Research and Development KPIs

KPIs Made Simple - Part 11

A company may spend money on research and development, but not achieve good results. It may overspend on R&D or take too long to get products to market. Products may have a poor market fit, meaning R&D spending is wasted.

4 Research and Development KPIs for Your Business

1. R&D Spend

The percentage of revenue spent on R&D reflects the size and activity of R&D teams.

R&D activity must be maintained to develop new products and stay ahead of competitors.

Toolbox / Ways to improve:

• ✅ Increase the budget for R&D
• 💰 Apply for tax/other incentives for R&D
• 💳 Reduce non-essential spending in other areas to free cash for R&D

2. New product revenue %

R&D may be ineffective and not result in products that sell.

This KPI tells us if the R&D efforts result in marketable products. It’s a measure of R&D effectiveness.

Toolbox / actions to improve:

• 🎯 Improve marketing for new products launched
• 🧪 More frequent testing before and after launch to test market fit
• 🚀 Faster launch - reduce development time. Faster launches means revenue can be earned faster.

3. Payback period

A business may spend too much developing products which have low sales.

A low payback period means R&D spend is lower risk and products developed have market acceptance.

Toolbox / actions to improve:

• 🔍 Focus on higher margin products
• 🚀 Accelerate time to market - reduce development time
• 💰Control costs by preventing scope creep/changes

4. Recall Rate

A business may develop new product, which are low quality and are returned by customers.

High recall means more costs in repairs or refunds, lowering profit. It also damages a firm’s brand reputation.

Toolbox / actions to improve:

• 🔍 Audits of suppliers and the production chain
• 🧪 Improved quality assurance testing