Consultancy or manufacturer?

Let us suppose you need a new product developed.  You have 3 choices:

  1. Develop the product entirely in-house.
  2. Contract a consultancy to develop the product for you.
  3. Contract a manufacturer to develop the product for you.

In the past, companies would develop products themselves, entirely in-house.  In recent years, that model has become less common as companies have reduced their internal R&D teams and looked for collaboration to bring new products to market.

In some markets, engineering and design consultancies have delivered development projects as a service.  More recently, manufacturing companies have hired development engineers and set up development labs.   This article discusses the pros and cons of each method.  If you would like to know more, or have any feedback, do not hesitate to get in touch.

Development strategy Pros Cons
In-house
  • Knowledge stays in-house.
  • Limited IP leakage (other than employees leaving, indiscretions etc.).
  • Lower cost if, and only if:
    • Team and facilities are already in place, and
    • Recruitment, training, site and maintenance costs are not in your budget, and
    • Your team is fully utilised on productive projects at all times.
  • Limited to the skillset of the existing team.
  • Psychological inertia due to historical products and constraints.
  • Large expense of keeping the team when they are not fully utilised.
Consultancy
  • Highly skilled people available. This can make all the difference between a device passing tests and getting to market on time, or languishing in endless cycles of fire-fighting modifications. Removing even one redesign-revalidate cycle can easily save far more money than using a low-fee-rate manufacturer.
  • Flexible team structures.
  • Best option for an impartial view of which technologies would work best.
  • Impartial as to which manufacturer to use: consultancies are the best option if you intend to have more than one manufacturing source for risk mitigation.
  • Some consultancies, particularly those that specialise in your industry, will have relevant up-to-date experience from other projects.
  • Can have high fee rates (particularly those with > 100 employees).
  • Might not have experience in manufacturing. You can ask who will be working on the project, and what their experience is.
  • Consultancies with internal projects might save the best ideas for themselves. Springboard does not have internal projects.
Manufacturer
  • Fee rate can appear lower than consultancies.
  • Sometimes, deep knowledge of a given manufacturing process.
  • Good at making incremental changes to existing products, but not at innovating new products.
  • It will be very difficult to transfer manufacture to another party because the design will be optimised
    for their processes, and there will be no documentation or data necessary for transfer to another company.
  • Manufacturing costs will be high because they will need to recover their costs and make more profit than otherwise to make up for Net Present Value, and their risk.
  • Most manufacturers are trying to build up their own IP portfolio. This might mean they save the best ideas for themselves, or put some of their IP into your product.
  • Limited to the skillset of the existing team.
  • Psychological inertia due to knowledge of their existing processes. For example, if the company is very experienced with aluminium tooling, can you guess what your tools will be made from, even if steel tooling would have been a better option?

How to find the best contract R&D partners

“Most of us understand that innovation is enormously important.  It’s the only insurance against irrelevance”

Gary Hamel

“Innovation requires the ability to collaborate and share ideas”

Bill Gates

Innovation is critical to all businesses. We live in a knowledge-driven economy and, especially in medical devices and drug delivery, giving patients the benefits of new and better products is clearly beneficial for all concerned: patients, payers, healthcare authorities, pharmaceutical companies, and medical device manufacturers.

Collaboration is more important than ever to manage technical risks and build on the best talent available throughout the development process.  But there are very few sources of good information on how to find the best companies to collaborate with.  This article gives an insight based on many years of experience in the field.

We hope that it is helpful and perhaps even interesting!

Working together

Step 1: Consider the pros and cons of working with external experts

Collaborating with external experts works best when you and the relevant stakeholders within your organisation (particularly the development team) see the value.

In some cases, there’s reluctance to collaborate, but it can lead to projects not working very well due to the limits of the skills, capability and equipment of your own development team.

In other cases, where you just want more people in your office or labs to work under your own supervision, a lone contractor may be more appropriate than an external R&D partner. Using contractors is a different mind set from working with external R&D companies because typically the latter will take on leadership to overcome hurdles in the way, and display a greater degree of autonomy on reaching a solution.

