This is the first part of a series of blog entries around common situations in R&D.
This week we will start this series with an overview of the most common questions asked to R&D. In the following weeks we will dig deeper into addressing the motivation of the question as well as ways to find satisfactory answers.
Part 1: The Overview
Having been in the industry for more than 20 years, I have found that there are three questions that R&D executives are getting asked most often:
- Why does R&D take so long?
- Why is R&D so expensive?
- Why are R&D so many?
You find this kind of questions asked in various way, shape, form and intensity in any R&D-dependent industry.
While it is my perception, that oftentimes these questions are greeted by the R&D with negative feelings such as frustration or annoyance, there is no doubt, these questions are 100% legitimate in a commercial environment that needs to get reliable results at a certain point in time within a certain budget.
It is therefore worthwhile to explore the motivation behind the questions and the hurdles and boundaries that drive their answer.
Why does R&D take so long?
Why time matters: Time is money and short development times lead to short commercialization times and thus earlier revenue, higher ROI on a new product.
The drivers for development time are
- The natural laws: water freezes at 0 °C and boils at 100 °C and if you aim to have it otherwise you need to invest into development.
- Compliance with legal and regulatory requirements: Only compliant products can stay on the market long enough to achieve an ROI.
- Market and customer fitness: New products need to meet the needs otherwise they are needless.
- In-house requirements towards development and decision processes: Processes and decisions take up a fair amount of development time.
- Risk management: A careful approach to risk based decisions may increase development speed.
Why are R&D so many?
Why people matter: Deliberately we approach this topic from the inside. For a successful R&D organization it all comes to having the right people at the right places. You need to have skilled experts in the key positions and it sometimes takes decades to acquire the experience and skills to fill an R&D position in the optimal way.
The drivers for R&D staffing are
- Managing the work: Having the right expert in the right place to cover all development steps of a product.
- Managing the workload: Having enough workforce to handle the R&D project portfolio.
- Sustainable succession planning: As it takes sometimes decades to reach mastery in R&D, a long term succession planning is crucial to maintain R&D success.
Why is R&D so expensive?
Why money matters: Only profitable companies survive. As basic as this is, there is on unprofitable company that survives in the long run. R&D spend makes up a significant chunk of expenditure and reductions in R&D spend may have a significant positive effect on the P&L.
R&D spend is a double-edged sword. On the one hand it reduced profitability, on the other hand it is THE best way to demonstrate a company’s commitment to innovation.
The drivers for R&D costs are
- Development time: While R&D is developing a product they can’t develop another.
- Material costs: Often new products are made from non-standard parts that achieve economy of scale only after maturity
- Equipment/ infrastructure costs: Standards, regulation and legal texts set forth the need for specialised equipment and infrastructure.
- Personnel costs: You want the best and they come at a price.
Stay tuned
With Bessler Consulting we help R&D leaders find the appropriate answers to these questions and to develop their R&D towards shorter time to market and increased innovation rate.
