HCLT White Paper: Research, Development and Engineering Effectiveness

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HCLT White Paper: Research, Development and Engineering Effectiveness

  1. 1. Research, Development and Engineering Effectiveness May 2012
  2. 2. Research, Development and Engineering Effectiveness | May 2012 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 © 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.
  3. 3. Research, Development and Engineering Effectiveness | May 2012 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. © 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.3
  4. 4. Research, Development and Engineering Effectiveness | May 2012 Abbreviations Sl. Acronyms Full form No. RD&E Research, Development and Engineering © 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.4
  5. 5. Research, Development and Engineering Effectiveness | May 2012 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? 1 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 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. © 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.5
  6. 6. Research, Development and Engineering Effectiveness | May 2012 What is RD&E Effectiveness? RD&E Effectiveness is the $ value generated by RD&E RD&E effectiveness is defined as the ratio of the value generated over time for every RD&E $ by the Research, Development and Engineering function over a invested period of time to the investments in RD&E. Value generated by RD&E ($) RD&E Effectiveness = Investments in RD&E ($) Components of RD&E Value  Intellectual Property RD&E is a large and complex organization in itself, and encompasses pure research, applied research, experimental  Products research, etc., product conceptualization, prototype development,  Services verification and validation and even engineering support. Depending on the type and complexity of product, expertise from  Skills and Competence multiple engineering domains is required. Given all the engineering INTELLECTUAL PROPERTY SKILL & COMPETENCE RD&E VALUE PRODUCTS SERVICES 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 © 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.6
  7. 7. Research, Development and Engineering Effectiveness | May 2012 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 The key to maximizing RD&E complex, global R&D resource management becomes challenging Effectiveness is the capability and so does R&D project/program management. to channelize diverse inputs RD&E effectiveness becomes a useful concept for decision makers to not only benchmark their R&D returns against other players, but into most relevant projects that also to benchmark the effectiveness of their distributed centers. The produce outputs which deliver concept is also applicable to identify key RD&E levers that influence business results. 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, 2,4 Inc.‟s DeWalt division , 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. © 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.7
  8. 8. Research, Development and Engineering Effectiveness | May 2012 Dewalt focused on identification of customers needs, and successfully converted that input into a product that added value to 3,4 the customer. Google adopted a 70-20-10 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 4,5 and services. Siemens AG spends 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 © 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.8
  9. 9. Research, Development and Engineering Effectiveness | May 2012 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. © 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.9
  10. 10. Research, Development and Engineering Effectiveness | May 2012 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 © 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.10
  11. 11. Research, Development and Engineering Effectiveness | May 2012 Author Info Chinmay M. Kale (Chinmay.Kale@hcl.com) 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. © 2011, HCL Technologies, Ltd. Reproduction prohibited. This document is protected under copyright by the author. All rights reserved.11
  12. 12. Hello, I’m from HCL’s Engineering and R&D Services. We enabletechnology led organizations to go to market with innovative productsand solutions. We partner with our customers in building world classproducts and creating associated solution delivery ecosystems to helpbring market leadership. We develop engineering products, solutionsand platforms across Aerospace and Defense, Automotive, ConsumerElectronics, Software, Online, Industrial Manufacturing, MedicalDevices, Networking & Telecom, Office Automation, Semiconductorand Servers & Storage for our customers.For more details contact eootb@hcl.comFollow us on twitter: http://twitter.com/hclersand visit our blog: http://ers.hclblogs.com/Visit our website: http://www.hcltech.com/engineering-services/About HCLAbout HCL TechnologiesHCL Technologies is a leading global IT services company, workingwith clients in the areas that impact and redefine the core of theirbusinesses. Since its inception into the global landscape after its IPO in1999, HCL focuses on „transformational outsourcing‟, underlined byinnovation and value creation, and offers integrated portfolio of servicesincluding software-led IT solutions, remote infrastructure management,engineering and R&D services and BPO. HCL leverages its extensiveglobal offshore infrastructure and network of offices in 26 countries toprovide holistic, multi-service delivery in key industry verticals includingFinancial Services, Manufacturing, Consumer Services, Public Servicesand Healthcare. HCL takes pride in its philosophy of Employees First,Customers Second which empowers our 83,076 transformers to createa real value for the customers. HCL Technologies, along with itssubsidiaries, 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.comAbout HCL EnterpriseHCL is a $6.2 billion leading global technology and IT enterprisecomprising two companies listed in India - HCL Technologies and HCLInfosystems. Founded in 1976, HCL is one of Indias original IT garagestart-ups. A pioneer of modern computing, HCL is a globaltransformational enterprise today. Its range of offerings includesproduct engineering, custom & package applications, BPO, ITinfrastructure services, IT hardware, systems integration, anddistribution of information and communications technology (ICT)products across a wide range of focused industry verticals. The HCLteam consists of over 90,000 professionals of diverse nationalities, whooperate from 31 countries including over 500 points of presence inIndia. HCL has partnerships with several leading global 1000 firms,including leading IT and technology firms.For more information, please visit www.hcl.com

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