It is misleading to compare quotes to salaries. This is a common temptation, but when you consider the salary of yourself or your staff, you are not including pension, bonus, National Insurance, premises, training, recruitment costs, computers, software licences, under-utilisation, lab equipment, lab space, insurance, accounting and legal support and so on. If you add up those things for your internal team, you will find the market rate for R&D work. The quotes from potential partners should match this: they should be the market rate after all. When coupled with rapid and reliable progress on solving a valuable problem, the cost-effectiveness should be clear.

If you and your team do see the value in an external collaboration, move to Step 2…

Step 2: Think about what you’re asking for

What is it that you need?  This will inform what you’re looking for in an external partner.

When it comes to specifying the size and shape of a project, there are 3 competing factors:

  • Quality.
  • Time.
  • Cost.

Typically, you can optimise a project for any 2 of the above.

Step 3: Find out from peers who is good

Reputation is everything. A really good innovation partner will have a good reputation which others in your field will know about.  If you don’t know who to ask, maybe former colleagues at another company can help [Springboard has gained many clients this way].  You can always get in touch and ask us!

You may already know that a company’s name being well-known correlates strongly with its marketing budget, and not necessarily with the quality of its work.

It is about the people, not the brands.  We have found that the most important ingredient in successful development projects is the quality of the people.  Two qualities stand out as being vital:

  • Their technical and project management ability; and (no less)
  • Their ability to communicate and work with you (and you trust them).

Really good engineers and scientists will be able to use the right technique and equipment even if they have not used exactly the same things before.  On the other hand, it could be folly to expect mediocre engineers and scientists to develop market-leading high performance, usable and safe products, or fix non-trivial technical problems.  Perhaps ask yourself this provocative question: “How many opportunities do I have to get this project right?”

There is sometimes a downside to really capable people: they can be arrogant and therefore not so good to work with.  The best way to assess this is Step 4…

Step 4: Talk with the potential partners

It is worth spending the time to speak with potential partners because a website or word-of-mouth cannot give the full picture about the quality and attitude of the people actually working at the potential partner company.  By definition, case studies on websites will be very old because they have to be outside of confidentiality terms.  Therefore, the people that developed those devices might not be working at that company anyway.

Talking with the company can help you assess:

  1. Would I want to work with these people?  Are they listening to me?
  2. Are they capable people who I trust to deliver the project successfully?
  3. Do they understand the constraints of the project?

Here is a list of common pitfalls to watch for:

  1. Be aware of the A-team/B-team.  You might be talking to some experienced, capable people during the negotiation and planning, only to find that you get a completely different set of people working on the project once it starts.  You can minimise this risk by seeking assurances about who would be working on the project: the partner should be able to at least be sure of the project leader.
  2. Ensure the correct incentives.  If the potential partner has internal projects, it will be wanting to secure its own IP.  If it has experience in your field, it is probably going to want to secure its own IP in your field.  Development contracts can say that IP will belong to you, but perhaps you do not want an incentive for people working on your project to keep the best ideas for their company.  The best way around this is to use a partner which does not have internal projects at all.
  3. Location is almost irrelevant.  If you work for a leading multinational organisation, you probably want to find the best team in the world to deliver your projects – why not?  The probability of having an excellent team available down the road is slim.  If you do, that’s great!  If you do not, it does not tend to matter these days whether they are 500 miles away or 1,500.  Weekly web conferences cover most project updates, and regular face-to-face meetings are easy in this age of cheap and convenient air travel.
  4. Size is important, but maybe not how you think.  A partner who is too small (one or two people) might not have the breadth and depth of the skills that you need, and you would be at the mercy of any one person being sick or taking holiday when you need them most.  A large partner will prioritise their largest projects. If your project is many millions of dollars in each phase, great! if not, you might find you are not at the front of the queue for resources if you use large partners.
  5. Will the rest of your company treat your partner well?  You may have found the right partner who you trust and you’re really keen go get a great project going. It helps the relationship, and therefore chances of success, if your procurement department agrees to reasonable payment terms, and your accounts department fulfils its obligation to pay on time.

