An insight from the “Decoding R&D Performance” study
Today, most R&D organizations are grappling with the question of how to increase efficiency, reduce time to market, and drive innovation while ensuring deliverability at the same time. Their interdependencies are complex and vary depending on the individual situation. The recent 3DSE study “Decoding R&D Performance” set out to uncover the success factors of high-performing R&D organizations. In doing so, it identified the seven most critical challenges facing R&D organizations. This insight outlines the current challenges in R&D organizations and describes possible solutions for boosting your R&D performance.
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To identify patterns of success among high-performing R&D organizations, 3DSE conducted the recent study “Decoding R&D Performance” through a quantitative survey followed by in-depth one-on-one interviews, during which three key questions were addressed.
- How can R&D performance be measured in light of today’s challenges?
- How do different companies differ in terms of their R&D performance?
- What are the key factors for achieving high R&D performance?
Decoding Challenges in R&D Organizations
The 3DSE R&D performance study identified seven critical challenges facing R&D organizations today:
- Acquire and apply the skills needed for the future
- Determine a future-proof target state and strategy
- Stay Ahead of the Competition
- Mastering R&D Complexity
- Lead the way toward a sustainable future
- Develop tomorrow’s digital solutions
- Rethink how work is done in the new normal (post-COVID)
These challenges are not specific to any single industry but are present in all 10+ sectors surveyed in the study.
Figure 1: Overview of the 7 Critical Challenges Facing R&D Organizations Today
Overcoming the 7 Critical Challenges in R&D Organizations
1. Challenge: Acquire and apply the skills needed for the future
One of the greatest challenges facing R&D organizations across all industries is acquiring and deploying the skills needed for the future. As technology shifts from primarily mechatronic systems toward digital solutions, it is crucial for companies to develop the necessary digital competencies—such as data intelligence and virtual development—while also fostering a holistic systems approach. Employee training programs and the recruitment of new talent are therefore equally important. This is because not only is technology changing, but so is the way we work together. It is increasingly important to foster an entrepreneurial and collaborative culture and mindset in order to remain successful and attractive to new talent.
2. Challenge: Determine a future-proof target state and strategy
Another important challenge in R&D organizations is to define a future-proof target state. This target state is aligned with the overall strategic direction.
In general, there are four strategic directions that create a field of tension.
- Disruption: The companies focus on innovation and new business development—offering a valuable portfolio of products and services.
- Customer Orientation: These companies are particularly responsive to specific customer needs, react flexibly to changing customer requirements, and bring new products and services to market quickly.
- Deliverability: Companies have been successful in delivering new products and services as planned and in accordance with the required specifications.
- Synergy: The goal of these companies is to be as efficient as possible, keeping product and organizational complexity to a minimum, and maintaining a strong focus.
The target state can usually be aligned with one or two of these strategic directions. Since the strategic directions are opposing, the organization needs to balance them and establish a focus for the optimal target state. Measured by KPIs, the targets can be tracked and realigned if necessary. The chosen directions and targets may also be influenced by competitors facing similar challenges. A comprehensive understanding of the market is therefore another important factor in defining a future-proof target state.
Figure 2: Strategic Directions
3. Challenge: Stay Ahead of the Competition
Staying ahead of the competition may seem obvious, but it is just as important to manage as other challenges. This becomes even more relevant given the growing global competition, which is intensifying and demanding higher margins.
As today’s market is characterized by increasing volatility and speed, it is important to improve time-to-market in order to establish a strong market position and maintain market share. In addition to this accelerated pace, innovative solutions and business models enable R&D organizations to stand out in the market and take a leading position.
4. Challenge: Mastering R&D Complexity
Mastering R&D complexity remains a critical challenge for R&D organizations across all industrial sectors. On the one hand, this stems from the increased connectivity and interdependencies of solutions, but also from their increased internal variance. One way to improve R&D performance is therefore to reduce internal variance and leverage synergies. Internal commonality can be achieved by building products on a stable platform architecture and following a modular approach.
