Why R&D Matters in Times of Shortage

Why R&D Matters in Times of Shortage cover

For almost three years, waves of disruption have shaken individual business models and entire industries. From Covid-19 to trade wars to clogged supply chains and regional conflict, businesses had to hurry to meet customer demand and, in many cases, survive.

R&D and innovation have long been established as drivers of new products and services, but the challenges of the past few years have placed urgency on their importance.

What does R&D look like during a crisis? What are companies doing to manage previously plentiful resources? And why does R&D matter in times of shortage?

Mixed Signals

When Covid-19 ran through the globe, impacting every country, it created a set of challenges no one had encountered before. Some industries, such as medical, food, and delivery, were overwhelmed with demand. Others saw increased demand and a shortage of raw materials. And yet other companies saw demand drop to the point that it threatened their existence.

Data shows that the responses have been a mixed bag. One McKinsey study determined that 90% of executives considered Covid-19 a catalyst that would forever alter their business models. Yet only 21% felt that their company had the staff, resources, and commitment to take on new growth.

The same data found that assumptions of growth opportunity varied wildly depending on the industry. While over 73% of executives in pharmaceuticals and medical supplies, consumer packaged goods, and technology companies saw these disruptions as an opportunity for growth, only half of those in basic materials industries and 38% in industrials felt the same.

Strategies for R&D During Shortage

These disruptions have placed an enormous strain upon global supply chains, resulting in shortages in almost every category. The last few years have seen shortages in a wide range of products, including:

  • Computer chips
  • Baby formula
  • Packaged food items
  • Necessities such as toilet paper and diapers

Regardless of the pre-disruption R&D strategy of a company, most found themselves developing crisis R&D strategies to cope with shortages in raw materials. These include:

Cost Cutting R&D

Many companies were hit in product and packaging. Food companies that generally sold in bulk to grocery stores couldn’t sell large packages to consumers. They had to quickly shift packaging formats and work with alternate delivery services to move from B2B to a mixed B2B and B2C model.

These companies also used ABC analysis to focus on core products, and this analysis meant temporarily or permanently ceasing production on variants that, while popular, were lower volume. This strategy relied on supply chain and inventory software technology and allowed them to focus on their most profitable lines when materials were short.

Substitution R&D

Many companies engaged in fast-iteration R&D to find temporary or permanent substitutions for scarce materials. Packaging formats and materials changed as well as ingredients for food, cosmetics, medicines, and other products. They could make many substitutions without impacting their products.

Companies in regulated industries like medical, food, and pharmaceuticals had to match their R&D to meet temporary suspensions or loosening of formerly rigid guidelines to meet demand.

Survival R&D

While demand for many products created material shortages that triggered an aggressive R&D response to work around, others found that the shortage was demand itself. Overnight, demand in many industries disappeared.

Those with an innovative culture and an agile R&D focus were able to create new products and services to take the place of those no longer in demand. Some companies reinvented themselves entirely to survive.

Focusing Your R&D During Shortages

It’s common during shortages and crises to recoil and reduce operating costs to get by, but companies that increase R&D and aggressively pursue opportunities find a way to navigate shortages and grow after the crisis has passed.

There are several ways to leverage your R&D during shortages to help you get over the hump and position your company for growth:

  1. Remain Agile – R&D should be focused on adapting to shifts in consumer demand and finding a way for your core products and services to meet these changes.
  2. Identify Opportunity – A shortage that requires a change to less expensive packaging, more cost-effective cloud hosting, or different parts in an assembly may lead to permanent changes in those products and an opportunity to reduce operating costs. Likewise, quickly deploying R&D assets can lead to discoveries that drive new product and service offerings.
  3. Build for the Future – While managing shortages in demand and raw materials are challenging, keep R&D focused on how lessons learned can be used to power growth once the crisis has passed.

The Henry Bernick Entrepreneurship Centre at Georgian College realizes how challenging the new business landscape can be for business owners and entrepreneurs. We can help guide you with mentorship, training, and networking so you can keep your R&D agile to meet challenges and position your company for growth.

Contact us to find out how we can help.

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