A Blueprint for Bringing in Outside R&D

When in-house teams are under pressure, bringing in outsiders can add a fresh perspective to the research and development process. Core technology should remain in-house—correctly structured, managed and funded. But when the process is lead and managed properly, an outside contractor can help energize the effectiveness of internal design teams, particularly in these kinds of situations:

• Schedules are lagging and quality of output is lacking
• Internal teams are delivering inconsistent quality and are lacking creativity
• You are having to subsidize work with part-time expertise
• Recruitment efforts and training are hampering your senior engineers

HR Should Be Part of the Mix

Once you starting looking for an R&D partner, human resource strategies should be in high gear to find the right consultancy. Focus on gaining insight into how successful the consultant will be in meeting expectations on time and on budget.

Considerations in the selection process:

• Establish a non-disclosure at the outset—before revealing proprietary information
• Is the firm’s size compatible with your project? Is it too large to give your project its deserved attention or too small to meet expectations?
• Can the firm demonstrate its core competency with successfully completed projects of similar budgets and complexity? Ask for references.
• Does the firm you’re considering offer stability, and would you benefit from establishing a long-term relationship?
• Meet and spend quality time with the critical team members. Chemistry is extremely important if the team becomes an extension of your staff.
• Become familiar with how the prospect conducts their business—are they flexible with terms, yet firm on operational structure? Respect that a successful consultancy protects its interests.
• Does the prospect routinely sub any of their work out to other firms or contractors? If so, make sure they have appropriate contracts and security measures in place.
• Do you require an ISO-certified quality system, or is self-certified “compliance” acceptable to your quality stakeholder?

Reviewing Proposals and Selecting a Partner

Outreach to three or four firms is usually ample due diligence. Request an executive summary and rough order of magnitude (ROM) budget from candidates. These data points should ensure confidence in a realistic budget, development methodology and timeframe. Next solicit formal proposals from two to three shortlisted firms, with RFP structured the same way. Look for emerging patterns on how each firm structures and budgets your project.

Traditionally, a waterfall-style “top-down” design process allows parallel work and is highly collaborative and complex, relying on outputs from one to drive the next stage of work. A formal stage-gate review happens before each next phase. In contrast, software developers practice a “bottom-up” agile design process, with work conducted in rapid, discrete modules called “sprints”—excellent for feasibility studies. Sprints can be iteratively deployed to solve critical subsystem hurdles within a major phase of a waterfall plan, without disrupting overall interactivity. Few tasks in R&D, beyond the first exploratory phases, can be confidently quoted in not-to-exceed terms. However, subsequent phases can be given a cost range based on similar past projects. These “budgeted” proposals ultimately require payment in terms of actual time and materials spent, with budgets, scope and timelines provided as a guide for overall cost control. Once all proposals are collected, a decision matrix can be helpful in assessing how the finalists stack up. If you use such quantitative tools, carefully consider intangible and qualitative assets like proposal quality, personal chemistry, team enthusiasm, work environment and ease of travel. The quantitative winner should match your qualitative choice.

Contract Development

A corporate master Service Agreement (MSA) may be used with preference for your company’s best interests. Expect a back and forth with attorneys or superiors to find a mutually acceptable, fair balance, which can take days or weeks to execute. The consultant is likely to ask for a purchase order and up-front deposit to cover project-related out-of-pocket expenses. Longer terms usually require a larger deposit request. And high-risk clients (like start-ups) may mean a pre-pay retainer-based system.  

Management of the Project and the Consultant

At the kick-off meeting, establish protocol-driven checkpoints and approvals. Any additional requirements should be integrated into the plan. Communication protocol is essential to manage outsourced projects. Regular online meetings should be arranged with only critical players and written meeting minutes should be distributed to all team members. Reviews may initially be required on a weekly basis (but can be less frequent in later phases) to coordinate on multiple levels and ensure resource availability in a timely and predictable manner.

Determining how and how often to communicate is the backbone of ensuring an outsourced program’s success. All-remote services mean a lack of assessment at walk-through and insufficient interaction, while too many meetings stifle creativity and stretch the budget. Find a balance between adequate oversight and written and verbal communication.

Cost and Schedule Control

Engineers will tell you engineering takes a finite amount of task time—but problems can be solved with varying degrees of complexity. Technologists, by nature, often gravitate to the best—and not necessarily the easiest—solutions, a process often called “creeping elegance.” The project management must balance risk/cost with levels of complexity/performance.

Establish project objectives in order of priority (cost, risk, size, weight, speed, reliability, etc.) and keep the team in sync with reminders. This is particularly important when you may not see output for weeks at a time. Consistent focus on project objectives aids good decision-making and keeps the project on course. Time and materials projects or phases should be monitored closely to ensure scope remains relevant, since there is typically only a loosely defined statement-of-work. Weekly reports should include next steps/expected budget burn. To maintain project expenses, predicted costs should be provided to ensure appropriate spending. Leverage the formal stage-gate reviews to assess progress against the original plan. If deliverables or the output’s quality are not keeping pace with the expended budget, you can bring some tasks in-house, adjust the design process methodology—or worst case, seek more time and budget for unforeseen challenges to the original scope assessment. Always reserve budget and time buffers for the unexpected. Negotiate 10 to 20% buffers, with larger margins for innovative and higher-risk programs. Identify and conduct these types of activities at the beginning of the project to ensure solvability before progressing with the overall development.

Successful R&D outsourcing begins with a partner who matches project needs, corporate culture and individual chemistry. Establishing a robust and collaborative project plan with stage-gate reviews, coupled with effective communication, will minimize surprises and enable plan adjustment along the way to maintain expectations. Furthermore, completing the first successful outsourced project will allow even greater efficiency due to less upfront due-diligence and a reduced learning curve.

Philip Remedios is principal and design director at BlackHägen Design, an R&D consultancy focused on medical device innovation. With a combined design and engineering background, Remedios has spent most of his 35-year career in executive consulting roles, developing project plans and managing integrated technical teams, schedules and budgets. Philip has a Bachelor of Science in industrial design/transportation from the Art Center College of Design in California and is a named inventor on 34 patents to date.