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How to reduce the costs of R&D today without sacrificing tomorrow’s growth?

by on January 20, 2010

In the bad economy, it is natural that many companies find some ways to conserve cash. And the most common way to conserve cash is to reduce the costs of R&D. Forty percent of respondents to a recent McKinsey & Co. survey said their companies were actively looking to reduce R&D costs. The end result for companies holding back on research-and-development during a downturn is “they don’t have anything new in their product portfolio that is of interest to their customers,” when better times eventually return, Donovan R. Hardenbrook, principal of Hardenbrook Consulting, notes. However, in a Harvard Business Review Article, “How Open Innovation Can Help You Cope in Lean Times,” Henry W. Chesbrough and Andrew R. Garman introduced five strategic moves to help companies reduce the costs of R&D today without sacrificing tomorrow’s growth.

Move 1: Become a customer or supplier of your former internal projects

Move 2: Let others develop your nonstrategic initiatives

Move 3: Make your IP work harder for you and others

Move 4: Grow your ecosystem, even when you are not growing

Move 5: Create open domains to reduce costs and expand participation

In the bad economy, companies are facing big challenges to reduce the costs of R&D today without sacrificing tomorrow’s growth. However, open innovation can play an important part in the solution. By making the boundaries between a firm and its environment become more permeable, open innovation allows intellectual property, ideas, and people to flow freely both into and out of an organization.

-Brian Chen

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