Business Simulation Seminar

1. Business Simulation Seminar Research and Development

2. 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

3. 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”

4. 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

5. 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

6. 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?

7. 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”

8. 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

9. When to deploy? Pressure to deploy “Pressure” Pressure to improve Time Practical answer: you deploy the product or service when the pressure to deploy it is greater than the pressure to improve it.

10. 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?)

11. 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

12. 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?