High development costs pose challenges for European companies
When even industry giants like Bosch (aggressive cost-cutting programs) and VW (systematic cost-cutting) are publicly responding to cost pressures, one thing is clear: continuing with business as usual in product development will be expensive. Many engineering managers report rising costs and see a significant need for cost reductions in the coming years.
At the same time, the European Commission shows that while global investment in R&D continues to grow, Europe’s growth rate is significantly lower in a global comparison (iri.jrc.ec.europa.eu). European companies would need to offset the slower growth in R&D investment through greater cost efficiency to achieve comparable R&D results.
The potential causes of high development costs are well known
What are the key drivers of losses in cost efficiency? In addition to causes beyond the direct control of individual companies—such as energy prices, bureaucracy and regulation, wage levels, or supply chains—there are also causes that a company can directly influence:
- Too many or too many product features → development costs for features that customers do not value (gold-plating)
- Late, unplanned changes → unplanned costs for rework, retesting, recertification, and supplier loops
- Low reuse of results → projects “reinvent” existing building blocks, leading to unnecessarily high variance
- Late integration & validation → costly errors late in the process
- Low productivity due to silos, legacy toolchains, and lack of digital continuity → increased coordination effort, media breaks, duplication of work, errors due to inconsistent data states
3 possible measures:
- Introduce clean requirements engineering, clear acceptance criteria, and early validation (prototypes/simulation) for requirements.
- Apply front-loading & ensure reuse of existing solutions.
- Optimize the product development flow (value stream mapping, prioritization, cross-functional teams, flow-optimized interfaces, WIP limits, “stop starting – start finishing”).