Engineeringand R&Dpulse 2026 How are engineering leadersnavigating speed, agility, and costpressures in the age of AI? Who should readthis report and why? This report is primarily intended for seniordecision-makers in engineering and R&Dfunctions – including chief R&D officers,VPs and heads of engineering or productdevelopment, chief technology officers(CTOs), and innovation directors – who arenavigating today’s challenging businesslandscape. It provides an overview of thestrategic evolution of engineering andR&D functions in response to rising costpressures, longer time-to-market cycles,intensifying global disruptions – fromsupply chain shocks to talent shortages –and the impact of technology, especiallyAI. The report is also relevant to chief financial officers (CFOs) and chief supplychain officers, whose decisions regardingcapital allocation, procurement strategy,and supplier ecosystems shape theeffectiveness and agility of engineeringfunctions. Informed by insights from1,500 global executives, the report distillsthe key trends, organizational shifts, andtechnology priorities that are redefiningmarket competition and strategic direction.It offers actionable guidance to helpdecision-makers navigate disruption andaccelerate transformation in a fast-changingenvironment. Executivesummary Executive summary Preparedness gaps in the face of macro disruptions compound the challenge While addressing these realities, engineering leaders must also contend with disruption from the broaderbusiness environment. Some factors are harder to mitigate than others. Less than one third of executivesbelieve their organizations are prepared to address geopolitical uncertainty, supply chain disruptions, andtalent shortages, for example. This lack of preparedness makes transformation even more challenging. Asorganizations face both persistent and unpredictable disruptions, there is an acute need for the agility toadapt quickly and remain resilient. (Interestingly, while AI is seen as a significant influencing macro-factor,most believe that they are reasonably prepared to seize its opportunities.) The urgency for engineering and R&Dtransformation is real Engineering and R&D leaders from across sectors includingaerospace, to automotive, energy, life sciences, and beyond,are urgently articulating a need to transform: 44% believetheir organizations risk losing significant market share if theycannot accelerate their innovation processes within the nextfive years. Even more (48%) say they need to bring down theircosts significantly in order to stay competitive. Executivesbelieve costs must be reduced, on average, by 10%; design anddevelopment time by 9%; and production ramp-up time by 8%over the next two to three years. Core engineering metrics are heading in the wrong direction While speed, agility, and cost reduction remain top engineering and R&D priorities for surveyedorganizations, our data suggests that these metrics are sliding backwards. Nearly eight in 10 (78%)respondents say costs1have increased over the past three years, and over a quarter of these say theincrease was significant (more than 15%). In addition, nearly half (48%) report an increase in design anddevelopment timelines, underscoring the need for a new approach. These trends vary from sector to sector.For example, telecom organizations are notably less likely to report cost and time-to-market increases,suggesting that some sectors may be better positioned than others to manage these pressures. Executives point to a range of organizational and systemic barriers undermining efficiency and agility.These include supply chain constraints, talent shortages, resistance to change, legacy systems, weakinnovation cultures, and regulatory or compliance challenges. Executive summary Unlocking efficiency and agility: Digitization anddiversified outsourcing top the agenda Emerging technologies are catalysts for engineeringreinvention Digitization and outsourcing are the top strategies to improve engineering and R&Defficiency, while tech partnerships and internal streamlining are gaining traction.While all forms of outsourcing are increasing, organizations are adding to theirportfolio of models to include performance-based outsourcing, build-operate-transfer (BOT) arrangements, and revenue-sharing partnerships. This suggests thatthey are seeking a stronger focus on outcomes, the opportunity to share risk, and theagility to respond more effectively to competition and disruption. More than six in 10 (63%) executives see emerging technologies and digitalinnovation as enablers of change, with AI, digital twins, and next-generationmaterials ranking as the most transformative technologies for engineering overthe next two to three years. While the global average stands at 63%, prioritizationvaries across geographies: organizations in China lead, with 81% prioritizing digitalinnovation in engineering and R&D, followed by the US at 73%, while Europe trailswith 60%. Org




