HCLT White Paper: Research, Development and Engineering Effectiveness

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



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.



4

Abbreviations

Sl.

No.

Acronyms Full form

RD&E Research, Development and Engineering



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.

http://www.booz.com/global/home/what_we_think/featured_content/innovation_1000_2010



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



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.



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



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.



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



http://www.baselinemag.com/c/a/Business-Intelligence/Convergence-The-Key-to-Successful-Innovation/

http://www.baselinemag.com/c/a/Business-Intelligence/Convergence-The-Key-to-Successful-Innovation/

http://money.cnn.com/magazines/business2/business2_archive/2005/12/01/8364616/index.htm

http://money.cnn.com/magazines/business2/business2_archive/2005/12/01/8364616/index.htm

http://www.booz.com/media/file/sb61_10408-R.pdf

http://www.siemens.com/investor/pool/en/investor_relations/financial_publications/speeches_and_presentations/cmd_healthcare_2012/cmd_healthcare_michael_reitermann.pdf





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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.

For more details contact [email protected]

Follow us on twitter: http://twitter.com/hclers

and visit our blog: http://ers.hclblogs.com/

Visit our website: http://www.hcltech.com/engineering-services/

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

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HCLT White Paper: Research, Development and Engineering Effectiveness

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