R&D is a Cost Center

Everyone’s working hard to ship valuable products, optimize operations, and deliver on customers’ recurring feature requests. Product management is rigorous; data is driving; design is thoughtful; engineering is disciplined… and some very important truths are lost in the cogs of an otherwise well-oiled machine.

Namely, that:

  • R&D expenses appear on budgeting worksheets
  • …but the payoffs do not
  • The value of new business (and even new leads) is easy to measure
  • …but the value of new features is not
  • Proposed products’ value won’t be realized for months
  • …but operational expenses are incurred today
  • Attributing new business to a single R&D team is very difficult
  • …but attributing churned customers to a specific outage or defect is not

In other words: R&D is not and will not ever sell itself. Senior leaders will be aware of the importance of investing in R&D, of course, but what investment is warranted, and what return is expected? All financial models involve guesswork, but an operational black box and the speculative work that defines R&D make it impossible to know exactly what the company is getting out.

And inside the department, we know exactly how slippery “exactly” will be. The answers are unknowable (at least today), and we hedge our bets accordingly. When will a new product be delivered? Depends what goes into it. How much new business does an additional developer drive? Depends on things we’re in the process of learning as we speak.

But how much will we save by eliminating a developer? That’s an easy one.

What we have here is a marketing problem, and we’re starting on the back heel. If we want a say in the conversation, we need to frame it ourselves. And get every leader, manager, and member of the R&D department repeating it to make sure the rest of the business “gets it”.

  • What is R&D working on that’s going to generate outsize returns for the company? (e.g., do roadmaps/backlogs include forecast value?)
  • When will we start to see results, and what will they look like? (are project timelines available, credible, and regularly updated?)
  • What metrics should everyone be holding us to account on? (what KPIs should the business at large watch to understand the health of people/projects/operations across R&D?

At the end of the day, R&D is an essential part of opportunity creation and operations across the entire business. But without contributions that speak clearly for themselves, someone needs to stand up and evangelize them. We won’t have perfect answers, but plans will be made on whatever answers are available–and writing them ourselves, before someone else does them for us, tends to go better for everyone.