Agile elements in R&D processes: How to brace your company for today’s and future challenges
Establishing agility and automation in value-added steps are two adequate ways to position oneself resiliently against future challenges. Embedding agility into Research and Development (R&D) is important for all industries, including the Automation & Electronics industry itself. After recent shocks, the industry is still on alert. The implementation of agile elements gives reason to be confident.
Dynamics in the R&D environment, caused by economic, political, social, or environmental challenges, can result in unnecessary engineering efforts as well as delays in time-to-market and therefore in lost business opportunities.
Recently shocks such as major supply chain disruptions caused by geopolitical conflicts have put the Automation & Electronics industry on alert. Moreover, ongoing external influences including the digitalization but also trends like mass customization and other manifestations of VUCA (Volatility, Uncertainty, Complexity, Ambiguity) lead to rapidly changing conditions and are therefore challenging. Besides, internal company factors such as employee demand for New Work concepts have an impact on the industry.
As if that is not enough, new threats are already on the horizon. Supply chain issues could often be addressed with some delay but in disruptive times unprepared companies are likely to be permanently more vulnerable. Furthermore, e.g., emerging legislative actions such as cyber resilience measures by the EU are expected to pose a severe challenge for several companies. How can companies adapt their design, development, and production processes to meet the challenges? Past shocks have shown and upcoming threats indicate that agility in R&D processes is inevitable.
Mechatronic system development – a transformation due to evolving demands
Mentioned challenges and market changes not only demand changes in the product development but also transform the demanded product itself. The composition of mechatronic products with shares of mechanical, electronic, and software components has changed. While the share of electronic components has remained constant, the shares of software and mechanical components have behaved in opposite ways. The product development in the 1980s was mainly focused on mechanical components and nowadays it is focused on the software proportion of the products. This change can be attributed in particular to the ongoing digitalization.
Product Creation Processes – the key to competitiveness
R&D is the heart of a company’s innovation process. Product Creation Processes (PCP) as core process of R&D are crucial for companies to be sustainable competitive and need to be adapted to the changing composition of mechatronic products. While innovations define the success of a company, the success of innovations depends on forward-looking and profitable product creation. The more innovative a product, the more likely it is to have an increased number of changes/ interventions during the course of the PCP. Accordingly, properly managed PCP can already bring competitive advantages.
Especially companies in the Automation & Electronics industry depend on their innovation leadership since they are aiming for progress generation and differentiation through innovations. For example, TRUMPF spent 10.6%, Festo 7.1%, and Phoenix Contact 6.6% of their revenue on R&D investments in 2021, while, for example, companies in the Chemicals industrial sector spent an average of 2.4% and in the Construction sector 2.3% of their revenue on R&D, according to the European Commission.
Innovation and product life cycles become shorter and require adapted PCP. Competition is determined not only by product quality but above all by speed and time-to-market. PCP are becoming increasingly complex. Customer and user needs are incorporated early in PCP, prototypes are designed early for validation purposes, and iteration is a constant companion to correlate problems and solutions. PCP have evolved from a linear, procedural process to an iterative, problem-solving process.
Success factors for Product Creation Processes
Within the scope of numerous project experiences and several conducted industry studies, the following six aspects have been identified by Horváth as success factors for PCP in the Automation & Electronics industry.
Fast time-to-market: Designing, developing, producing, and distributing products as fast as possible and delivering solutions on time
Sophisticated timing of development cycles: Aligning differing development cycles of physical and software product components
Efficient requirement management: Handling unknown customer and user needs at the beginning of PCP as well as changing product requirements
Modular product systems: Enabling adjustments to changing market conditions and reuse instead of reinventing the components, e.g., CTO instead of ETO
Efficient use of resources: Developing the product at a competitive price level despite rising material costs, esp. for physical materials
Simultaneous engineering and implementation of cross-functional teams: Establishing teams with skilled mechanical, electronics, and software engineers with T-shaped skills (deep specialist knowledge and broad knowledge from related disciplines)
Agile elements – an effective instrument in the context of physical product creation
Agility can be seen as the ability to make situation-dependent changes to the product in a volatile environment even in advanced PCP, and to act quickly, flexibly as well as iteratively. Implementing agile elements supports the response to unknown factors as well as it enables and drives digital transformation by increasing the adaptability of the operating model. Often, only technical agility, such as the use of agile tools, methods, or techniques, receives attention within companies. However, it is at least as important to consider cultural agility of the people within the processes.
