Intelligence instead of fear
Innovation in times of crisis
The instability of the international financial markets has led to an acute capital crunch in recent months. Companies around the world were forced to curb spending. The consequences for innovation management and R&D: companies have thought twice about investments, projects have been shelved, and market launches for new products postponed. But the crisis is also a time for rethinking and offers new opportunities for innovation. Roland Berger Strategy Consultants has identified eight keys to success for research and development management in the current climate.
Systematic innovation management that provides long-term stability must extend beyond short-term considerations during the financial crisis. Globalization and the growing competitive pressure from developing nations have drastically stepped up the pace of important decisions. Many companies are relocating R&D activities directly to target markets in order to accelerate product launches. Furthermore, the sheer numbers and diversity of new product features has increased exponentially. Product development is becoming increasingly complex due to shrinking development cycles and an ever-growing number of variations. Last but not least, laws are continually changing all over the world, forcing companies with global operations to constantly rethink their innovation strategy and react with flexibility. But external pressure, whether from capital markets, the competitive environment or perhaps patent laws, doesn't have to be counterproductive. A challenging environment can accelerate decision-making and even produce innovative solutions, if companies follow some central success factors.
1 Customer-oriented development
Customers' needs are becoming more individualized and short-lived. Companies would thus be well-advised to specialize in flexible, modular solutions for product development. And companies must focus firmly on customer benefits throughout the process – in other words, they should improve only those functions that customers are actually willing to pay for.
2 Intelligent product architecture
A number of industries already employ platform and module structures that greatly reduce development and production costs while improving product quality. The automotive and mechanical engineering industries are leading this trend. The objective is to cut costs at any price – in these difficult times, even competitors are working together.
3 Prioritization and portfolio management
To weather the crisis, companies may need to set new priorities and reallocate resources. Combining a product and technology roadmap has proven effective for this task. A well-structured, detailed product roadmap creates transparency for upcoming product innovations. A thorough analysis can reveal possible blind spots as early as the planning phase, whether it affects planned models, potential markets or customers.
4 Optimizing vertical integration in development
Efforts to improve vertical integration must emphasize a precise analysis of core competencies and opportunities for differentiation from competitors. A process can be considered successful if it incorporates not only all of a company's competencies, but also the competencies of a development service provider. Determining the scope of vertical integration requires adaptable in- and outsourcing as well as flexible R&D capacity management.
5 Global expansion of the R&D division
The way a company manages its global R&D expansion is a key success factor. When businesses decide which countries they should move research activities to, market and technology access are often weighted heavily, while cost issues play a lesser role. In contrast, experience shows that cost plays a greater role when it comes to individual project decisions. In a recent study, Roland Berger Strategy Consultants identified four globalization types: globalization leaders, global marketers, technology hunters and opportunistic players. All four pursue different strategies based on their respective corporate strategies.
6 Efficient and effective product development processes
Within the development process, creating clear structures is essential. Effective and efficient product development processes require cross-functional, lean and transparent process descriptions that incorporate all the necessary functions, such as procurement, marketing and controlling, right from the start. Quality-gate systems are crucial for comprehensively structuring development projects and systematically evaluating individual functions (or all of them) at critical junctures for interim results. This is also done to ensure early recognition and management of potential time and resource bottlenecks along the critical path.
7 Effective management and control systems
Monitoring a process and the critical path relies heavily on an effective management and control system that records data quickly and efficiently and converts it into key performance indicators (KPIs). The available data must be useful, comparable and easy to understand. KPIs include critical indicators of time, budget and results for individual development projects, as well as for the entire project portfolio. An incentive system tied to KPIs can serve to motivate employees and ensure that activities are focused on overarching goals.
8 Benchmarking
Benchmark studies with a wide scope can support efficient product development. How competitors deal with similar situations and which best practices could be adopted are only one aspect. In their roles as innovation visionaries, CEOs should introduce a broader comparative approach that includes many sectors and industries. Establishing a benchmarking center within the company can be of enormous advantage here.
