The statistics for R&D success are less than encouraging. Perhaps one of 20 programs that start out in the laboratory ever produces a positive cash flow, and the average time required from the idea stage to commercialization for major programs is seven to ten years. This is too long — the need may have disappeared or been satisfied in another way.
The constraint analysis that is described here, however, has produced eight out of ten successes and telescoped the time to market from seven to ten years to two to four years. This process when it is combined with the Stage Gate Process minimizes the downside risk.
Constraint analysis is basically a logic sequence or decision tree that asks three questions. Is this a good business for anyone to be in? If yes, is this a good business for us to be in? If yes, what is the best method of entry?
The first two of these questions has an expanded list of critical factors that have been selected through experience. It is important to determine, even before the first laboratory experiment is run, whether or not a new development could ever result in a commercially attractive product. (The shelves of research labs are cluttered with great mouse traps for which there have turned out to be no mice or for which the manufacturing, marketing, management, capital, and other requirements for commercialization were inadequate.)
Twelve factors are rated from 0 – 10, giving a maximum possible score of 120 : 60 for “business attractiveness” and 60 for “company fit.” Over many years of experience, those projects with scores of 80 or above were successful in eight out of ten cases. The few that did fail did so because of unexpected regulatory interventions or from increased costs for raw materials because of the oil embargo, and occasionally a major program was discontinued because a parallel effort turned up a second-generation development that was superior to the first (all of which were, indeed, surprise factors). Below 70 points the probability of success falls off rapidly to 30% or less.
1. Sales/Profit Potential (Max 10 Points)
a) Does this opportunity have the potential to make a significant contribution to current sales? (Max 5 points)
b) Will this opportunity provide 10% or higher after tax profits? (Max 5 points with lower scores below 10%)
2. Growth Potential (Max 10 Points)
Will annual real (inflation-corrected) growth exceed 10% per year? (10 points, with lower scores for slower growth)
3. Competition (Max 10 Points)
a) Is the competition fragmented with small-weak competitors unlikely to react quickly? (Max 4 points)
b) Will this product or process have a long life (more than 5 years) or will it be quickly obsolete? (Max 3 points)
c) Are there strong patents, copyrights, and other types of proprietary technology not easily evaded? (Max 3 points)
4. Distribution Risk (Max 10 Points)
Does this opportunity involve generic technology that can apply to four or more market segments, sufficiently differentiated from each other by manufacturing, marketing, geography, or other requirements, such that if a new technology emerges for one of these segments, the others will remain viable? (Max 10 points, with lower scores for fewer segments)
5. Potential for Industry Restructuring (Max 10 Points)
Does this opportunity involve breakthrough technology of such magnitude that it restructures an entire industry (10 points) or some segments of an industry (less than 10 points)?
6. Political/Social Factors (Max 10 Points)
Does this opportunity meet strong political or social needs (national security, safety, environmental) that will provide incentives for use of the technology (10 points), is it neutral (5 points), or does it risk penalties (liability concerns, tariff barriers, negative exchange rate differentials, tax penalties (less than 5 points)?
1. Capital Availability (Max 10 Points)
Time-critical access to needed capital for investment in facilities, equipment, and operations is essential to maximize an opportunity in the life cycle projected (10 points if readily available)
2. Manufacturing–Production (Max 10 Points)
Time-critical access to at least interim production capabilities with assurance of increased cost-effective capacity, consistent with maximum growth, would rate 10 points. (If production facilities are unnecessary, score 10 also)
3. Marketing–Distribution (Max 10 Points)
Rapid market penetration, with an existing marketing-distribution capability, on a global scale would rate 10 points.
4. Technical Competence (Max 10 Points)
a) Technical service competence: A high level of effective support of field operations would rate 3 points
b) Incremental improvements: A strong program of continuing development work to maintain current market share and profitability would rate 4 points maximum.
c) Next generation systems: Significant investments simultaneously being made in advanced technology through strategic alliances would rate 3 points maximum.
5. Access to Components (Max 10 Points)
Timely access to important raw materials or components’ is essential, preferably from more than one source. Politically inspired embargoes, fires or explosions can interrupt supplies. Score 10 points for readily available materials and components.
6. Management (The Champion) (Max 10 Points)
Strong and sustained top-level management support is essential for success, particularly for multiple-year developments. Also, a dedicated champion, determined to succeed, is required to manage each project. Weighs a maximum of 5 points for top management support, and 5 points for a champion.