I got a great idea!”  

There’s an external focus on new ideas and trends. So they’re always focused and looking and they’re paying close attention to market growth. There’s a very strong sense of encouragement for employees to be involved and introduce new ideas, and that has obvious applications of the R&D process. 

Lydia Clowney:  

Well, the more people you’re hearing from, the more people you’re claiming the wages for. Right? 

Allen Tobin: 

That’s right … That’s exactly right. But I guess some of the downfalls are potentially there’s too much focus paid on status and notoriety, social media… instead of going for all these huge pie-in-the-sky sort of goals, maybe there’s some less impactful initiatives and innovations that are being overlooked. Again, another type of culture, but as every other culture has, it’s not for everybody and it has its own flaws. 

Lydia Clowney: 

Yeah. It would seem like it would be at the risk of relying more on maybe personalities or personal relationships. There could be a risk that the concept of nepotism or people favoring their own pet projects at the expense of maybe another project that someone else thought of that could potentially be better.  

Allen Tobin: 

Yeah. I would agree a hundred percent with that.  

Lydia Clowney: 

Are there others? I… 

Allen Tobin: 

We could go on forever. Right? You have the hierarchy culture, which I think we started this podcast with, we were comparing an agile business structure to really a hierarchy culture, you know… 

Lydia Clowney: 

A ‘father knows best’ kind of thing. 

Allen Tobin: 

That’s exactly right. You have someone who’s at the top of the food chain, they know best to your rigid rankings. Top-down always, there is no deviation from that. And it can be very stifling. You could feel like, frankly, that you have a ceiling and there’s no career in, you’re not part of the innovation process. Some people would also say that when you look at Tim Cook at Apple – that hierarchy makes sense. Tim Cook has the singularity of vision, experience, and focus… Could Apple operate any other way as an overall company? 

So certainly some strengths, certainly some flaws with that one. And then you have a market culture where everyone is all in on the market access, it’s more risk averse, but you’re less likely to foster innovation in terms of really new ideas. You could still use R&D as a tool for market success. But again, the key here is everyone is just focused on the market and that risk aversion tends to really ramp R&D down. 

Lydia Clowney: 

Well, and the market doesn’t always know. I mean, you just mentioned Apple. So I’ve got to say, I mean, we didn’t know we needed Apple? We didn’t know we needed iPods until they came out and then we didn’t know he needed iPhone!  

Allen Tobin: 

Do… we really need them? [Laughs.] 

Lydia Clowney: 

Okay, I gotta ask, is there a best method? And I mean, even if you say, “No, there’s no best method.” Is there a best method for an industry or is there a best method for a company hoping to claim an R&D credit? What should we take away from this? 

Allen Tobin: 

I think that the move in the future is to move toward an agile business venture, but there are certainly components, key components with some of those other struggles that we talked about that could be pulled in to really enhance the success.  

But I think the ability to be able to pivot on a dime, to be flexible, to have open lines of communication from the C-suite all the way down, and to really value the opinions of everybody within the organization – and not only to value the opinions, but to act on them, if their ideas are great. I think those are really keys to success in the future. We don’t know when the next COVID is going to happen,  and if it ever does happen, the companies that are able to really change on a dime, to make that pivot are going to be the most successful companies.