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!
You forgot about asking your employees to bring their own toilet paper. That saves a couple bucks.
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
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.