Since the conditions of the creation of physical products do not correspond to those of software products where most agile approaches have their origin, agile elements need to be picked carefully and should always be tailored to the specific context. Transformations such as Industry 4.0 that result in a higher software share in mechatronic products can therefore be seen as enabler of agility.
Combining agile and process-oriented elements to deal with future challenges
Agile elements are established alongside process-oriented elements in PCP to reduce development and decision-making times (faster time-to-market), increase work efficiency, validate and adapt early in the process (e.g., MVP principle), as well as increase the responsiveness of development teams. Through iterative and incremental approaches, the maturity of the product is continuously increased during the process and feedback from customers and users is continuously obtained. Agile approaches aim to solve complex challenges and generate customer and user benefits quickly. Development teams are small and multidisciplinary as well as communicate directly and closely with each other, e.g., in form of regular stand-up meetings. To reach the full potential, the definition of the interfaces between agile teams and their environments needs to be clear.
A company that has recognized the benefits of agility and successfully combines it with proven processes in R&D is TRUMPF. For more than a decade in software development, TRUMPF has also been using agile elements in the development of mechatronic products for quite some time. Here, both technical agility through, e.g., the establishment of Scrum, as well as cultural agility through the integration of agility managers, who develop employees professionally and personally, have been implemented.
Companies in the Automation & Electronics industry that do not have flexibility in their R&D and especially a hybrid PCP will lose competitiveness and market positioning.
The success factor “fast time-to-market”
Agile approaches support the decomposition of work within development cycles. Using agile elements to split the development work into small, testable mechanical and functional components improves time-to-market and flexibility. This happens as iterative procedures with many feedback loops and the tendency of agile approaches to collaboration or even co-location help to make faster progress in product development without sacrificing quality. As companies must deliver new products and innovations quickly to keep up with the competition, time-to-market is an important KPI and must be anchored both in R&D but also in production. Agile methods such as the “Kanban Board” assist to keep an eye on the big picture.
To keep the product development speed up, considering cultural agility is necessary as well. By enforcing principles such as “deliver the best architectures through self-organized teams”, “simplicity as a foundation”, “leverage change for the customer’s competitive advantage”, and “get physical and test”, developers are properly set.
The success factor “sophisticated timing of development cycles”
As software and mechanical product components will continue to have different development times and therefore cycles, e.g., due to different complexities in the creation of prototypes, an attempt must be made to align these cycles. Development cycles must be coordinated in such a way that prototypes can be validated iteratively during the process, time-to-market is optimized, and the compound product is ultimately delivered on time. The following figure demonstrates how cycles can be coordinated.
The staggered sprint length represents a compromise between uniform and cycle-specific sprint length. This allows efficient work within the cycles as well as the efficient transfer of information. The implementation of short development sections for mechanical products, e.g., by introducing the Scrum framework, helps to quickly react if there are any issues and provides the possibility for continuous feedback.
Development teams should act according to agile principles such as “iterate for evolution”, “deliver functioning products regularly”, or “focus on the user”. By considering technical and cultural agility, the stage is set to develop multiple software and mechanical prototypes in short intervals as well as continuously improve and adapt them based on stakeholder feedback.
Hybrid approaches to increase the prospect of success
A context-based synergy of agile and process-oriented elements is strongly recommended. Flexibility should be present especially at the beginning of PCP. On the home stretch, more emphasis should be placed on process elements that provide stability and discipline. Lower layers, so the regular processes, can be standardized but upper layers must be flexible and creatively adaptable. Hybrid PCP combine the best of both worlds and are a decisive competitive advantage.