In addition, the increased complexity and connectivity of solutions and systems compel R&D organizations to take a holistic view of products throughout their entire lifecycle. This requires advanced system and solution expertise within the R&D organization.
In addition to the product-related factors described above, the development methods themselves are playing an increasingly important role in managing complexity within R&D organizations. Common strategies include agile development and the digitization of processes. While the adoption of agile principles enables flexibility and a customer-centric approach, the digitization of development processes enhances overall efficiency. Both are essential for gaining a competitive edge and managing the growing complexity of R&D.
5. Challenge: Lead the change toward a sustainable future
One major challenge the world faces today is the preservation of our natural environment. This is driven by growing awareness of the effects that, among other things, CO2 has on our environment, as well as an overall shift in the mindset of the younger generation. Another challenge for R&D organizations is to proactively shape a sustainable future. Innovation is key to developing new solutions across all industries.
This—in particular—is influencing the automotive industry, where engines and fuels as we know them are evolving toward more sustainable alternatives. As the automotive industry demonstrates, the drive toward more sustainable transportation will not only shape products but also transform overall transportation concepts (e.g., car sharing). Consequently, the development of new business models will become an additional pillar in the future of R&D organizations.
6. Challenge: Develop tomorrow’s digital solutions
In an ever-changing world driven by digitalization, products and solutions are evolving just as rapidly. This was already recognized in 1965 by G. Moore and his famous law. (Packing more components onto integrated circuits (Gordon E. Moore, April 19, 1965)).
However, as a result of digitalization, not only are the products themselves changing, but their product lifecycles must also be reevaluated. In particular, predictive and data-driven maintenance is becoming increasingly important. Therefore, relevant data must be collected, organized, synchronized, and made available and useful in an efficient manner.
Furthermore, expectations regarding software and software development have risen dramatically as a result of digitalization. Mastering digitalization is therefore a key factor in developing the solutions of tomorrow.
7. Challenge: Rethink how work is done in the new normal (post-COVID)
Finally, the COVID-19 crisis presented new challenges not only in our daily lives, but also in terms of corporate culture.
The pandemic, combined with supply chain challenges and chip shortages, taught us how to navigate a rapidly changing market. It has never been more difficult to predict market trends, as many variables are subject to high levels of uncertainty. However, aside from the major impact COVID-19 has had on many markets, it has also altered the availability of resources. This makes it particularly difficult to develop rigorous, predictive plans that ensure efficiency.
In addition to the economic consequences of the pandemic, corporate culture has also been influenced by the large amount of time people spend working from home, which can hinder the development of their skills. Despite these challenges, it is important to emerge from the crisis stronger than before and rethink how work is done in terms of flexibility, efficiency, and employee relations.
If you want to learn more about how to improve your R&D performance remotely, take a look at our paper “Remote R&D Optimization—Challenges, Obstacles, and Solutions in a Virtual Environment.”
Conclusion
This insight revealed the most critical challenges facing R&D organizations and their importance in improving a company’s performance, and provided initial strategies for overcoming those challenges. Each challenge manifests itself differently and affects various industries in its own way.
However, these challenges are interrelated and must be considered holistically. Digitalization, for example, plays an important role in the challenge of remaining competitive and acquiring new skill sets. Another example is the COVID-19 crisis, which has turned our personal lives upside down and challenged us to define a future-proof target state in an unpredictable environment—a crisis that has disrupted not only various markets but also corporate culture. It is now more common to work “online.” While this has unlocked the potential for greater flexibility, remote work is taking a toll on interpersonal interaction.
Beyond that, the R&D performance study identified patterns of success and capabilities that will determine the success and performance of R&D organizations in the future. With its expertise, 3DSE is a strong partner in overcoming the specific and most critical challenges faced by R&D organizations.
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