An insight from the “Decoding R&D Performance” study

Today, most R&D organizations are facing the question of how to increase efficiency, reduce time to market and drive innovativeness while ensuring deliverability at the same time. Their dependencies are complex and depend on the individual situation. The recent 3DSE study “Decoding R&D Performance” has set the target to uncover the success factors of high performing R&D organizations. Thereby, the 7 most critical challenges in R&D organizations were identified. This insight outlines the current challenges in R&D organizations and describes possible solutions for boosting your R&D performance.

To identify success patterns of high performing R&D organizations, 3DSE performed the recent study “Decoding R&D performance” through a quantitative survey and follow-up one-on-one deep dive interviews where 3 key questions were answered.

1. How can R&D performance be measured under today’s challenges?
2. How do different companies differ in terms of their R&D performance?
3. What are the key levers to achieve high R&D performance?

Decoding challenges in R&D organizations

The 3DSE R&D performance study revealed 7 critical challenges R&D organizations are facing today:

1. Acquire and deploy the skillset of the future
2. Determine a future proven target state and strategy
3. Stay ahead of competition
4. Master R&D complexity
5. Lead the change towards a sustainable future
6. Develop tomorrow’s digital solutions
7. Rethink how work is done in the new normal (post COVID)

These challenges are not specific for any industry but are present in all 10+ sectors surveyed in the study.

Figure 1: Overview of today’s 7 critical Challenges in R&D Organizations

Overcoming the 7 critical challenges in R&D organizations

1. Challenge: Acquire and deploy the skillset of the future

One of the greatest challenges in R&D organizations across all industries is to acquire and deploy the skillset of the future. As the technology is changing from mainly mechatronic systems towards digital solutions, it is crucial for companies to build up the required digital competencies such as data intelligence and virtual development but also foster holistic system thinking. Qualification programs of employees and recruitment of new talents are therefore equally important. As not only the technology is changing, but also the way we work together. It is increasingly important to create an entrepreneurial and collaborative culture and mindset to remain successful and attractive to new talent.

2. Challenge: Determine a future proven target state and strategy

Another important challenge in R&D organizations is to determine a futureproof target state. This target state is aligned with the overall strategic orientation.

In general, there are four strategic directions that form a tension field.

• Disruption: The companies’ focus is on innovation and new business development – offering a valuable product and service portfolio.
• Customer Orientation: The companies are especially responsive to specific customer needs, react flexibly to changing customer requirements and bring new products and services to market quickly.
• Deliverability: Companies have been good at delivering new products and services as planned and according to the required specification.
• Synergy: The goal of these companies is to be as efficient as possible, keeping the product and organizational complexity low, and having strong focus.

The target state can usually be allocated to one or two of these strategic directions. As the strategic directions are opposing, the organization needs to balance them and set a focus for the optimal target state. Measured by KPIs the targets can be tracked and realigned if necessary. The chosen directions and targets might also be influenced by competitors who are facing similar challenges. A comprehensive market understanding is therefore an additional important factor to define a future proven target state.

Figure 2: Strategic Directions

3. Challenge: Stay ahead of competition

Staying ahead of the competition might be obvious but is just as important to manage as other challenges. This becomes even more relevant with the growing global competition that is getting stronger and demands higher margins.

As today’s market is characterized by its increasing volatility and speed, it is important to improve time-to-market in order to position oneself and maintain market share. In addition to increased pace, innovative solutions and business models enable R&D organizations to stand out in the market and take a leading position.

4. Challenge: Master in R&D complexity

To master R&D complexity remains a critical challenge in R&D organizations across all industrial sectors. On the one hand, this results from increased connectivity and interdependencies of solutions but also from their increased internal variance. One way to improve R&D performance is to therefore decrease internal variance and lever 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 forces R&D organizations to consider the products holistically along the entire lifecycle. This requires advanced system and solution competencies within the R&D organization.

Besides product related factors as described above, the development methods themselves play an increasing role to master complexity in R&D organizations. Common levers are agile development and the digitalization of processes. While the introduction of agile principles allows for flexibility and customer focus, the digitalization of development processes benefits the overall efficiency. Both are important to gain an advantage and master the increased R&D complexity.

5. Challenge: Lead the change towards a sustainable future

One major challenge the world is facing today is the preservation of our nature. This is caused by the growing awareness of the effects that, among other things, CO2 has on our environment as well as an overall mindset shift of the younger generation. Another challenge in R&D organizations is to proactively shape a sustainable future. Innovativeness is key to develop the new solutions in all industries.

This – in particular – influences the automotive industry, where engines and fuels as we know them are transforming towards more sustainable alternatives. As the automotive industry shows, the aspiration for a more sustainable way of transport will not only influence the products, but also impact the overall concepts of transportation (e.g., car sharing). Hence, the elaboration of new business models will form 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 changing just as fast. This has already been recognized in 1965 by G. Moore and his famous law. (Cramming more components onto integrated circuits (Gordon E. Moore, April 19, 1965)).

However, through digitalization not only the products themselves are changing but also their product lifecycles have to be reconsidered. In particular, predictive and data-driven maintenance gains in importance. Thus, relevant data must be collected, organized, synchronized, and made available and useful in an efficient way.

Furthermore, the expectations towards software and software development have increased tremendously due to digitalization. To master digitalization is therefore a key lever to develop tomorrow’s solutions.

7. Challenge: Rethink how work is done in the new normal (post COVID)

Finally, the corona crisis imposed new challenges not only in our day to day live, but also in terms of corporate culture.

The pandemic alongside with supply chain challenges and chip shortages taught us how to deal with a quick changing market. It has never been more difficult to predict the market development, since a lot of variables come with high levels of uncertainty. However, aside from the major impact COVID-19 has had on many markets, it also changed the availability of resources. This makes it especially complicated for a predictive stringent planning to ensure efficiency.

Besides the economic consequences of corona, corporate culture has also been influenced by the large amount of time people spend working in home office, which can negatively affect the improvement of their skillset. Despite these challenges, it is important to come out of the crisis stronger than before and rethink how work is done in a sense of flexibility, efficiency, and employee relations.

Conclusion

This insight uncovered a landscape of the most critical challenges in R&D organizations and their importance in improving a companies’ performance and provided initial levers to overcome those challenges. Thereby, each challenge has an individual manifestation and affects the various industries in its own way.

However, these challenges are interrelated to each other and need to be considered holistically. Digitalization, for example, plays an important role in the challenge to stay competitive and in acquiring new skillsets. Another example is the corona crisis, which has turned our private lives upside down and challenged us to determine a future proven target state in an unpredictable environment and not only disrupted the different markets, but also corporate culture. It is now more common to do work “online”. While this released the potential of increased flexibility, remote work is taking its toll on interpersonal interaction.

Beyond that, the R&D performance study uncovered success patterns and capabilities that will determine the success and performance of R&D organizations in the future. With their expertise, 3DSE is a strong partner to overcome the individual and most critical challenges in R&D organizations.