Firms need to tackle biases to drive research and development

Businesses can make better choices about which R&D projects gain funding by managing bias and involving more people, according to new research.

Deciding which new ideas to take forward and which to discard is unhelpfully influenced by personal preferences and the decision making-process of expert panels, which can impact on a company’s ability to stay creative, say the authors. In their article, Better Ways to Green-Light New Projects, they provide a number of recommendations for R&D directors and expert panels to reduce biases and improve outcomes before, during, and after selecting innovation projects for investment.

The research was a collaboration between Imperial College Business School, Bocconi University (Milan), ESMT (Berlin) and the University of Bath and published in an article in the MIT Sloan Management Review.

The authors suggest that R&D expert panels are problematic for the following reasons:

• They show a strong bias against new ideas. Decision makers often reject breakthrough innovations because they are uncomfortable with the risk from pursuing them. They are more likely to fund projects with intermediate levels of novelty. Some degree of novelty increases the chance of funding, but too much reduces the odds.
• They suffer from a lack of diversity. Decisions are largely based on the opinions of senior men who typically make up panels, missing valuable input from people with different experiences.
• They’re staffed with scientists and engineers. These professionals tend to focus on the technical aspects of an idea without considering the business opportunities and challenges, say the researchers. They may have a bias for ideas originating from their own area of expertise, and do not want a colleague’s success to surpass their own.
• The panel decision-making process itself. R&D funding applications are often introduced by a panel member, who acts as its sponsor. Even if the sponsor strives to be objective, their own views on the project may be reflected in their tone and presentation, transferring biases and shaping views of others on the panel.
• The timing of the process or the order in which projects are reviewed can influence decisions. Unique data from a professional services firm shows that the decision to fund one project makes it unlikely that the next project will be funded.

"This research highlights why it’s important that decision makers continue to review their processes to ensure that their businesses continue to thrive." Professor Paola Criscuolo Professor of Innovation Management, Imperial College Business School

Professor Paola Criscuolo, Professor of Innovation Management at Imperial College Business School, one of the authors of the study said: “R&D staff and innovators might become demotivated if their proposal gets rejected, which could result in people leaving their organisation. This research highlights why it’s important that decision makers continue to review their processes to ensure that their businesses continue to thrive.”

The authors argue that before projects are evaluated, companies can ensure they get a fair assessment based on their merits by revising the process for submitting ideas for consideration. To combat latent biases, organisations should remove names and demographic information about the creators of the new ideas, and standardise the information required in submissions so they are evaluated based on the same criteria.

During the selection process, businesses should assemble a diverse selection panel in order to ensure that the viability of an idea is considered from a broader range of perspectives, the authors say. Panels should include people with both technical and non-technical backgrounds to ensure projects are evaluated on technical aspects and also on market potential, business planning, strategic fit, and financing. Companies may also find it beneficial to use crowd-sourcing principles, a workshop approach, leave it up to chance, or stage head-to-head comparisons.

The authors suggest that once companies have determined which projects to fund, they can provide feedback on proposals as well as track and learn from failures in order to help decision makers make better choices the next time.

The article, Better Ways to Green-Light New Projects is published in the latest issue of the MIT Sloan Management Review.