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 “Pressure” Pressure to deploy Pressure to improve Practical answer: you deploy the product or service when the pressure 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?