The instability of the international financial markets has led to an acute capital crunch in recent months. Companies around the world were forced to curb spending. The consequences for innovation management and R&D: companies have thought twice about investments, projects have been shelved, and market launches for new products postponed. But the crisis is also a time for rethinking and offers new opportunities for innovation. Roland Berger Strategy Consultants has identified eight keys to success for research and development management in the current climate.
Systematic innovation management that provides long-term stability must extend beyond short-term considerations during the financial crisis. Globalization and the growing competitive pressure from developing nations have drastically stepped up the pace of important decisions. Many companies are relocating R&D activities directly to target markets in order to accelerate product launches. Furthermore, the sheer numbers and diversity of new product features has increased exponentially. Product development is becoming increasingly complex due to shrinking development cycles and an ever-growing number of variations. Last but not least, laws are continually changing all over the world, forcing companies with global operations to constantly rethink their innovation strategy and react with flexibility. But external pressure, whether from capital markets, the competitive environment or perhaps patent laws, doesn't have to be counterproductive. A challenging environment can accelerate decision-making and even produce innovative solutions, if companies follow some central success factors.
1 Customer-oriented development
Customers' needs are becoming more individualized and short-lived. Companies would thus be well-advised to specialize in flexible, modular solutions for product development. And companies must focus firmly on customer benefits throughout the process – in other words, they should improve only those functions that customers are actually willing to pay for.
2 Intelligent product architecture
A number of industries already employ platform and module structures that greatly reduce development and production costs while improving product quality. The automotive and mechanical engineering industries are leading this trend. The objective is to cut costs at any price – in these difficult times, even competitors are working together.
3 Prioritization and portfolio management
To weather the crisis, companies may need to set new priorities and reallocate resources. Combining a product and technology roadmap has proven effective for this task. A well-structured, detailed product roadmap creates transparency for upcoming product innovations. A thorough analysis can reveal possible blind spots as early as the planning phase, whether it affects planned models, potential markets or customers.
4 Optimizing vertical integration in development
Efforts to improve vertical integration must emphasize a precise analysis of core competencies and opportunities for differentiation from competitors. A process can be considered successful if it incorporates not only all of a company's competencies, but also the competencies of a development service provider. Determining the scope of vertical integration requires adaptable in- and outsourcing as well as flexible R&D capacity management.
5 Global expansion of the R&D division
The way a company manages its global R&D expansion is a key success factor. When businesses decide which countries they should move research activities to, market and technology access are often weighted heavily, while cost issues play a lesser role. In contrast, experience shows that cost plays a greater role when it comes to individual project decisions. In a recent study, Roland Berger Strategy Consultants identified four globalization types: globalization leaders, global marketers, technology hunters and opportunistic players. All four pursue different strategies based on their respective corporate strategies.
6 Efficient and effective product development processes
Within the development process, creating clear structures is essential. Effective and efficient product development processes require cross-functional, lean and transparent process descriptions that incorporate all the necessary functions, such as procurement, marketing and controlling, right from the start. Quality-gate systems are crucial for comprehensively structuring development projects and systematically evaluating individual functions (or all of them) at critical junctures for interim results. This is also done to ensure early recognition and management of potential time and resource bottlenecks along the critical path.
7 Effective management and control systems
Monitoring a process and the critical path relies heavily on an effective management and control system that records data quickly and efficiently and converts it into key performance indicators (KPIs). The available data must be useful, comparable and easy to understand. KPIs include critical indicators of time, budget and results for individual development projects, as well as for the entire project portfolio. An incentive system tied to KPIs can serve to motivate employees and ensure that activities are focused on overarching goals.
8 Benchmarking
Benchmark studies with a wide scope can support efficient product development. How competitors deal with similar situations and which best practices could be adopted are only one aspect. In their roles as innovation visionaries, CEOs should introduce a broader comparative approach that includes many sectors and industries. Establishing a benchmarking center within the company can be of enormous advantage here.
