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What is an external R&D department?

| PODCAST 10.03.2023
What is the episode about?

In today's podcast episode, we will talk about what an external R&D department is and its role in solving problems and creating innovative products. We will take a closer look at the problems that are solved by the company's external R&D department. We will also talk about whether the product creation process is expensive and how long it takes.

Paweł Huchla – founded his first company at the age of 17. Already during his studies, he started implementing projects for the founders, and in 2003 he joined the Inquel company. At the very beginning he was a programmer. To this day, the company's products still contain lines of code written by him. After some time, he became the president of Inquel. The company was developing, and with it there was a need to expand competences. That's why he completed his MBA studies and a year-long series of coaching training courses. Currently, he is also involved in mentoring and supporting pro bono young businessmen and startupers.

What's included in the episode:

[1:24] What is external R&D?

[4:19] What kinds of problems are solved by external R&D?

[7:03] An example of solving the Szumisi problem

[15:02] What problems are solved by technologies?

[20:30] Who is the external R&D service for?

[24:46] What does "optimal" mean?

[27:30] Will an external R&D department undertake every project?

[30:30] Is the product creation process expensive?

[34:08] How long does the product creation process take?

[36:22] Why is it worth investing now?

For those who prefer to read rather than listen, we have prepared a transcript of the entire episode.

Hello Inquel Talks. If you're listening to this podcast, you're probably looking to increase your competitive advantage by using technology, electronic devices, and software. If so, you've come to the right place. In this podcast we will talk about the latest trends and technological solutions. Thanks to them, you will be able to increase the efficiency and effectiveness of your business. This podcast will also include practical tips and advice that will help you fully use the potential of technology in your company. Inquel Talks is conducted in simple language, so you don't have to be an engineer to use it. Our goal is to help you better understand how technology can help you build a competitive advantage. Well, let's get started.

[T]omek Kowiecun: Good morning, ladies and gentlemen. Hello and welcome to the Inquel Talks podcast. My name is Tomek Kowcen and I am the host of Inquel Talks. Today my guest is Paweł Huchla, who is the president of the management board and one of the co-founders of Inquel, which is an external R&D department. Hello Pawel.

[Paweł Huchla: Hello, hello.

[T]: Paweł, let's start with the first question. I would like you to decode for our listeners what an external R&D department is.

[P]: An external R&D department is a unit for you, thanks to which you can start implementing what you consider to be difficult projects without investing in equipment, people, know-how, or waiting years until you manage to get it all together. and solve difficult problems.

[T]: What kind of problems are these? You said it very generally. We are to speak in the simplest language possible so as to make it clearer to the listeners. What is an external R&D department? Break the spell a bit from these words.

[P]: This is a group of people who have knowledge and experience in solving problems, in our case problems that can be solved using technology, specifically electronics. Right now, most of the devices we use that perform some function, whether it's smart functions or automation functions, contain electronics. And the use of these electronics allows us to simplify many things that take us a lot of time on a daily basis. However, creating such a device, designing and programming such a device is not an easy thing for people who do not do it every day. If you have a business that focuses on providing benefits to your customers and you are focused on your business, you do not have to think about how to automate a certain process or how to modernize your product using electronics. By coming to such an external R&D department, you can learn how to do it. You can find out how you can do what you have been doing better, faster, more effectively, more interestingly for your customers and earn more, right?

[T]: So, in some way, replace the idea with a ready-made, I mean, system with software, right? Consisting of certain sensors, device software that solve certain business problems, right?

[P]: You know what, yes, but not only that. We went through, I think, over a hundred different projects, and there were some that came up without any idea. So, thanks to the fact that we entered the client's business, saw how it works, how it functions, what it provides to its clients, we proposed a solution that was not even in our client's mind.

[T]: Okay, okay. So tell me and the listeners first of all, what kinds of problems do Inquel solve? I would probably say it best with examples, I think it's best to show listeners what types of challenges they can approach a company like Inquel with.

[P]: This is a difficult question, over a beer, when someone asks me what you actually do, right? This first answer is everything, because electronics are everywhere now, right? So we don't focus on any industry, we just focus on the application, right? We want to use electronics because we have such competences, that is, our know-how and the things we can offer to our clients are always based on some software and hardware solutions. What could it be? Just look at our product portfolio. These can be toys and here we can boast about products that have introduced a lot of innovation compared to what was previously on the market. These may be solutions for industry, where we have systems that, for example, automate the process of dispensing liquids or organize the work of car repair shops. But they can also be everyday products, such as heating systems for bathroom radiators, where we supply electronics for heaters that dry towels for our client's customers.

