Organizing R&D for the Future

Executives from around the world agree that research and development is a global effort requiring collaboration. Yet many say their organizations must improve in this area — evolving from the predominantly centralized approach that’s prevalent today — to meet strategic goals. In other words, for today’s R&D organizations, there is a significant gap between knowing what to do and actually doing it.

In a 2012 McKinsey survey on R&D, we surveyed 1,283 executives representing a range of regions, industries, functional specialties, tenures and company sizes. (Note: To adjust for differences in response rates in different countries, the data were weighted by the contribution of each respondent’s nation to global GDP.) A vast majority of the executives surveyed — 80% — believed that the best way organizations can position themselves to meet goals is by establishing satellite units that operate — and collaborate — as a network. But only 63% of respondents said that their R&D organizations already include satellites.

Executives’ responses on the current state of R&D depict an increasingly global reality that is at odds with today’s organizational structures. Specifically, a plurality of respondents — 37% — said their current R&D organizations consist of a central function in a single location. To meet their collaborative goals in the next three to five years, more than half of respondents acknowledged that their organizations should employ a more decentralized model.

This overall preference for moving away from centralization reflects the reality on the ground: 38% of executives said their companies plan to increase offshoring of their global R&D activities. While there has been much recent discussion of companies bringing manufacturing activities and processes closer to home (to increase operating flexibility, for example), our results suggest that for many R&D organizations, the offshoring trend continues. In fact, just 18% of respondents said their companies’ “onshoring” of global R&D functions and processes will increase in the next three to five years, and only 24% said the same about “nearshoring” (bringing functions and processes closer to the company’s home base).

The Value — and Challenge — of Collaboration

Nevertheless, for the time being, collaboration is an art that many R&D organizations have yet to master. Of the executives responding to this question, less than half said their central functions and satellites collaborate very or extremely effectively.