Today’s knowledge intensive businesses need more flexible R&D organizations

News categories: enterprise and business strategy, management of intellectual capital, business performance management

As products have become more sophisticated and knowledge intensive and intangibles are dominating in any industry, companies have to spend larger amounts of money for R&D. The pharmaceutical, high tech and movie industry are known for the huge R&D spendings it requires upfront to come up with new products. But also other industries are fighting with significantly increasing R&D costs. So the time is ripe to think about new and more efficient ways to organize R&D.

At the annual (now the 7.) Stuttgarter Industriekolloquium in Germany, representatives from companies like Adolf Wuerth, Alcatel SEL, BASF, Daimler-Chrysler, Leuco Ledermann, MCC Smart, Robert Bosch, Trumpf and Voith Sulzer discussed the topic how to make R&D more flexible. Two main challenges for any R&D organization had been identified which require more flexibility in R&D:

1. time from product specification to market entry (time-to-market) has to be reduced, and

2. the relationship between short term changing customer requirements and preferences and between more long term product development routines within the R&D organization needs to be optimised.

The participants identified as a possible solution to differentiate within R&D much more between pre-development which is more driven by technology (called “platforms”) and final customer specific product or product variant development, which is more driven by short term customer needs. With this “platform strategy” companies will create competencies (platforms), which represent “options” at the back end for different products and services at the front-end. This allows to tie one part of the development process more to long term technology trends and research (the platform development) and the other part more to marketing, sales and product live cycle management and profitability and returns planning (the final product development).

But it became also clear, that such new development processes require also a new type of management system and measures. For example, the company should measure how many products had been developed based on a platform and how fast new products have been developed compared to the appropriate market dynamic in order to track not only results of final products but also of the pre-development platforms.

Source: “Flexibilisierungspotentiale in Forschung und Entwicklung” (Flexibility Potentials in Research and Development) by Hans Dietmar Bürgel, Professor for business economics at the University of Stuttgart / Germany, an article published in “Frankfurter Allgemeine Zeitung, August 14, 2000” – page 187 (in German).

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