Theodora chairs the R&D selection panel at a global professional service firm. She recently had to lead the committee in deciding whether to fund a proposal from an up-and-coming engineer and one of the company’s business leaders. The project focused on how to design rooms in intensive care units to minimize sleep disruption and facilitate healing. Gerhard, from the infrastructure group in Munich, started the discussion: “This project is just too out there. It is not really what we do.” Frank, an expert in water engineering from the consulting unit in Edinburgh, said, “Funding should be sought for client work. This is not going to generate much benefit for the organization.”
But Julie from the London office, who has focused on designing public buildings, countered, “Sure, it is a bit off topic, but the area was mentioned in our R&D strategy last year. My office is getting increasingly involved in design work for hospitals.” Gerhard noticed that the R&D budget was nearly spent for the year and suggested that the project was “a nice-to-have, rather than a need-to-have.” Theodora compromised: “Let’s fund the project at 30%. Is that OK?” The panel members nodded and moved on to the next proposal.
This story is fictional, but it is based on our observations of managers deciding whether to fund new projects. We set out to explore how organizations decide to invest in different innovations. There is little data on this, because these decisions tend to be made behind closed doors. But in studying a large professional service firm with offices in 37 countries, we were able to get access to all of the R&D project proposals submitted by its staff, including information about which projects received funding.