Step 5: Decide who you want to work with

This may be the hardest step.  There are any number of approaches to come to a decision…

Factors such as trust in the people, and your belief in their ability to deliver are hugely important.  Therefore, a spreadsheet of metrics (beloved by procurement departments) is probably not the best way to decide between potential partners.

Perhaps the best way is to think about which partner you would prefer to have a long-term business relationship with, and see if their match to the current project need is good enough.

 

We hope that you have found this post helpful!

If this post has teased any thoughts or questions, please either write a comment below, or get in touch.  We would love to hear from you.

 

Strategies for faster R&D: Break it into manageable steps

When Edmund Hillary and Tenzing Norgay climbed Everest for the first time in 1953, they didn’t just take a giant leap for the top. Rather, they conquered the 8000 meter giant in a series of 10 centimetre steps with manageable milestones along the way.

Everest

An R&D analogy is a company who had spent years developing a new biopsy product in which a rotating blade advanced over a needle used as an anchor. The samples were small and unreliable, so customers were losing confidence. They had tried a bigger motor, sharper blade, different shape, but to no avail. Generation 4 was on the market but still too few customers.

Instead of leaping immediately for a whole new design, we broke the challenge down into a series of steps. How strong is the anchor force? How big is the cutting force? Which is larger? These could be measured simply on a standard piece of laboratory apparatus called a tensometer. When the graph was plotted, we could see that the cutting force was far greater than the anchor force, so the device was just recoiling every time it fired.

So the next steps were: how can I make the cutting force smaller? How can I make the anchor force larger?

Breaking down the problem into steps like this means you then spend your time solving the right problem. It might feel that pausing to do a sequence of scientific experiments adds time compared to aiming straight for the whole answer, but in reality it is often possible to find a much quicker route to success. If every step is in the right direction, you’ll arrive at the answer. But if you spend time solving the wrong problem, no matter how elegantly, you get nowhere.

This is an approach we’ve done for our clients many times over, and the savings can often be measured in years.

Please contact Keith Turner if you think we could help you or if you would like to be alerted to the next strategy.

Strategies for faster R&D: Save tooling for later

There’s a great quote by Thomas Edison when asked if he felt like a failure because of all his failed attempts to invent the electric light bulb. “Young man, why would I feel like a failure? And why would I ever give up? I now know definitively over 9,000 ways that an electric light bulb will not work. Success is almost in my grasp.”

Lightbulb

And not one of those 9,000 prototypes was made on a production line.

A situation that our clients commonly find themselves in goes a bit like this. “Yes, I know it’s not quite working yet but time is running out before the product launch next April and so we have to commission the tooling now. Management aren’t willing to let the launch date slip.”

It brings to mind a medical project in which the disposable part had been pushed through to injection moulding. The trouble was that revisions to the design were still being made. It was possible to modify the tool, but each time that happened, it took six weeks to get the next parts released before they could be tested.

Earlier in the same project, we had been prototyping the disposable component on our CNC mill. You could do a test, modify the CAD, set the mill running overnight and test the next iteration the next day.

Short development cycles demand flexibility, and for this it helps to delay tooling until you know the design works in all respects except for those specifically dependent on tooled properties. Even if you need 100 parts for a clinical evaluation, perhaps they can be machined? It might cost $10,000 and some planning ahead in validation, but that’s child’s play compared with a 12 month delay to a multi-million dollar programme.

There’s a whole suite of prototyping methods available today, such as additive methods (SLA, 3D printing, SLS, vacuum casting…) and subtractive methods (machining, laser cutting, EDM…), not to mention various ways of sealing, bending and so on.

In the next article we look at how to break down a daunting, complex problem into a series of manageable steps.

Please contact Keith Turner if you think we could help you or if you would like to be alerted to the next strategy.