Business

R&D Productivity: How to target it,. How to measure it. Why it matters..

Name: R&D Productivity: How to target it,. How to measure it. Why it matters..
Author: Gerald P Dundon
ISBN: 9780986152504

by Gerald P Dundon

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Language EN

ISBN: 9780986152504

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Based on work from the frontline of high-tech business, this book describes a new approach to targeting and measuring research and development (R&D) productivity. Using logic and basic math, lifecycle revenue and profit ... Based on work from the frontline of high-tech business, this book describes a new approach to targeting and measuring research and development (R&D) productivity. Using logic and basic math, lifecycle revenue and profit targets for R&D project spending can be calculated that are intrinsically allied with corporate goals for revenue growth and profitability. It describes how to measure and track R&D productivity performance versus target and how to interpret and report on variance. CRRM, or the Cumulative Required Revenue Multiple, is the value of cumulative revenue an R&D investment must return by the end of its lifecycle (expressed as a multiple of the cost of the R&D investment) in order to support the declared business goals. The business goals are generally articulated as a desire to grow corporate (or divisional) revenue at a given CAGR in the medium to long term and a willingness to commit a fixed percent of annual revenue to R&D spending, to fuel the revenue growth ambition. Once the desired revenue CAGR and annual R&D spend are known, and the lifecycle of the investment is estimated, it becomes possible to calculate the CRRM. The book develops the logic and math to calculate CRRMs. The book contrasts the utility of the CRRM metric to the more traditional methods of assessing project ROI using discounted cash flow-Net Present Value (NPV) and Internal rate of Return (IRR). By comparison, NPV is a very blunt instrument. For a given cost of capital, a positive NPV says it's a good investment, zero means it's neutral or breakeven, and negative says it's a bad investment. Even if an investment shows a positive NPV, it still doesn't tell the user if the predicted returns are sufficient to support the stated business goals. If the cost of capital is adjusted until the NPV = 0, this yields the internal rate of return (IRR). But knowing that the IRR is higher, or even substantially higher than the assumed cost of capital, still fails to answer the question "Is the inv

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