[T]: Okay, Paweł. What I care about, or what I think is important to our listeners, is to understand it from a practical perspective. And you gave three examples of technologies, solutions and brands. However, I think that the value for the listeners will be if we present a real problem that had to be solved and how technology, with the help of designers and engineers, was used to solve this challenge or problem. And I think this is the most vivid way to present the spectrum of possibilities, as you said. Theoretically, everything can be done in practice, but the question is whether it is profitable, sensible, etc. Let's leave that aside, because these examples, as I understand it, are all examples of projects that are not only profitable, but also constitute the business value or competitive advantage of given entrepreneurs. Let's go back again. If you could name a problem or challenge that entrepreneurs faced and how technology solved it?

[P]: Each of our projects is a solution to our client's problem and we always try to approach each project in this way. Interestingly, every client who comes to us with an idea or solution is not yet fully aware of how many other problems and issues lie behind it. However, what we have to offer the client is the certainty that he will not have to solve these problems on his own, and secondly, the fact that he is working with a team that has already addressed most of these problems. The moment Ania came to us with a hairdryer and a toy, asking if we could…

[T]: Ania from Szumiś?

[P]: Ania from Szumiś. She asked us to put the dryer in the teddy bear, and she came to us with the finished product, because she started this cooperation at a stage when she already had a humming product. However, for some reasons she was not satisfied with it. These reasons were very important, firstly, the high failure rate of the solution, and secondly, design problems that did not allow for the satisfactory replication of this solution, i.e. did not allow for the serial production that the company was preparing for. When we started this project, we started by practically throwing away what was there, so as not to focus on improving what she came to us with, but on creating something anew, based on our experience and the client's needs. This move resulted, first of all, in the preparation of a product that was perfectly suited to mass production, optimized in terms of production costs, which were very important for this product due to the expected production scale. We changed the way noise is generated, basically reinventing it and creating a special type of loudspeaker specifically for this purpose, which was manufactured especially to our order, so that the noise generated was of the highest quality.

[T]: And why all this noise, yes, I'm trying… Let's go one step earlier, what was the business challenge? Well, I understand, Ania came to the team and said, I need to turn the dryer into a device, but why this dryer, as if people who don't have children might not understand it yet?

[P]: Yes, you're right. I've been using this product for so long that it's so obvious to me that I don't talk about it at all. There are scientific studies, and apart from scientific studies, parents' experiences, which indicate that white noise or its various variants have a beneficial effect on the quality of a child's sleep and generally put children to sleep.

[T]: I confirm. I am one of those parents who used the Szumiś and, what's more, I would say that from the parent's perspective, such a Szumiś provides some kind of security, it gives a kind of, let's call it, repeatability in putting the child to sleep. Thanks to this, I or my wife, depending on who was taking care of the child, could put the child to sleep and take care of other household duties. It was us, as users, from my perspective, that this technology solved the problem that I don't know whether I will put the child to sleep now or not, what is going to happen here, whether I should call my wife now, when I have to put the dishwasher in, let's say, or not, and what if she's not there? So in short, I understand from my perspective, not as the founder of Szumisi, but the problem was that I didn't know how to put a baby to sleep in a repeatable way. And this white noise from what I understand… I mean, from what I understand. I experienced it! They helped put the baby to sleep quite quickly, repeatedly, and well. This is what I would add as a user, in other words, this is how I decode this parent's problem. Can you confirm if it was different?

[P]: Yes, that's how we started the product. What's interesting is that at the beginning of working with the product, we looked at it completely differently, we looked at it as a series of technical problems to solve. However, due to the fact that at that time, when creating this product, we were deeply rooted in industrial technology and we were doing very complicated things, such as synchronizing clocks, equipment guiding planes on airstrips at the Okęcie airport. This project was, I would call it, a departure from these industrial projects. And we actually focused mainly on these technical aspects. And, contrary to appearances, there were a lot of these technical aspects, because someone looking from the side might think what a problem it is to connect a loudspeaker to a player and play a humming sound.

[T]: What's the problem with putting a hair dryer in a teddy bear?

[P]: Well, for example. However, it turned out that putting it in a housing that would fit the mascot, preparing the device to be controlled with one button that allows you to select many functions of the device, preparing the housing in such a way that it does not resonate with the loudspeaker, and so that we can to use a microphone that listens to the surroundings, detects the baby's crying and turns on the device when it is needed, well, these were such challenges. Which are not obvious at first glance and which the client did not come to us with, right?

