most of the time companies go bankrupt because development is expensive
Any research or sources to back such a claim before continuing on to the question? Cursory websearching about top causes of bankruptcy and R&D costs doesn’t come up.
I haven’t been in a company that has gone bankrupt, but I’ve been in a few that struggled. The biggest problem is usually not the tech. It’s to align the product with the customer needs.
You can have the most advanced tech in the world. If it doesn’t solve anyone’s problems, no one will buy it.
top causes, not factors
if your R&D costs make your business unprofitable, something’s going to come along and topple it, same as how “smoking” isn’t a cause of death but lung cancer is a very major cause of death
I would still say citation is needed. Of course if a company’s R&D costs balloon large enough they will topple a company. Is that really what’s happening in bankruptcies “most of the time”?
On its face that looks like an impossible claim because of the number of bankrupted companies that don’t even have R&D.
Isn’t it the lack of R&D that kills companies? It’s possible to have too much R&D, but that pretty much only applies to startups.
What do you mean by “companies”? Tech companies? There’s way more than that. Restaurants, insurance, real estate, farming, radio stations, schools, book publishing, auto parts dealer, grocery stores, nursing and medical home care, and on and on. What are they R&Ding that would drive them to bankruptcy?
I get the sense OP meant tech companies but didn’t say that. That drastically changes their argument/question. It’s still quite the claim. Massive amounts of R&D $ is fine so long as there’s a way to get it back.
A big mismatch in R&D$ in and profit out is a problem that could lead to bankruptcy. But the $ spent on R&D isn’t the root cause, the next “why” is the poor financial management and poor market research that led the company to make bad R&D investments.
What are they R&Ding that would drive them to bankruptcy?
It’s what they’re not R&Ding that would cause them to not be competitive and thus go bankrupt:
- Restaurants - new recipes to keep customers coming
- insurance - mostly innovation in marketing and self-service
- real estate - lower cost materials (for new construction), faster pairing of buyers to sellers, etc
- farming - better yields (esp GMOs), efficient land and water use, storage, etc
- radio stations - access to customers outside of radio frequencies (e.g. apps), constantly changing radio programs to differentiate from competitors, etc
- schools - new teaching methods, adapt to new tech, etc
- book publishing - marketing(also applies to video game publishing)
- auto parts dealer - inventory and supply chain optimization, adjusting to changing markets (e.g. EVs), etc
- grocery stores - supply chain, marketing, faster checkout, more customers per square foot
- nursing and medical home care - nursing is always evolving, esp geriatric care
Pretty much every company needs to innovate or they’ll get outcompeted, that’s the way market economies work. The only companies that don’t need to innovate are monopolies, and we generally oppose those because stagnation isn’t good.
If we’re going to call those R&D (which I have a difficult time calling marketing that but fine for sake of moving discussion further), we loop back to cause of bankruptcy. If a restaurant goes bankrupt from sinking too much $ into developing new recipes, or an insurance company on too much marketing, that’s not a cost of R&D problem, that’s a mismanagement problem.
So to OPs question of how to make R&D affordable, the answer is to not make stupid investments in excessive R&D that is poorly understood for how likely it is to return the investment. Study the market, identify and mitigate the risks, manage a budget, don’t get caught up in the VC tech bubble mindset of “innovate or die” because that is a catchphrase and not an actual business management technique.
Are we getting off track? I think so. My initial point to OP was 1) I don’t believe most bankruptcies are caused by R&D investments. And if I’m wrong on that point and it really is as OP says 2) some really stupid business people need to learn not to take so many big risks that they can’t survive when the risks materialize.
- Don’t buy supplies. Workers often think they need things to do their jobs but they’re always wrong
- Make the lights flicker. By flickering the lights continually, you save 50% on electric bills without major loss of visibility
- Deny PTO requests. It doesn’t cost anything to have employees work through their vacation. You’re already paying for that time, might as well get some productivity out of it.
