R&D: In-house vs. Outsourcing—Making the Right Product Development Decision

  • In-house R&D. I can tell you from experience that having everything developed by your in-house R&D department risks speed to market and dramatically increases risk of completion, especially if they are working on something entirely new to them. Your own team has limits in their resource capacity and expertise, and as competitive forces continue to put pressure on costs, these constraints surely will only increase—so pick the “go it alone” projects carefully and play to your strengths.
  • Hiring an outside developer. If you are willing to go to an outside innovation shop that has expertise in disciplines closely adjacent to what you’re looking to do, they may be able to turn around your project (or a key portion of your project) much more quickly than your own R&D team could, while dramatically reducing the risk of completion success, as they are already familiar with the challenges that will be encountered and have better insight as to how to overcome them. Drawing on their experience, they also may be able to give you a more solid timeline and possibly even a fixed cost, which dramatically reduces your cost and completion risks.
  • Licensing another company’s existing technology. With this option, there is less risk of completion, increased speed, and a limited learning curve. Many innovative companies have technologies “sitting on the shelf” that they never deployed, or are being used in a non-competitive way—these technologies can be turned into revenue generators for them and you by creating a win-win licensing deal. In some cases, outright acquisition of the company with the desired technology may even be the most logical path to consider.
Russ Rogers recently joined Chief Executive Network (CEN) as Managing Director of the Manufacturing Group. CEN is the peerto- peer membership organization exclusively for manufacturing presidents and CEOs, devoted to helping them improve their effectiveness and gain competitive advantage by learning from the experiences of their peers. Russ has deep expertise in manufacturing management: As divisional president of Essentra Porous Technologies, Russ oversaw growth of the business from $33 million to $164 during 11 years through a combination of product and technology diversification, business model change and globalization. The business grew to include six factories with customers in more than 64 countries and approximately 550 employees. Russ can be reached at russ@chiefexec.com or 804-234-4024.