[T]: It's actually very interesting what you said. In the sense that here, I am pointing out as more of an observer and user that technology can detect, for example, that a child is crying and there is no need for a parent to activate something, you can just say that there is detection or detection of crying and turns on the Buzzer. And again, it gives me, as a parent, peace of mind, a relative peace of mind, that something will take care of me at this moment, it may be abusive, but it will help my child calm down.

[Bird. Well, we went even further with the solutions and in the next version we added control of the device, a heart, from a mobile phone, and added Bluetooth technology, which allowed the device to be conveniently turned on remotely. Also conduct a kind of listening of the device, the room in which the child is staying. And again, enriching this device with further functions that are very useful on a daily basis, right? Many parents complained that when they enter their child's room to, for example, turn on or turn off the Buzzer, they wake up the child unnecessarily, so the ability to remotely turn off the device was a very useful function.

[P]: The SDMP system, i.e. a liquid dosing and monitoring system, is a solution that, as I mentioned earlier, is aimed more at industry. Specifically, in its original form, to transport companies that have a large amount of fuel-powered equipment. In order to save and optimize fuel costs, these companies use internal fuel stations instead of refueling their vehicles at public stations. So they build something like an internal station, a tank to which they connect control devices. And they use our system to refuel their equipment.

[T]: So you can say that in a way they replace human work, right? Because I know gas stations, first I go to pour fuel, then I go to pay for it, I ask for an invoice, etc., I'm speaking from the user's perspective.

[P]: You know what, they do something more, because the problem to be solved wasn't just pouring fluid from one tank to another. But really, from the point of view of the owners of such companies, it is about sealing the entire process so that employees do not have the opportunity to abuse the easy availability of fuel, which, as we know, is an expensive resource, right? The introduction of the SDMP system in such a company meant that, firstly, the customer gave up the need for an additional person operating the dispenser, all refueling was done by the driver, and secondly, it sealed the entire process in such a way that it could not be abused in any way, i.e. simply stolen. fuel, right?

[T]: Okay, I understand, it's a problem that probably happens to many entrepreneurs in the logistics industry in some smaller or larger way, as if the point was not to say that we are surrounded by thieves, but that they also happen to us as entrepreneurs. be robbed by your employee.

[P]: Unfortunately, this happens, this industry suffers from such problems. However, thanks to the fact that we cooperated very closely with our client's industry, because here it should be noted that our clients are not transport companies, but actually a company that provides tanks and such systems to transport companies. Thanks to close cooperation, it quickly turned out that there were other problems in the industry. For example, problems related to the fact that some machines cannot reach the external station, right? Some cranes, we even have installations in mines where machines working many meters underground are refueled because they can't just get out of there, right? The use of the system in such situations means that, firstly, the driver himself is able to refill the fuel, is able to account for it, and the owner is sure that the fuel is being added to his vehicles, and most importantly, he has full records of the fuel circulation within the company. This means that he can see how much was added when refueling this large tank, how much was poured into which machine, and thanks to the fact that we can also connect the vehicle to our system and read its mileage, the owner receives statistics in the form of equipment consumption and average fuel consumption. and so on.

[T]: Great, it sounds a bit, I would say, Google Analytics, in the sense that it's a set of data that needs to be analyzed later, but thanks to this you can catch all kinds of deviations, R&D, etc. Cool thing. Listen, Paweł, thank you for explaining this from a practical perspective and answering how technology could help. So we more or less know how such… R&D works externally. So there is a problem, a business challenge, sometimes you don't even need to have an idea, but it's worth contacting specialists, right? But tell me, because some companies, some entrepreneurs may wonder why I should use someone from the outside, maybe they have their own specialists. So tell me, what do you think, from your experience, is the value of using an external R&D department like this? Do you know who this service is for?

[P]: You know what, I think there are many reasons for this. First of all, it is the know-how gathered in such a company. Being on the market for over 20 years is a guarantee for our clients that the solutions we offer are, first of all, proven and based on proven technologies. We have confirmation of the quality of all components we use in our solutions. And we are a kind of guarantee of success, I would say. When building competences within the company, the client must take into account that he will have to employ the right people. Most often, these are people from the IT industry, who are known to be very demanding nowadays and require the creation of certain working conditions specific to their industry, which are often different from those that are implemented on a daily basis in the structures of our clients. In addition, R&D departments should be equipped with appropriate equipment. If we talk about software houses, we are dealing with computers and compilers, in the case of hardware houses, i.e. R&D departments that design hardware. There are many more tools needed for work, they are much more expensive and require special maintenance. For example, we have special chambers that are used for specific measurements. First of all, these solutions are expensive and difficult to store, even due to their size or the way they need to be positioned in order to use them. And again, there are further costs and problems associated with maintaining it. Another thing is this experience, right? The fact that we have a team and that it has tools and knows what to use does not mean that we will be able to immediately use the latest technology, and what is most important for us, use it optimally. And in fact, the knowledge of how to optimally use technology is probably the most important thing here. And this is the most important reason why it is worth using such an R&D department.

