This post is part of the 33 Ways to Amplify Your Profit Quickly.
Depending on your industry sector, you may or may not have a big R&D and product development investment. R&D, if done efficiently and effectively, can become a major driver of future EBITDA growth. However, if done incorrectly, it is simply a waste of resources – even when you capitalize on the cost.
Therefore, you need to:
Rationalize your R&D projects by eliminating the non-promising R&D projects (i.e., increasing the effectiveness)
Speed up your R&D process (i.e., improve the efficiency) via lean engineering
1. Rationalize Your R&D Projects
You can improve the effectiveness of your R&D by removing the long-tail R&D projects (the ones with a small chance of success or small impact) and focusing on a few small projects (the ones with high impact and a high chance of success).
The objectives:
Remove non-performing R&D projects.
Speed up critical R&D projects.
Identify missing key R&D projects to be initiated.
Steps to execute:
First, you start by reviewing all R&D projects in the pipeline, in terms of:
Spending.
Maturity/Progress.
Risk profile (Probability of Success).
Expected Outcome/Impact.
Based on the review, you can analyze the status of R&D performance.
Identify key projects based on the expected impact and risk profile.
Identify missing projects (e.g., by comparing the project pipeline to market requirements, you can identify gaps).
Then, beyond individual projects, analyze also the entire R&D process (e.g., via interviews and document reviews):
Decision-making process.
Monitoring process.
Accountability/responsibility for the results.
The incentive for success.
Internal Performance vs. External Benchmark.
Once you understand the performance of each R&D project as well as the performance of the entire process, you can identify opportunities and develop initiatives, e.g.,
Eliminate projects that are unlikely to succeed (technology/market risks) or are considered uncompetitive.
Speed up critical projects.
Finally, you execute the implementation plans.
Terminate projects that have failed or did not pass the thresholds and redeploy resources to better projects.
Eliminate the long-tail of projects with uncertain outcomes or long-time-to-market.
Ensure sufficient resourcing and attention to the must-deliver projects.
Terminate projects with significant deviations from the initial plan if no clear actions to fix them.
2. Speed up Your R&D Process using Lean Engineering
Lean engineering can help you to reduce the costs of your R&D smartly. There is no need to spend a fortune on innovation when you can avoid it.
The objectives:
Identify process improvements for the R&D/Product Development process.
Execute lean engineering R&D.
Steps to execute:
First, review the performance of the entire R&D division.
Total Cost.
The number of Full Time Employees.
Outputs generated.
Then, identify opportunities by checking whether:
KPIs performance is better or on par with external benchmarks.
The end-to-end R&D process is lean (e.g., by conducting value stream/process mapping and applying the principles of lean engineering).
Pain points and bottlenecks exist (e.g., by interviewing the R&D staff, the users of R&D services, the management team, and other relevant stakeholders).
Finally, develop the action plans and execute them.
Remove redundant, parallel development processes.
Remove over-engineering, and extra product features that customers are not willing to pay for.
Free up the capacity of skilled R&D experts by letting non-experts do admin/basic/repetitive tasks.
Remove process obstacles creating waiting time (e.g., via proper sequencing).
Remove variants and use standards across products.
Tips:
R&D people often have a tendency to create many R&D projects. Make sure you focus on bigger, better projects and eliminate everything else.
Sometimes, you don't have to develop everything in-house. You can partner with universities, research centers, and other companies to have joint R&D projects.
Management systems often hinder the full potential of R&D. Make sure you unleash the power of R&D experts by eliminating this blocker.
It is very important to have capable R&D experts. Consider reviewing the skillset of your R&D people too.
To see other ways to improve your profit, check the 33 Ways to Amplify Your Profit Quickly.
Alternatively, to continue exploring winning strategy, click here.
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