Volume 7, 
January, 2009


Where's Your Bathing Suit?
Wise R&D Investments Won't Leave You Exposed


Sheila Mello

There are lots of naked business people on the beach these days.

Warren Buffett conjured up this unforgettable image when he said “It is only when the tide goes out that you know who was swimming naked.” Buffett's reference was to those who act carelessly in financial matters, but those who approach product development and innovation haphazardly leave themselves just as vulnerable.

When times are good, you can muddle along with a cumbersome process for managing research and development. You can throw money at projects without a high level of confidence they'll pay off. You can use fuzzy information about what's bugging customers rather than gather hard data. You can afford a re-do when you travel down a design dead-end. In short, you can paddle around without a suit, and no one will be the wiser.

When times get tough, this slapdash approach leaves you exposed. The margin for error is slimmer. You need to be sure you're investing the right amount in the right projects. Here are three practices, which, if you have been executing them faithfully, will ensure you're fully covered as the tide ebbs:

  • Determine what customers value before investing in new projects;
  • Insure that developers focus on increasing gross margins while creating customer value;
  • Execute only value added activities in the product development process.

These 34 words sound simple enough. Translating them into fruitful activity can be tougher. For an idea of how a biomedical manufacturer put these ideas into practice, take a look at the video about Beckman Coulter's development of a new diagnostic system. You'll see the practical, everyday work involved in understanding customer value and translating it into an innovative product.

You don't need to spend a lot of money to undertake this work. There are lots of opportunities to make small changes with big payoffs. Maybe you need to streamline a cumbersome development process; maybe you can conduct inexpensive research to hone in on customer needs.

The bottom line: when the economic tide goes out, you need to intelligently reduce R&D resource requirements without shutting off the valve on the flow of products and services. An outside perspective can help you see clearly how to do this.

For more ideas about small changes to ensure you're the one with the bathing suit on, give me a call or drop me an e-mail.

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