Every connector company has a budget allocated for Research and Development, it is expressed as a percentage of annual sales, and it ranges on average between 2 to 5 percent for large and mid-market connector companies.
For example, over the last 3 years TE reported 4.4% to 5% and Amphenol reported 2.6% to 3% in annual R&D expenses from their net sales.
R&D expenses represent an important ongoing investment for a connector company and planning such investment rather proactively than reactively may take some practice and determined effort.
When we speak of R&D, we may associate it with innovation and new product introduction, a process flow that looks something like this:
R&D > Innovation > New Products
However, innovation is the challenging aspect of the process, and many companies struggle to identify what innovation means for them and how to classify it.
Innovation and its classification should be clearly defined in every connector company’s vocabulary. Having such definitions in place will help management define the company’s technology and innovation roadmap, and also will help to frame the diversification of investment in innovation.
So, let’s have a detailed look at the four distinct classes of innovation with some typical examples from the connector industry.
Incremental innovation is when you make slight improvements to your existing technology for the benefit of your existing market. A good example of incremental innovation is when adding new configuration options or new features to enhance the offering of an existing connector series.
The success of incremental innovation is highly dependent on demand and often, incremental innovation occurs as the result of collaboration with customers when developing improved solutions for their applications.
Returns from investment in incremental innovation are quick and often very profitable, this is why a minimum of 40% of all R&D annual expenses should be allocated to incremental innovation.
Strategic innovation is when you take your existing technology, adapt it, or transform it in such way as to capture an entirely new market.
A great example of strategic innovation is when a D-Subminiature connector manufacturer qualifies a D-Sub series to spaceflight specifications such as ESCC-3401 or GSFC S-311. Suddenly, the satellite and space exploration markets become available for product placement opportunities.
The success of strategic innovation is highly dependent on identifying the specific needs, trends, and challenges within your target industries. Connector companies who succeed in strategic innovation generally participate in industry workgroup activities by joining technical committees who are in charge of developing new standards or specifications.
Investment in strategic innovation should not be overlooked because of two factors: superior payback potential in mid to long term periods and the possibility to allocate the total corresponding costs to R&D expenses. A minimum of 25% of annual R&D expenses should be allocated to strategic innovation.
Disruptive innovation occurs when you adopt or invent a new technology which leads to the creation of new products or significantly improve your existing products rendering a high level of appeal due to superior performance or reduction of cost or a combination thereof.
An interesting example of disruptive innovation in the connector industry was the introduction of modular connectors. A modular connector allows the user to selectively configure the contact arrangements within a given envelope without dealing with the cost of custom moldings and increased lead-times. The modular connector concept took off with fast market adoption and several connector companies developed their own distinct versions.
On a note of hindsight however, beware on the potential impact of new disruptive technology on your own legacy products. In other words, try to evaluate upfront whether or not, a decade later, some of your perfectly good legacy products should be faced with obsolescence because they simply lost their appeal in the shadow of their younger sibling.
A connector company should budget a minimum of 25% of annual R&D expenses on acquiring or developing disruptive innovation.
Breakthrough Innovation is the rarest form of innovation and quite frankly not all connector companies can claim that any of their products meet the criteria in the breakthrough innovation class. It is even difficult to find many examples of connectors which feature new technology to the extent of creating new markets or new areas of utilization.
Perhaps one of the most evident examples of breakthrough innovation in the connector industry is the fiber-optic connector. The ability to splice and connect optic fibers repeatebly and reliably, allowed infocom technologies to evolve to the level known to us today.
Breakthrough innovation in electrical interconnections appear most often at the interface with or between printed circuit boards where the innovation aspect is characterized by elimination or simplification, either by eliminating materials or components or by simplifying the installation process.
For example, zero-insertion force or very-low insertion force solderless through-hole technologies are becoming appealing to traditionally conservative markets such as military and spaceflight sectors. Furthermore, solderless surface mount technologies are gaining popularity in new markets primarily due to miniaturization and increasing densities of components placement.
Ultimately, reliable non-destructive solderless technologies occupy prime consideration in the breakthrough innovation class when it comes to connectors.
Yet other aspects remain unexplored when it comes to breakthrough innovation in connector technology because two main conflicting drivers consistently challenge the envelope of possibilities for connectors: higher power and smaller packages.
As the “more & small” trend continues unavoidably, we are forced to innovate and the next breakthrough in connector technology may be just around the corner.
It is challenging to define the right amount of recurring investment a connector company should consider making in breakthrough innovation however, the old saying “no pain, no gain” should give something to think about… Let’s say if 10% of total annual R&D expenses go to finance breakthrough innovation objectives and a breakthrough is hit once in five or even ten years, hmm… that’s something to think about…
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