[T]: Paweł, referring to our earlier conversation, I also understood what optimal means. I have been a gamer since I was a child in the sense that I played computer games. I had the feeling that the better the processor, the more RAM, the better the graphics card, it means the more optimal. But suddenly I realized that there are applications where, for example, a device is in the field, runs on a battery and a better processor does not mean that something works faster, but it will cause the power consumption to be much higher. And thus, the battery life is much shorter. And thanks to this I understood that optimal does not mean the fastest, but rather solving a given problem in the most appropriate way, also taking into account, let's call it, boundary conditions, or some kind of additional requirements and understanding how it will be used. It was such an eye opener for me that how is the fastest processor not the most optimal? No, it's just the fastest. Optimal doesn't mean the fastest, or not always, right? Ok super. What if you told me whether this external R&D department does all the projects? Today at the beginning I said that theoretically everything. I wanted to expand on this topic, it is certainly important information from the perspective of our listeners.

[P]: You know what, let me come back to this optimization and what optimal means. I like to talk about it by illustrating it with a triangle, which we usually use to find the center of the triangle. In each of these corners of this triangle, we have a certain priority to achieve, right? One of them is the unit cost of production, which, if we are developing devices for mass production, must be as low as possible. The second aspect is the functional aspect, i.e. this is the point at which we want to meet all the requirements set by the client. And the third corner is the development time, i.e. the cost of this development. And the optimum is playing with these three aspects to meet at a point where all of them will be best satisfied. The ideal solution is one that we develop quickly and that meets the full functionality declared by the client, or even more. And this unit price is within these assumed ranges or is below. And that's what you said, that using the fastest processor, for example, is a good approach when we want to shorten the execution time. And have the highest functionality, but then we have the highest unit production cost. By giving a very small processor, we can reduce the cost of production, but then we need more development time. Because, for example, writing an audio compression algorithm for such a processor is more complicated. We cannot use ready-made libraries, we have to create such an algorithm, e.g. ourselves. And we can't use it to perform all the functions we would like to, so we have to give up some of them. And playing with these three aspects is a key element of working on the project. At such a moment, when we are preparing the first brief for the client, the most important thing for us is to find the point where these three aspects will be best met. And that's best for the customer, right? Because please note that both the unit cost and development time, i.e. the cost of development for the client, and the functionality that the client will offer to its customers, are key aspects for him.

[T]: Absolutely. I'm very glad you added this, because in a way it makes it so. It's nice because it describes the approach in three elements. So thank you very much.

[Q]: Coming back to your question, you were asking what we can do, right?

[T]: Is everything, is such an external R&D department actually able to undertake any project?

[P]: We undertake each one, but that doesn't mean we finish each one, right? We want to discuss each project with the client, we want to see what his expectations are. However, we don't accept everyone, right? However, electronics is such a broad field that it is difficult to imagine that one company would be able to use all available technology, right? We specialize in solutions that can be implemented using single-chip micro controllers. I know everyone has run away from the speakers now. These are small processors that allow us to optimize the triangle I mentioned earlier in a good way. And since their availability on the market is relatively large and this aspect of the performance of these processors is very wide, we can do a lot with this type of systems. And this is what we mainly focus our activities on when building devices. Of course, in addition, when writing applications for mobile devices, we use very advanced electronics, because these are our mobile phones, which nowadays are probably the answer to the highest technological possibilities available on the market. Plus, when we create various types of systems, whether cloud systems or distributed systems that run on large computers or in the cloud, we use this technology. So here, as you can see, this fan is large. However, there are things that we do not take up because they require very specific solutions. However, it sometimes happens that we also reach for such projects, right? Taking advantage of cooperation with universities. And then we can try to provide our clients with solutions that are not yet available on the market.

[T]: Okay, great. Paweł, I'm sure he'll show up, I have to ask this question. It runs through every entrepreneur's mind. Do you know how much it costs? Is it expensive? If you could discover this world or these budgets a little bit. What does it involve, because… Let me simplify it, is it expensive, or how expensive is it?

