Business Simulation Seminar

Research and Development

Research & Development (R&D)

What is it? Who does it? How much is spent on it? How is it done? How do you manage it? Special Considerations

Research & Development (R&D)

The creation of new products and services Can you name new products have been

introduced recently? Can you name services that need to be

developed? What does it take to create these

products and services? People? Resources?

The difference between “research” and “development”

R&D – Who does it?

Typically a dedicated organization May not be if a small business

People have detailed expertise in the product or service May be very technical – engineers

E.g. Tesla, Microsoft May be very creative – industrial

designers E.g. Oxo

May be technical and creative E.g. Apple

R&D – How much is spent on it?

R&D is typically ~7% of sales May be more in a technical

company E.g. Google, Microsoft

May be less in a commodity company E.g. American Paper, Coke

R&D – How is it done?

Can set out to create totally new, disruptive products E.g., Tesla, Volt, iPod, XM

Can incrementally change a product, i.e. new versions E.g., new DVD recorder, Cheerios with

Berries, Double Stuff Oreos, 2010 Ford Mustang

What are benefits and risks of each approach?

R&D – How is it done?

Create product requirements Ideally, requires marketing input

What do customers want? Can not do this for new, disruptive products –

never been done before Get input from manufacturing, others

Create a prototype Test to see if that’s what is wanted Understand costs, manufacturing and delivery

issues Create an initial product

Test internally – “Alpha testing” Test externally – “Beta testing”

R&D – How is it done?

In addition to product or service, need to develop documentation and training

Measure readiness according to acceptance criteria

Formally hand off to manufacturing and marketing

When to deploy?

Time

“Pre

ssu

re”

Pressure to deploy

Pressure to improve

Practical answer: you deploy the product or service when thepressure to deploy it is greater than the pressure to improve it.

R&D – How do you manage it?

Requires strong project management skills Manage resources (people, capital) Manage time Manage features

Manage trade-offs between resources, time, and features

Know the critical path and watch it like a hawk! R&D staff are typically different than other

employees Self motivated (Theory Y) Critical Often perfectionists (why could this be a problem?)

R&D – Special Considerations

Long projects involve greater risk Need to develop new products

before they are needed R&D needs to consider

Customers Manufacturing Training Sales & marketing

R&D is critical to the long-term health of the business

R&D and the Simulation

What is your R&D strategy? Short or long projects? Modify products or develop new ones? How new will your products be?

What is the R&D interaction with production? Automation?