Research & Development (R&D) costs are an issue to address if you have any significant amount of money expended in this way. Make sure that your product development costs are economical.
Scientists may have difficulty explaining to you, in “English”, about why the product development project is important and why the costs are necessary.
Push hard for a pragmatic analysis of what the research will produce. Also its probability of success and the likely income benefits.
Don’t let the scientists do the product development alone. They are likely oblivious to the market’s demand for their innovations. Involve marketing and other staff in a reality check of each project.
Scientists are often very pragmatic. Therefore once they are over their initial shock and horror, they may be quite positive or at worse neutral about the review of the costs.
R&D can be loosely broken up into 5 categories:
- Pure or basic R&D, for example, nuclear fission.
- New product development R&D, for example, a new hair shampoo.
- Improvement to existing products.
- Process R&D which will work on saving you manufacturing costs in your production line.
- Customer R&D where your scientists are working to better understand the customer and how to make more sales to them.
It doesn’t take much to realise that most of your product development cost effort will be most Profit-productive in numbers 3 to 5 and somewhat in number 2.
Number 1, pure R&D, is much less important unless you can see a very valuable patent coming out of it.
Go to the Campaign: C2.4.3 Cost Reduction – Products to Discard
Take a different approach to your product development cost and reduce costs at the same time.