From Decline to Comeback: Rebuilding R&D at a Global Energy Equipment Maker

Company revenue had contracted from €150M in 2011 to €100M in 2015 — shrinking by roughly 7% a year for four years. Management tried to halt the decline through heavy investment (R&D at 20% of revenue), internationalisation, and pushing internal competition. But confidence in the company’s future viability and a consistent strategy eroded.

The R&D KPIs told a clear story but it was not pretty: development project delays averaged 12 months, manufacturing cost targets were overrun by 22%, project cost overruns averaged 137%, and annual field failure rates of power supplies exceeded 8%. Too many projects ran in parallel, priorities shifted constantly, there was scope creep, and teams spent too much of their time on non-value-adding activity. Development teams were asked to build products for which they lacked the necessary experience and technical depth, and R&D methodologies were outdated.

Product Management compounded the pressure. Volume assumptions at project start were consistently over-optimistic, with unit quantities reduced by up to 75% by the time products reached mass production. Product integration time in the semiconductor equipment market was underestimated. Internal responsibility for product profitability was unclear, the focus through to the end-customer was weak, and the PM role itself carried little authority.

Then external and internal challenges met: a collapse in the market coincided with a development process that was too slow and strategically misaligned. Each of the two development sites acted according to its own interests and resources. Internal competition had replaced clear prioritisation.

The turnaround was structured around four initiatives running in parallel across phases. Immediate right-sizing and long-term capability build were treated as inseparable: releasing cash and people would only matter if the remaining organisation could operate differently.

Initiative 1 - Restructuring: R&D spending was brought back in line with the company's economic reality by reducing the organization by approximately 30%, while simultaneously reshaping its capabilities toward software and RF engineering, with lower strategic-value capabilities phased out.

Initiative 2 - Focus & Technology Base: A portfolio analysis on value contribution, strategic relevance, and time/cost to completion was used to rationalise the pipeline - finishing strategic and short-term value contributors, stopping low-value projects, adding cost and quality improvements for quick wins, and resetting platform developments. Technology developments with manufacturing-cost or performance advantage were kicked off.

Initiative 3 - Engineering & Cycle-Time Excellence: An integrated cross-functional stage-gate workflow was designed, piloted and rolled out alongside systems engineering, core teams with phase contracts and gate reviews, cross-functional engineering reviews and return-of-experience, PMI-aligned project management, Scrum/sprints in HW and SW, daily builds and automated regression testing on HW and SW emulators. Cross-site resource planning, technology and module collaboration, portfolio management, and a prototype/platform/reuse strategy were introduced.

Initiative 4 - Engagement & Psychological Safety: Management KPIs were re-anchored on time-to-market, manufacturing-cost target achievement, and first-year field failure rate. A values framework was introduced - Capabilities (talent, education, experience, tools) + Mindset (responsibility, respect, integrity) = Professional Work (effective, efficient, consistent), with trust across roles and functions - and anchored in performance management and bonus. A "smarter not harder" stream tapped team wisdom for productivity gains. An international engineering culture was built with core/non-core site definitions, lead-site allocation, and the end of duplicate technology developments.

Five years after the programme started, revenue had more than doubled from the floor in 2015 to 2020, while R&D quota came down from 20% of revenue to 7% - more output from a smaller, better-equipped organisation.

Three engineering KPIs turned with it:

Time-to-Market: Average across all projects fell from 2.9 years (2015) to 1.8 (2018). In 2019, new products averaged 1.8 years, derivatives 1.1, and prototypes 0.5.

Manufacturing-Cost Deviation from Target: +22% in 2015 improved to +11% in 2018, +1% in 2019 - essentially on-plan outcomes replacing chronic overruns. For three product families manufacturing cost were halved.

R&D Efficiency: R&D quota declined from 20% of revenue (2015) 8% (2018) and 9% (2019) as output rose and the organisation delivered more with less.

Beyond the numbers, the organisation had shifted. Portfolio discipline, systems engineering, and cross-site lead-site logic replaced duplicated effort and internal competition. A values-based performance culture - capabilities plus mindset, anchored in the bonus system - held the gains and made further productivity improvements a line-management responsibility rather than a consulting output.