To manage research and development projects, companies need to ensure that informal social networks are reinforced — and not thwarted — by formal organizational structures.
Research and development projects fail more often than they succeed. In fact, out of every 10 R&D projects, five are flops, three are abandoned and only two ultimately become commercially successful. A principal problem is that many companies don’t know how best to organize their labs to conduct R&D work. A classic hierarchical structure, for instance, tends to impede the rapid spread of knowledge. Matrix organizations, on the other hand, can lead to information logjams, confusion and conflict among employees. To investigate how companies can best manage their efforts to innovate, the author conducted an in-depth study of six R&D projects at the laboratory of a Fortune 500 corporation. She found that highly successful R&D projects have four crucial factors that reinforce each other. The first is strong and sustained corporate support. The second is the presence of open communication patterns and a low degree of formal reporting. Beyond this, R&D teams must be organized in specific ways so that informal social networks are reinforced — not thwarted — by the formal organizational structures. This leads to other crucial factors: third, R&D projects must include a person who is central to the “technical-advice network” (a “technical star”); and fourth, they must include someone key to the “organizational-advice network” (a “managerial star”). An understanding of the interplay between informal social networks and formal organizational structures can help companies design and maintain learning organizations in which employees exchange pertinent knowledge efficiently and willingly, leading to more successful R&D efforts.