Do you know the “Effectiveness” of your Research, Development & Engineering?

A couple of questions that have plagued most RD&E managers and decision makers are:

a)      How effective is my RD&E?

b)      What are the returns from my RD&E investments?

The Booz Global Innovation 1000 Survey points out that the top 20 R&D spenders of the world spent $128 billion in 2009 alone; an average of 8.3% when expressed as a % of sales.  Apparently there is no correlation between spending huge amount of money and financial success in the market place.  Apple, considered as one of the most innovative companies, spent 3.1% of sales on R&D and churned out phenomenally successful products while Microsoft spent almost 16% of its sales and wasn’t as successful.  

The point is that decision makers are essentially blind while navigating their R&D ship.  They are missing out on identifying the true levers within their RD&E function that are most critical towards achieving their business objectives.  Worse, they are possibly misdirecting available funds. 

RD&E Effectiveness can be expressed as a ratio of the value (in $) generated by RD&E over time to the RD&E investments ($). 

Stanley Black and Decker Inc.’s DeWalt division is a maker of power tools for professional contractors. They observed their customers (carpenters) in action and came out with a 12-inch miter saw. It was a best seller!  Google keeps coming with innovative products time and again. We all know how:  It allows engineers the freedom to work on projects of their choice for 10% of company time.  But does that mean any company that allows 10% of company time to its engineers be as innovative as Google? Unfortunately, NO!  Think about DeWalt again..many companies spend a fortune on “identifying consumer needs” but then does every product hit the sweet spot ? NO!   Dewalt did it because not only did it correctly identify the pain of its customers; it also channelized its resources and learning into engineering projects which delivered the exact product that the market always wanted.

The key to maximizing RD&E effectiveness is the capability to channelize diverse inputs into most relevant projects that produce outputs which deliver business results.  To be able to derive sustainable extraordinary returns from their RD&E investments, organizations should make an effort to

1. Establish the linkage between its strategy, projects, outputs and business targets
2. Determine the value created by RD&E : IP, Knowledge, products and services
3. Identify the high impact levers of effectiveness

(Blog also posted on: http://ers.hclblogs.com/author/chinmay-kale/)