Crisis of R&D Service:
You probably know this already. There is a set of organizations which provide services in IT, Engineering and R&D. This article is about the crisis they are facing today. In particular – about these organizations in India which started booming in late 1990s. And how they can re-invent.
These R&D organizations fall into the two categories:
- Global Technology Centers providing effort based service to the business units. These are the 100% subsidiaries of global organizations. They are captive centers are primarily exist in order to support parent organizations.
- IT or Engineering service organizations involved in outsourcing. Mostly these work again on effort based model.
For high end skills, they rely on specialists in parent organizations or clients. Due to this the complexity of work to be done by them is low. Relatively juniors can do the job. Fewer seniors are needed to manage the people.
How to get revenue? It is by billing effort as opposed to outcome or value. This is due to the vague nature of R&D work. Overall profitability is good while risks are lower.
So far so good.
As days pass, growth is in single digit percentage on larger base. And you have more experienced people than needed.
The Crisis – What to do with the experienced people ?
I know many R&D organizations who are struggling with this specific issue. At least in India, the industry picked up in late 90s-early 2000s. They had high growth period in terms of head count. Too many people who reached 10 years of experience and above are at cross roads.These are highly accomplished members who understand the technology, domain, customers and organization dynamics. They can think in multiple dimensions. Can give high quality output.
There is a real problem in both extracting value from employee for the salary they take and giving her a meaningful career.
How Are Organizations Responding?
1.Some organizations simply showcase their value to the business units they serve and seek the higher rate for the efforts. This is the most desired way for an R&D center. However, the scope to give higher technical value is limited and so is the ROI for the business unit funding the service. I have seen this succeeding only in small pockets.
2. Innovation: The experienced people can think of new things, prove them and help the main business. This helps to utilize part of the experience. However this does not solve the problem of revenue. Most of the output will not leave the premise towards a customer installation.
3. Create more cross-functional roles under category of program management or technical lead/manager roles.
Under this umbrella, park people in not-so-value-adding roles. These are cross-functional roles bundled as Program management or technical lead/manager roles. Drag this as long as possible.
This has the following problems:
a. Each role requires a specific mindset to be cultivated. The roles are created as miscellaneous catch-all jobs. I have explained issues with this here. Also take a look at the checklist to ensure right job design.
b. No sense of direction.
c. Organization does not know what to expect from this set of employees. Without the alignment with business, management will not spend much time with these people. Everyone fights to somehow get into people management roles of core effort based business.
d. Roles exist without right Ecosystem
For example, program manager’s role is meaningful only when there is program which spans across groups. If opportunity does not exist, org can not get back its due from employee.
Likewise, a specialist creates value only when someone needs to consult her. Or when she builds a product/solution or service using this specialized knowledge. Any other way to utilize will be frustrating for both.
Likewise several other roles also are wasting people and careers.
4. When the above two approaches hit the dead end, inevitable happens. Being in dummy roles, they have not added any skill that generates value. The organizations are forcing these “spent forces” to leave somehow.
How to solve the crisis of R&D Centers? … Introduce product management as key function.
What is Product Management
It is the role that connects market/business, R&D and sales/customers. This role brings the voice of the product. There are several blogs defining the role. I liked this one (include the clarifications in the discussions also). Also I have defined one aspect of the role here.
How to approach this?
- Offering product management as career to senior members. The technical members understand pretty much all sides of the business they are in.
- Orient them in marketing and sales.
- Have them chase real end users requiring real solutions – not chase the effort based revenue.
The Product Management Roles – Possible business objectives:
1. Getting new consulting business
The senior member takes complete responsibility for getting business lead, specifying solution etc. based on existing IP / competencies. This can be in adjacent domains of the business unit being served. This will ensure that there is no conflict with current customers. This is essentially about taking the solution to adjacent markets where the core business has no interest.
Invest in prototyping solutions which can attract large deals. The investment helps the senior employees to build upon existing skills.
Build consulting practice. Generate business leads to customize existing IP, specify new solutions and pilot it.
2. Working for Future Growth – Products and Solutions:
They can build basic business case and lead incremental solution development for new ideas.
How does this help the employees:
- The effort based revenue requires project from outside to come. This makes it very hard to do employee skill development due to low predictability.
- The roles are limited by the R&D services requested by external entities. In the suggested approach, there is no limit. The real limit is only by investment.
- Each member in this role will develop skills of getting revenue in. Indeed very useful skill to have for both employee and the organization.
And, how organization gains:
- Bringing business experience and perspective to R&D entities. The mindset change will help to create revenue-generating IP.
- Management can develop skills to take techno-business decisions. The organization leadership at various levels is used to taking stand on technical aspects. The steps suggested here will graduate them to techno-business decisions. Without this, the dream of earning revenue through IP will never materialize.
- Some of the innovation initiatives will eventually succeed and bring revenue.
- If there is need to let go of people, it is more socially acceptable. They are better equipped to be entrepreneurs. Or consultants.
But I am still skeptical. Innovation has been tried in Indian IT and also in R&D centers in general. But commercial success had been very limited.
Yes. You are right. Trying new products and so on had been tried in service organizations. But there had been no significant success. I am presenting the reasons “here”. There is an effective remedy too ‘here’.
As I always suggest, do not create redundant roles to please people. Also check where do you stand with respect to the role checklist.
Bottomline – The role of product manager is under-appreciated in R&D setups. There is urgent need for developing more and more product managers from technical ranks. High time the organizations do it – to reinvent themselves.