Research & Development (R&D) is a critical component of most business strategies, and a driver for market success. However, executives typically have little visibility into the R&D pipeline or the value being generated in R&D.
Overall, like any other corporate function, improved R&D effectiveness can have two potential impacts: Improve Revenues and/or Reduce Costs. Let us explore how:
R&D can help increase revenues by:
- Gain market share by developing and delivering more innovation to customers
- Improve Average Sales Price by providing differentiating capabilities to customers
- Address new market segments by quickly developing new products using existing capabilities and components
R&D can help optimize revenue timing by:
- Align R&D pipeline with corporate strategy
- Accelerate or slow-down R&D efforts to maximize market impact
- Efficiently modify R&D portfolio based on new competitive or market challenges
R&D costs can be reduced (without significantly impacting delivery) by:
- Leverage cross-product synergies to effectively reduce costs of developing any new feature
- Reduce R&D management overhead costs
- Provide R&D teams early and better visibility so they can reconfigure projects at minimal costs
Avoid costs of wasted development efforts:
- Identify and kill non-viable or pet projects that have no planned insertions into new products
- Find projects with schedule slack and slow them down to ensure parts of a new product are not ready before others
- Effectively monitor R&D portfolio and find and fix problems early
However, as most managers know, these are hard objectives to achieve. Key challenges are:
- Lack of visibility and access: R&D is spread over many teams and locations. It is hard to get quick and easy access to status of the R&D pipeline. It is hard to aggregate the R&D pipeline to make management decisions and then segregate management decisions into individual R&D project-level actions.
- Long development timelines: The impact of decisions is not felt for quite some time. That means it is hard to make decisions that address current strategic or market challenges. It is also hard to perform what-if analysis to decide on the best course of action
- Complex interdependencies: R&D portfolios require investments in multiple products and technologies at various stages of maturity. Delays in one development project can have significant impact on others and on the overall development schedule. It is hard to make decisions while keeping these complex interdependencies in mind.
- Lack of Metrics: Most R&D metrics tend to give information about the past (such as Revenue from New Products or Number of Patents Generated). There is a lack of metrics that allow managers to quickly assess the health of the R&D pipeline and make decisions about improving it.
This blog is going to focus on both the benefits of improved R&D effectiveness and challenges to getting there…