[P]: Yes, it's expensive [laughter]. It's expensive, you know. I'd like to say right away that it's expensive, because sometimes we have inquiries where someone comes to us with a cool idea, an entrepreneur, a sole proprietorship, and he asks us if we can do it for him, right? We can do it to him, but we start from 100,000. It is often the case that such a client will say as much as 100,000 for it, but for what? Nowadays, creating a finished product that works based on electronics costs money. The electronics must be developed, it must be programmed, the casing must be designed, the casing must be manufactured, the device must be prepared for series production. This device must undergo a series of tests and only then, after completing the entire process, can we say that we have a device ready for production. Because we care about our clients' success, we do not take on projects that we see do not have financing from the very beginning. We do not want this to be the goal of our activity to create a prototype that will not be produced later. That's why I answered the question that it is expensive because you have to allocate some of the funds that we would normally like to put straight into marketing, first into product development. Maybe 100,000 is not such a starting ceiling, because we have projects that cost 30,000, right? However, you have to take into account that it's not 5,000, right? There is actually no upper limit. If we look at our system for monitoring and dispensing liquids, it is worth millions, because work on this system has been going on for many years and it is constantly being developed. We are currently producing the third version of the system. The system is currently aimed at fuel wholesalers who use it internally to provide the system to their customers, so there is such a system in the system. A very advanced cloud-based application that connects to all these devices and exchanges data with them. And such solutions have to cost money, right? This is something that lasts for years too.

[T]: If I understand correctly, the process of creating a new product or electronic device is relatively expensive. If I understand correctly, this is due to the fact that it is being worked on by programmers who, as we know, are hard to find and who like to work on ambitious projects. They are highly paid specialists in demand everywhere. I think that no one is surprised today that the software house or the budgets, projects that go to the software house, usually start from several dozen or several hundred thousand zlotys and probably do not have an upper limit, looking at it global. And here, from what I understand, there is also the issue of engineers, designers, electronics, etc. so it must be a comparable order of magnitude, because there is also software, right?

[P]: Well, that's what it looks like.

[T]: Paweł, well, we have an answer to that, we know more or less what order of magnitude we need to take into account. How long does this process take? Because this is the second basic question that probably every entrepreneur will ask. How long will it take?

[P]: You know what, that's a good question too. Of course, there are some minimum amounts of time needed to launch the project, to read the brief or to listen to the client and find out what his problem is. And that usually lasts a week, two to a month, right? However, how long it takes to develop the device depends very much on what kind of device it is, of course. I will answer yes, there are such projects, even recently my chief engineer came and said: listen, we have a project that we can do in two days. Why? Because we will use 100% of all technologies that we already have, finished. This is also the advantage of using an external R&D department. We have ready-made blocks from which we assemble devices. In such a situation, the client firstly pays less because he is not charged for developing this project, and secondly, he receives a ready-made solution very quickly. There are also projects in which most of the elements are very simple. All the electronics, developing the diagrams, takes less than 2-3 weeks, but there is a problem that will take up to half a year to solve, right? And we have completed projects in which we carried out such work, developing an algorithm that was necessary for the device to function properly and ultimately implement the intended functions addressed by the customer.

[T]: OK, so to sum up, projects start from several dozen thousand zlotys and last at least several weeks. Both of these criteria have no de facto upper limit, right? As they say: the sky is the limit. APPROX. Listen, and at the very end, I have these questions for you. Why is it worth investing now? You know, if people around look and see high inflation, conditions may not be favorable. So I'm going to ask a perverse question, but I think it's very necessary, you know. Why now?

[P]: You know, I'm an entrepreneur, I believe that you always have to invest. There is no bad time to invest. They are better or worse, yes. Investing in new products or solutions that in some way simplify or automate our work. In my opinion, they allow our clients to achieve a competitive advantage, an advantage in their industry. And nowadays, in times of crisis, this advantage is, in my opinion, crucial. Currently, we are dealing with a market that verifies whether the company is well managed, whether the product portfolio is tailored to customer needs and the introduction of better products, the introduction of better company management methods, the introduction of elements that automate the company's operation is, according to For me, it is a key aspect to survive and win in these difficult times.

[T]: As they say on the capital market: invest when there is bloodshed. In other words, it is relatively cheap and you can earn relatively much.

[P]: I would also like to add that I am unsatisfied and this may be a good topic for our next meeting. Expanding on the topic, coming to us when we don't have a problem, but showing up at a company that offers an external R&D department, just to see what they can offer me.

[T]: Paweł, thank you very much for our meeting. I hope that our conversation turns out to be inspiring for our listeners. It was Inquel Talks. You can reach us, Inquel, via the website. Through our LinkedIn. Once again, Paweł Huchla and Tomasz Kowcen. Please contact us, where we can analyze your idea free of charge as part of a consultation.

[P]: Thanks, see you later.

[T]: See you in the next episodes.

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