- Salary = 24/7 employee. By paying your R&D staff per year, you can extract a year’s worth of productivity every year. The sleepless delerium is good for creativity
- Skip the R. Research doesn’t make you any money. It’s the Development of new products that makes new money. Order your employees to Skip the R, which consumes a significant portion of R&D budgets
- Creative bonuses. A pizza party is bonus enough. Everybody loves pizza, and when they see you come in with that piping hot goodness it hacks their brains into liking you even more
- Lead the charge. Polls show that C- and mid-level management can find creative ways to help the process along, and often while skipping large portions of unnecessary work, by spending time showing R&D staff how it’s done
- Coordinate often. Further polls show that the number one reason things take too long is that nobody is asking for progress reports. Progress reports are best delivered in person, in the presence of the entire team. Zoom and other tools can support up to 3500 meeting participants, but even better is to clear out any lab space for a regular all-hands meeting. SCRUM stands for Standing Creatively, Reassessing the Utility of Meetingless time
You have to get a little creative to slash those R&D budgets, but in the long run it can pay off in terms of bonuses and promotions. Getting noticed by even higher management is important. You got this!
The most annoying one for me was management asking us turn our monitors off every day before going home. I hooked up a Kill-a-watt to my monitor and measured the actual electricity it uses and posted a super satirical comment about how much we’d save on electricity (esp given our low electricity prices) and that’s the last I heard them mention it.
Penny wise, pound foolish
You forgot about asking your employees to bring their own toilet paper. That saves a couple bucks.
I question the theory of r&d ->bankruptcy, most don’t go under. Xerox not being Microsoft had nothing to do with r&d cost.
r&d is the cost of not falling behind. For smaller company a good work environment and motivated staff is important. The people do offhour research because they like stuff they are doing. They don’t do it for the company, but they bring the skills and knowledge back to work.
Liking the work you do? Are you deranged?! What’s next, fair compensation?!
Inhouse founding across employes. Options are unlimited if you are willing to share 10% of future profit and worker is willing to cut their pay by same amount for a year of funding. Most companies don’t want to do it and just trying to milk the workers and r&d as soon as possible. Create business partners, not cows that if don’t give milk you immidiately put into slaughterhouse.
This question is a bit too broad to get the answers you may want.
Here’s what I think we need to know to give the best answers:
- What general industry are you working in?
- How ‘bleeding edge’ is the research?
- Are you really pushing the envelope with new untested ideas, or just innovating incrementally around market-tested concepts?
- Is the R&D for a totally new company or is it occurring within an established company?
- What expenses are absolutely required, including labor, capital and operational costs? Do you need just a pen and paper and someone to use them? Or do you need a multi-billion semiconductor fab?
Take some of those massive profits and fund your R&D division instead of paying them out. That’s how the big companies did it back in the glory days.
My company sold a major asset and the proceeds were enough to buy every employee a Lamborghini. But instead of rewarding employees or investing in growth, we issued a massive dividend and stock buyback (we don’t have an employee stock program). Feels bad man.
Make R&D more affordable? Lower your countries healthcare costs and rent.
Lower employee cost…
Seriously though, people who can do good R&D are not cheap (rightfully so IMO) and they often spend thousands of hours before anything they do can be monetised and start earning a company money. It’s a big expense that a company need to be able to absorb for an unknown amount of time and without any guarantees that the current direction pans out into something profitable.
Depending on the industry, regulatory requirements are also expensive to fulfill and another barrier to slow things down and increase the required man hours to reach a finished product.
Open source the research! I know people don’t think this is the best way for a company to do R&D, but it will get tons of people that are interested in whatever you’re doing to help for free and as a bonus you can find some great talent. Also, I’m not saying you need to give away the keys to your company. You could only open source select parts of the R&D to not give away your secrets.
but it will get tons of people that are interested in whatever you’re doing to help for free
Will they though? It requires that some of the target audience are capable to contribute, which is rare in my experience.
It really depends on what kind of project it is. Not everything will have a big appeal but if it doesn’t how big is your target audience going to be for the product really.
“What are some foods I can eat?”
This question is insanely unspecific and has not context to what you’re even working on.
just say it involves AI, you’ll get all the funding
obviously use unpaid interns only /s
start with literature search and listen to people who knock down physically impossible ideas, for starters. what are you cooking, at least point to general area
Some projects can be done as part of university courses cheaply and slowly.
