hclt white paper: research, development and engineering effectiveness
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Research, Development and Engineering Effectiveness
M a y 2 0 1 2
Research, Development and Engineering Effectiveness | May 2012
© 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.
TABLE OF CONTENTS
Abstract ............................................................................................. 3
Abbreviations .................................................................................... 4
Challenges ........................................................................................ 5
What is RD&E Effectiveness? ........................................................... 6
Why is RD&E Effectiveness Relevant? ............................................. 7
Conclusion......................................................................................... 9
Reference ........................................................................................ 10
Author Info ....................................................................................... 11
Research, Development and Engineering Effectiveness | May 2012
© 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.
3
Abstract
Research, Development and Engineering is an area where top
dollar is being spent by product companies the world over. At the
same time, it is a fact that only a few companies have been able to
identify their RD&E returns or the levers that impact the returns the
most. Therefore, most of the RD&E investments are “blind”
investments.
The concept of RD&E effectiveness is about knowing your global
RD&E capabilities and the returns these capabilities can generate. It
is about making informed RD&E decisions and directing
investments toward areas that can make a large positive difference
in the outcome.
The concept is relevant in the global marketplace where RD&E
decision makers find it increasingly difficult to gauge the
effectiveness of:
Globally distributed research and engineering centers
Increasingly complex product portfolios
Research activities and Innovation initiatives
Intangible benefits of RD&E
A structured method that facilitates the estimation of effectiveness
can go a long way toward helping product companies align their
RD&E spending to obtain sustainable extraordinary returns.
Research, Development and Engineering Effectiveness | May 2012
© 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.
4
Abbreviations
Sl.
No.
Acronyms Full form
RD&E Research, Development and Engineering
Research, Development and Engineering Effectiveness | May 2012
© 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.
5
Challenges
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 Survey1 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 percent of sales. Apparently
there is no correlation between spending huge amounts of money
and financial success in the marketplace. 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 toward achieving their
business objectives. Worse, they are possibly misdirecting available
funds.
A structured method of evaluating the RD&E operations in terms of
investments, returns (both tangible and intangible) and capabilities
will go a long way to enable key business decision makers to make
effective decisions.
Research, Development and Engineering Effectiveness | May 2012
© 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.
6
What is RD&E Effectiveness?
RD&E effectiveness is defined as the ratio of the value generated
by the Research, Development and Engineering function over a
period of time to the investments in RD&E.
RD&E is a large and complex organization in itself, and
encompasses pure research, applied research, experimental
research, etc., product conceptualization, prototype development,
verification and validation and even engineering support.
Depending on the type and complexity of product, expertise from
multiple engineering domains is required. Given all the engineering
diversity and multi-disciplinary interaction, the key elements that can
help organizations improve the value generated for every R&D
dollar spent, aka R&D effectiveness, are:
Clearly stated and communicated objectives
Focused performance measures
Effective RD&E management activities
Output-driven project execution
Correlation of RD&E output with business outcome
RD&E Effectiveness is the $
value generated by RD&E
over time for every RD&E $
invested
Components of RD&E Value
Intellectual Property
Products
Services
Skills and Competence
RD&E Effectiveness =
Value generated by RD&E ($)
Investments in RD&E ($)
RD&E VALUE
INTELLECTUAL PROPERTY
SKILL & COMPETENCE
PRODUCTS
SERVICES
Research, Development and Engineering Effectiveness | May 2012
© 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.
7
Why is RD&E Effectiveness Relevant?
The marketplace mandates that organizations come out with
innovative products at an affordable price for a global consumer, on
a continuous basis. To be able to do this, organizations set up
globally distributed Research, Development and Engineering
centers to leverage global resources and drive costs down. At the
same time, the organizational structure becomes increasingly
complex, global R&D resource management becomes challenging
and so does R&D project/program management.
RD&E effectiveness becomes a useful concept for decision makers
to not only benchmark their R&D returns against other players, but
also to benchmark the effectiveness of their distributed centers. The
concept is also applicable to identify key RD&E levers that influence
RD&E returns the most. Organizations can adopt different strategies
that guide their R&D operations, but the key to effectiveness is the
strength of the correlation between all the R&D input (strategy,
market intelligence and organizational capabilities), R&D projects
that are executed, and the R&D output that is delivered. When a
clear picture of the correlation emerges, the organizations clearly
know where and how much they want to invest and what benefits
they are likely to receive.
An example to consider is Stanley Black and Decker,
Inc.‟s DeWalt division2,4
, which is a maker of power tools for
professional contractors. They focused on observing their
customers in action (carpenters). The result was a 12-inch miter
saw — a best seller — after researchers saw carpenters struggle to
cut large pieces of molding on the industry-standard 10-inch saw.
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.
Research, Development and Engineering Effectiveness | May 2012
© 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.
