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R&D Outsourcing Strategy en Co-creation


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So how can companies outsource its R&D (or at last a part of R&D) in order to increase flexibility and effectiveness of R&D, whilst maintaining focus and dedication to the value chain’s needs?

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R&D Outsourcing Strategy en Co-creation

  1. 1. R&D Sourcing Strategy: increase effectiveness An Innovation Driven Procurement (IDP) Service Capgemini Consulting is the strategy Tags: and transformation consulting brand of Capgemini Group • Business Innovation • Procurement • Outsourcing • Business Model Innovation • Open Innovation • Co-creation
  2. 2. Outsourcing R&D requires a substantiated choice of the sourcing mode, as well as close alignment of the business models with Suppliers & Partners Many companies source the majority of their revenues from suppliers and Partners. Outsourcing initiatives has been increasing significantly over the years. Following the Situation Open Innovation concept, companies have initiated co-creation with supplier and partners. The next step is starting outsourcing R&D. R&D is one of the most protected business function in the large companies. Driven by IP and risk management this is not something likely to share with the outside world. Complication There is hardly any experiences, leadership, culture, methods and tools available in the current organisation to really open up or even to outsource R&D effectively. So how can companies outsource its R&D (or at last a part of R&D) in order to increase Question flexibility and effectiveness of R&D, whilst maintaining focus and dedication to the value chain’s needs? Companies should assess the criticality of their innovation programs and decide on the appropriate model of sourcing using the Global Sourcing of Services (GSS) model. The GSS model is a decision support tool for the right sourcing strategy for their Business Services and or functions. Answer Once an outsourcing decision has been made, suppliers/partners must be selected based on their ability and willingness to take over (part of) R&D. The business models need careful alignment and for current suppliers/partners, the change from contractor to developer will be substantial. 2 31/03/2009
  3. 3. Open Innovation concepts can increase the effectiveness of R&D by the concept of “Spin IN and Spin OUT” IDP based on Open innovation Value chain internal mechanisms Allowing suppliers to leverage innovations in other value chains for increased profitability Connecting existing suppliers with engineers Searching and stimulating new developments within the existing supply base Set up joint development programs, co-creation, partnerships Provide toll gate services for new technologies throughout the innovation funnel Value chain external mechanisms Ensuring influx of innovations from other value chains through suppliers Scouting for new developments outside the existing Innovators outperform the market supply base and in completely different markets 3,4% Creating flexibility in supplier segmentation and 14,3% dependency 11,1% Building scenarios of future markets with boundary spanning networks Connecting with new ventures inside & outside the product chain 0,4% Changing the market focus or future market Return to Shareholders Margin Growth Source graphic: Prof Henry Chesbrough UC Berkeley, Open Innovation: Renewing Growth from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis, Sept 27, 2004 3 31-3-2009 Source bar charts: S&P 1200 1995-2005 research
  4. 4. A trade-off must be made how to source a Research % Development program, by deciding on the optimal Ownership, Location and Management style The Global Sourcing of Services (GSS) model is a decision support tool which helps organisations to define the right sourcing strategy for their services/functions. Eight different sourcing modes are defined Offshore varying in: Location - Location (onshore or offshore) - Ownership (in-house or outsourced) Onshore Light - Management Style (light or tight management) Management Tight Style The GSS model ranks the different sourcing In-house Outsourced options based on attractiveness by Ownership evaluating the R&D program in scope, the organisation and the environment 4 31-3-2009
  5. 5. Each R&D program can be analysed by five sets of Environmental Characteristics that affect the choice of the right Sourcing Mode Each set of characteristics provides a unique insight into what the current maturity and preferred sourcing strategy is for the R&D Service Organisation’s program in scope Characteristics Characteristics Together they form the basis of the sourcing strategy and will facilitate SOURCING DECISION organisations to make these Customer Competitor sourcing decisions more effectively Demand Characteristics Characteristics by providing a systematic approach to diagnosing decision parameters Supply Market Characteristics Based on the outcome of the GSS model and the subsequent discussions, companies will be able to determine their strategy based on research and best practices 5 31-3-2009
  6. 6. Using the analytics of the GSS model we build a Realistic Future Positioning of the R&D function of the company Example To-Be: Outsourced, The analysis of an R&D program Offshore and Tight Management. can result in a change in Sourcing Offshore Supplier is seen as Mode. For any Sourcing Mode, (strategic) partner there are two options with respect to suppliers: Location 1. Develop the current supply base Onshore 2. Extend and/or change the current Light supply base Management Style Tight As-Is: In-house, Onshore In-house Outsourced and Tight Management. Supplier is seen as Ownership contractor Analyzing the R&D program can result in a different supplier relationship or Innovation Partnership 6 31-3-2009
  7. 7. The Four Collaboration Enablers help a company to decide for the right partner to source Levers Levers Definition of Organization objectives Power struggle Evaluation system Key processes Remuneration Procedures modes Dashboards Supplier and indicators development IT systems ARE THEY IS THERE AN Pressure / Interface with constraints other functions ABLE INTEREST TO DO IT? FOR THEM? DO THEY DO THEY WANT KNOW Levers Levers TO DO IT? HOW TO DO IT? Training Participation to the conception Knowledge transfer Emulation, Pride Coaching Management modes Skills import Support basis Communication Collective project Experimentation Simulation exercise If any of the four enablers is answered with “no”, the company should decide whether to upgrade the current supplier/partner, or to source for a new or additional supplier/partner 7 31-3-2009
  8. 8. Once the suitable sourcing mode and supplier/partner is defined, the Business Models of the company and supplier/partner need to be synchronised The business model shows the relationships between the customer, the value offered to the customer, and the organisational setup making it possible Resources Offer Customer Co-creation As soon as the company decides to move activities to the partner network (suppliers), core capabilities within the Partner Customer Network Relationship company and supplier will need to shift This shift in capabilities must be Core Value Value Distribution Customer Capabilities Configuration Proposition Channels Segment managed carefully in order to prevent redundancies, or worse, gaps Furthermore, the deal structure must fit Cost Revenue PROFIT Structure Streams the cost and benefit drivers of both Financial Performance parties. The four enablers of collaboration must be monitored continuously 8 31-3-2009
  9. 9. Capgemini has extensive experience in sourcing R&D and supporting and managing suppliers in high-tech environments Outsourcing Piloted appropriate methods & tools transition Set up supplier mgt organization R&D Supported R&D transition to suppliers Increased supplier R&D capability management Outsourcing Capgemini conducts R&D activities for Airbus in a long standing partnership R&D and Collaboration methods and tools are set up for management of R&D by Airbus Other R&D and management Supply chain control for Siemens credentials supplier Supplier mgt optimization for Basell Supplier R&D mgt for Snecma Co-innovation process for Faurecia 9 31/03/2009
  10. 10. Koen Klokgieters| Capgemini Consulting Vice President Business Innovation Consulting +31 (0) 6 27159293 Robbert den Braber | Capgemini Consulting Senior Consultant Procurement Transformation +31 (0) 6 15030901 Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group