HCLT White Paper: Research, Development and Engineering Effectiveness

Research, Development and Engineering
Effectiveness

May 2012

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.


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.

3


Abbreviations

Sl. Acronyms Full form
No.

RD&E Research, Development and Engineering

4


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.

5


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

6


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.

7


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

8


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.

9


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

10


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.

11

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 eootb@hcl.com
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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