8
Dewalt focused on identification of customers needs, and
successfully converted that input into a product that added value to
the customer. Google adopted a 70-20-103,4
rule of effort distribution
for its engineers: 70% of the time for core business tasks, 20% on
related projects, and 10% on their own ideas. Google has effectively
leveraged its engineering capabilities to create successful products
and services. Siemens AG spends 5%4,5
of its overall R&D budget
on long-term planning: developing detailed technology roadmaps
within business units and technology trends at the corporate level.
This process helped Siemens expand its large health technologies
business into new areas such as personalized healthcare.
These examples illustrate that the key to maximizing RD&E
effectiveness is the capability to channelize diverse input into the
most relevant projects that produce output which delivers business
results.
Effective RD&E is a function of the following capabilities:
Capability to translate strategic goals and targets into
executable projects and governance mechanisms
Capability of RD&E projects to deliver desired output
Capability to commercially leverage RD&E output to help
achieve desired business outcome
Research, Development and Engineering Effectiveness | May 2012
© 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.
9
Conclusion
RD&E investments are similar to investments in the stock market:
without reasonable analysis, it is a purely speculative play. The
probability of success (high returns) is greatly increased if the
investment is backed by reasonable data analysis and remains
focused on the areas that can lead to higher gains.
Gauging RD&E effectiveness allows RD&E managers and decision
makers to adopt a structured approach to understand how the
investments are flowing into their RD&E operations and what they
can do to maximize RD&E returns.
To be able to derive sustainable extraordinary returns from their
RD&E investments, organizations should make an effort to establish
the correlation between their strategy, projects, output and business
targets, and focus their investments on the high impact areas.
Research, Development and Engineering Effectiveness | May 2012
© 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.
10
Reference
1. Booz Global Innovation 1000 Survey
http://www.booz.com/global/home/what_we_think/featured_c
ontent/innovation_1000_2010
2. Convergence: The Key to successful Innovation
http://www.baselinemag.com/c/a/Business-
Intelligence/Convergence-The-Key-to-Successful-Innovation/
3. The 70 Percent Solution
(Google CEO Eric Schmidt gives us his golden rules for
managing innovation.)
http://money.cnn.com/magazines/business2/business2_archive/
2005/12/01/8364616/index.htm
4. How the top innovators keep winning
Whitepaper from Booz : Issue 61 Winter 2010
http://www.booz.com/media/file/sb61_10408-R.pdf
5. Diagnostics – Aiming for higher performance
Presentation by Michael Reitermann, CEO Healthcare
Diagnostics, Feb 2012
http://www.siemens.com/investor/pool/en/investor_relations/fi
nancial_publications/speeches_and_presentations/cmd_healthc
are_2012/cmd_healthcare_michael_reitermann.pdf
Research, Development and Engineering Effectiveness | May 2012
© 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.
11
Author Info
Chinmay M. Kale ([email protected])
is a Business Specialist, ERS - Strategic
Services Group at HCL Technologies,
Bangalore. He is an alumnus of XLRI
Jamshedpur with eleven years of experience
in RD&E.
Hello, I’m from HCL’s Engineering and R&D Services. We enable technology led organizations to go to market with innovative products and solutions. We partner with our customers in building world class products and creating associated solution delivery ecosystems to help bring market leadership. We develop engineering products, solutions and platforms across Aerospace and Defense, Automotive, Consumer Electronics, Software, Online, Industrial Manufacturing, Medical Devices, Networking & Telecom, Office Automation, Semiconductor and Servers & Storage for our customers.
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About HCL
About HCL Technologies HCL Technologies is a leading global IT services company, working with clients in the areas that impact and redefine the core of their businesses. Since its inception into the global landscape after its IPO in 1999, HCL focuses on „transformational outsourcing‟, underlined by innovation and value creation, and offers integrated portfolio of services including software-led IT solutions, remote infrastructure management, engineering and R&D services and BPO. HCL leverages its extensive global offshore infrastructure and network of offices in 26 countries to provide holistic, multi-service delivery in key industry verticals including Financial Services, Manufacturing, Consumer Services, Public Services and Healthcare. HCL takes pride in its philosophy of 'Employees First, Customers Second' which empowers our 83,076 transformers to create a real value for the customers. HCL Technologies, along with its subsidiaries, has reported consolidated revenues of US$ 3.7 billion (Rs. 16,977 crores), as on TTM ended Dec 31 '11. For more information, please visit www.hcltech.com
About HCL Enterprise HCL is a $6.2 billion leading global technology and IT enterprise comprising two companies listed in India - HCL Technologies and HCL Infosystems. Founded in 1976, HCL is one of India's original IT garage start-ups. A pioneer of modern computing, HCL is a global transformational enterprise today. Its range of offerings includes product engineering, custom & package applications, BPO, IT infrastructure services, IT hardware, systems integration, and distribution of information and communications technology (ICT) products across a wide range of focused industry verticals. The HCL team consists of over 90,000 professionals of diverse nationalities, who operate from 31 countries including over 500 points of presence in India. HCL has partnerships with several leading global 1000 firms, including leading IT and technology firms. For more information, please visit www.hcl.com