The vast majority of R&D leaders and especially consultants focus on the efficiency of R&D: how to convert requirements into software against the lowest possible cost and resource needs. Although anyone from agile and scrum experts to continuous integration professionals focus on this challenge, very few people focus on the effectiveness of R&D. Effectiveness refers to maximizing the business value generated by the R&D investment.
In earlier posts, I have shared that research by us and others shows that somewhere between half and two-thirds of all features added to a system are waste. The frequency of use is so low that, if the feature is used at all, that it should not have been built in the first place. This means that even if the efficiency of building the feature may have been very high, the R&D effectiveness was very low as it did not deliver any business value.
Similarly, I have shared in earlier posts that in most companies the majority of R&D resources are spent on commodity functionality. In fact, 80-90% of R&D resources at many companies is allocated to commodity functionality. Although commodity functionality is needed for your system or product to work properly, the fact of the matter is that it is differentiating functionality that drives sales and consequently generates business value. Again, the efficiency of R&D in commodity may be very high, but the business value generated is very low.
Assuming that this is the case for your organization, how can you increase the effectiveness of your R&D? In the way that I work with companies in order to accomplish this, we focus on three activities. First, starting from the architecture of the system, we classify each component or subsystem as either being commodity, differentiating or innovative. If it is not possible to classify a subsystem into one of these categories, we decompose the subsystem into its constituent parts and repeat the exercise. Please note that for any component to be marked diffferent from commodity, there has to be real evidence from customers that the functionality exhibited by the component indeed is differentiating or innovative and consequently delivers business value.
Once the components that make up the system have been labeled, the next step is to estimate resource allocation for each component. There are different ways to do this, but the details are beyond the scope of this article. Once the current resource allocation has been established, we make a decision that commodity components will only receive R&D resources for bug fixing and for staying compatible with external software assets. For instance, when the company upgrades the operating system on top of which its software runs, also legacy components need to be adjusted. However, except for bug fixing, no R&D resources can be allocated to commodity components. If conducted properly this allows companies to reduce the allocation of R&D resources to commodity with 50% or more. This in itself will already double R&D effectiveness.
Over the last months, I have started to write on a new, shorter, book again that describes the approach that I discuss here in this blog post. This weekend I finished the draft of the first part of the book. If you would be interested in reading the draft and, if possible, sharing your feedback with me, please send me an email and I’ll send the PDF to you.
In the next article, I will discuss the other activities that we apply for improving R&D effectiveness. These activities are concerned with measuring the value of already realized features in deployed systems as well as new features. Concluding, very few R&D leaders and consultants focus on effectiveness. I believe that this is a huge missed opportunity for most companies. In our research and my engagement with a variety of companies, I have developed and applied techniques that allow companies to double the effectiveness of their R&D investments. Contact me at email@example.com if you want to know more!
As a side note: last week’s blog post was about getting stuck in your comfort zone and I invited you to have lunch with me to discuss how to get unstuck, to grow professionally and as a person and how to maximize the contribution each of us makes to mankind. I am overwhelmed by the responses and have already booked several lunches. In fact, I had the first meeting last Friday. Thank you so much! I promise to write up my reflections and learnings and to post these in future blog posts. If you didn’t see the post, but would still like to meet with me (in person or using other means), just drop me an email. And for those that already sent me an email: please give me a few days to get back to you!