Is R&D a Prodigal Child?
Getting returns on R&D investments is a tough challenge, but success largely depends on appropriate value creation.
- Jul 9, 2018,
- Updated Jul 11, 2018 9:15 PM IST
Most industrial companies end up squandering their R&D resources. Interestingly, quite a few enterprises actually know that more than half of their R&D money is going down the drain. Numerous studies show that 50-75 per cent of R&D budgets get wasted on unsuccessful new products. And unlike advertising, where no one knows which 50 per cent is wasted, companies know which half of the R&D spending has not been effective although they realise it after the actual expenditure takes place.
It does not mean R&D labs are filled with non-technical people incapable of finding the right answers. They are just being asked the wrong questions. Questions that are unimaginative, being asked at too many other labs and, if solved, create too little value. In essence, these questions are too obvious.
Such questions can be grouped into two sets - wrong-market and wrong-need. The former occurs when researchers are asked to develop products for market segments that are unviable. It is an outrageous waste of resources, but most companies end up doing it.
On the other hand, most companies we know lead the footrace with wrong-need questions. Here is an all-too-familiar scenario faced by many manufacturing companies. An important customer tells your sales representative what it wants. It would have informed the same thing to every other supplier who is your competitor. That starting pistol shot begins the race, and your sales representative quickly drops the request off at R&D's doorstep, properly packaged and labelled, of course. R&D may ask the person to go back and ask more questions, but once the person has handed the baton to R&D, his/her leg of the relay is pretty much done.
The customer is always smart, and your competitors' sales representatives take the same request to their respective companies. Terrific! Now you are all in the same footrace, with the customer waiting at the finishing line. If more than one crosses it, you can forget that much-coveted price premium.
You will not want to win this race only to compete on price. It is better that you choose the race, time and place by targeting an attractive market segment, which you pursue with in-depth customer interviews. Making use of advanced probing techniques, a two-person or three-person technical marketing team can unearth unspoken needs. When your team knows how to engage the customer in collaborative brainstorming, you are likely to bring back unimagined needs as well. The race is on, and your competitors do not even know it. Most importantly, the new product you develop will be nothing like what the customer has seen before and nothing like it will be seen for a long time if you have patented it right. It will deliver real value, which the customer will be only too happy to procure by paying a premium. Patents are only granted if they are useful, new and non-obvious. Clearly, the value of non-obvious technical solutions is much higher than run-of-the-mill solutions.
Most industrial companies end up squandering their R&D resources. Interestingly, quite a few enterprises actually know that more than half of their R&D money is going down the drain. Numerous studies show that 50-75 per cent of R&D budgets get wasted on unsuccessful new products. And unlike advertising, where no one knows which 50 per cent is wasted, companies know which half of the R&D spending has not been effective although they realise it after the actual expenditure takes place.
It does not mean R&D labs are filled with non-technical people incapable of finding the right answers. They are just being asked the wrong questions. Questions that are unimaginative, being asked at too many other labs and, if solved, create too little value. In essence, these questions are too obvious.
Such questions can be grouped into two sets - wrong-market and wrong-need. The former occurs when researchers are asked to develop products for market segments that are unviable. It is an outrageous waste of resources, but most companies end up doing it.
On the other hand, most companies we know lead the footrace with wrong-need questions. Here is an all-too-familiar scenario faced by many manufacturing companies. An important customer tells your sales representative what it wants. It would have informed the same thing to every other supplier who is your competitor. That starting pistol shot begins the race, and your sales representative quickly drops the request off at R&D's doorstep, properly packaged and labelled, of course. R&D may ask the person to go back and ask more questions, but once the person has handed the baton to R&D, his/her leg of the relay is pretty much done.
The customer is always smart, and your competitors' sales representatives take the same request to their respective companies. Terrific! Now you are all in the same footrace, with the customer waiting at the finishing line. If more than one crosses it, you can forget that much-coveted price premium.
You will not want to win this race only to compete on price. It is better that you choose the race, time and place by targeting an attractive market segment, which you pursue with in-depth customer interviews. Making use of advanced probing techniques, a two-person or three-person technical marketing team can unearth unspoken needs. When your team knows how to engage the customer in collaborative brainstorming, you are likely to bring back unimagined needs as well. The race is on, and your competitors do not even know it. Most importantly, the new product you develop will be nothing like what the customer has seen before and nothing like it will be seen for a long time if you have patented it right. It will deliver real value, which the customer will be only too happy to procure by paying a premium. Patents are only granted if they are useful, new and non-obvious. Clearly, the value of non-obvious technical solutions is much higher than run-of-the-mill solutions.