Marketing vs. R&D vs. Operations

Value LeveragingKrasnikov, A.; Jayachandran, S. · 2008Journal of Marketing
Topicsmarketing capability·r&d capability·operations capability·firm performance·meta-analysis·resource-based view·market performance

You're building next year's investment case, and R&D and operations want a bigger share because leaders see them as more important. Before conceding, consider the evidence. Marketing capability has the strongest link to firm performance. Rivals can benchmark operations or read R&D patents, while marketing's customer knowledge and relationships are harder to copy.

Among marketing, research-and-development (R&D), and operations capabilities, marketing has the strongest link to firm performance.

Data chart

Marketing capability has the strongest link to firm performance

Average correlation between each capability and firm performance in published studies, on a scale from -1 to 1 where 0 means no link and 1 a perfect positive link; not a percentage.

Marketing capability.352R&D capability.275Operations capability.205
  • All three capabilities link positively to firm performance.

Marketing capability's link to firm performance is the strongest of the three, though all three matter.

Averages of 786 correlations from 114 published studies through October 2007 (319 for marketing capability, 206 for R&D and 261 for operations), with a total underlying sample of 30,645.

Data chart

Operations capability links more strongly to efficiency than to market performance

Average correlation between operations capability and two kinds of performance: efficiency (cost reduction, shorter lead times, faster time to market) and market (market share, profitability, sales). Correlation runs from -1 to 1; 0 means no link and 1 a perfect positive link.

.274Operations capability with efficiencyperformance.192Operations capability with marketperformance

Operations capability has a stronger link to efficiency performance than to market performance.

Averages from a separate split of the studies by kind of performance. The paper reports no efficiency average for marketing or R&D capability, so only operations is shown.

Action guide

  1. Protect marketing capability in the annual investment plan.Require the budget proposal to treat it as a strategic asset because its link to firm performance is the strongest of the three.
  2. Prioritize marketing capability for market-performance goals.Set market share, profitability, and sales as the outcomes the team must track, while keeping operations focused on efficiency performance.
  3. Direct operations investment toward defined efficiency goals.The plan should name cost reduction, shorter lead times, and faster time to market, where operations has a stronger link than with market performance.
  4. Protect marketing knowledge through leadership transitions.Require a continuity plan for customer knowledge and relationships because the study identifies CMO turnover as a threat to building the capability.
  5. Require every capability case to disclose its measurement method.The team must identify self-reported and objective evidence before leadership weighs a claim.

Evidence

  • Average correlations with firm performance are .352 for marketing capability, .275 for R&D, and .205 for operations, placing marketing first. The ranking also holds after the study accounts for differences between studies.
  • All three capabilities link positively to firm performance; the question is which link is strongest, not whether R&D or operations matter.
  • The study suggests marketing knowledge is harder to copy because it is built through customer relationships. It also identifies CMO turnover as a threat to building that capability.
  • For market performance, average correlations are .355 for marketing capability, .315 for R&D, and .192 for operations.
  • Overall, capabilities link more strongly to market performance than to efficiency performance. Operations capability reverses that pattern. Its average correlation is .274 with efficiency performance and .192 with market performance.
  • Studies using self-reported data show stronger links than studies using objective data. Self-reports may inflate the link, or objective measures may miss parts of complex capabilities. The study does not settle which explanation is correct.

Key takeaway

Protect marketing capability because its link to firm performance is stronger than R&D's or operations'.

Limitations

The studies cover firm and business-unit capabilities across industries and geographies in research published through October 2007. They measure links with performance, not gains from moving budgets. Test any budget shift with a pilot first, especially in turbulent markets or new-product settings the research did not directly test.

Source

Krasnikov, A., & Jayachandran, S. (2008). The relative impact of marketing, research-and-development, and operations capabilities on firm performance. Journal of Marketing, 72(4), 1–11. https://doi.org/10.1509/jmkg.72.4.001

https://doi.org/10.1509/jmkg.72.4.001

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