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Growth Crisis of Indian IT-Part1: How Product Management Function Can Save Careers and Business

This entry is part 1 of 3 in the series Indian IT: Growth & Innovation Crisis

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.  

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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.   

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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:

  1. Bringing business experience and perspective to R&D entities. The mindset change will help to create revenue-generating IP.
  2. 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.
  3. Some of the innovation initiatives will eventually succeed and bring revenue.
  4. 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.

Growth Crisis of Indian IT-Part2: 8 Reasons Why New Product & Business Innovation Fails In R&D and Technology Service Organizations

This entry is part 2 of 3 in the series Indian IT: Growth & Innovation Crisis

Business Crisis and Innovation Dilemma

I discussed the problem of R&D centers around the globe ‘here’. The case for keeping senior employees is decreasing rapidly. This is the scenario where the organization does not control the product and its road map. The organization entity gets revenue from billing R&D service efforts. Those customers do have more business to offer. But the senior employees take lot of money home without generating comparable business value. Hence there is a practical limit on value addition and get revenues for the same. Hence there is need for new business/innovation ideas and get new revenue streams.

Indian IT Innovation Crisis

This part goes okay

  • Initial idea generation
  • Idea filtering
  • Initial prototype
  • patents

Then things just do not move. There are hindrances.

8 Hindrances for developing new revenue streams:

  1. Ecosystem and Structure:  Developing new revenue stream starts with innovation management and proposing ideas. The whole responsibility literally FALLS on the head of the proposer of the idea. He has to perform all roles related to this idea.
  2. Funds: Historically the R&D service required only people. All required equipment and licenses were sent by customers. The organizations are just not used to spending money on specialized software and hardware. For own product development, investment besides people is needed. Organization needs to learn new spending habit. Some have program to give small seed fund – too small to create new revenue.
  3. Process Driven Culture: Several R&D centers and technology service organizations focused a lot on which was needed to get projects. This was good for the repeatable technical work. But this has wired the brains of all the executives in certain way. This pattern is not conducive for building new products, markets and consulting business. Some organizations have the initiative to give seed fund. But this process driven culture blocks the effective usage of the money.
  4. Decision-Making Habits: The organizations are well developed in people management. They are also pretty good in making technical decisions. However, in techno-business aspects, there is a long way to go.
  5. Business Direction: R&D service organization has many different extended teams corresponding to business units around the globe. For choosing business adjacency in multiple domains is a big challenge. It needs to ensure that it does not compete with the parent business unit.
  6. Short Term v/s Long Term Dilemma: The short term stakes of these initiatives are low compared to traditional effort based revenues. Management has to manage these two in different mindsets. The skilled employees can generate revenue in short term. There is always temptation to put the person to something that earns revenue in the short run. Also there is no maturity yet on how to track and to get a feel of whether long term tasks are progressing in right direction with optimal pace.
  7. Performance Management: The relative performance measurement between people in R&D service and the long term growth assignments become too difficult. These two being very different mindsets, even for reviewing the accomplishments.
  8. Risk Taking:
    1. The risks for the management are obvious. The management may not spend enough energy chasing uncertain long term revenue while the proven stream can ensure their job security. If they take, they may not hold the same position beyond two appraisal cycles.
    2. Employee gets the pay check irrespective of the outcome of the initiative. However he lives in the fear of losing job down the line. Because he knows that he is currently taking lot more than he is giving back. He does lot of miscellaneous work for the bosses in mainstream business, just to keep options open when failure hits. This mindset increases the chances of failure.
    3. This risk model does not help the task at hand. Getting revenue through new products requires lot more risk taking and free thinking.

Any other roadblocks do you see !?

The remedy: PASS capsule – Startup within the organization. It is intrapreneurship in true form. More on this next time.

Growth Crisis of Indian IT-Part3: 5 Benefits of ‘PASS Intrapreneurship’ for Global R&D Centers (and IT Service Providers)

This entry is part 3 of 3 in the series Indian IT: Growth & Innovation Crisis

I spoke about the crisis of service organizations in R&D space – especially in Indian IT context. Also wrote about innovation and new business efforts and why they are not working. Now, it is the time to see what is possible.

As mentioned, there is over-supply of senior employees and the numbers keep adding. The idea is to create “start-up capsules” within the organization.

 

Structure – PASS capsule:Growth-Strategy-innovation-entrepreneurship

It is a “start-up capsule”. It can truly work as start-up within the organization. The senior people in that can work as “‘entrepreneurs with some structure”. However it still uses the same brand, infrastructure etc. It is separate entity from legal stand point. The team is freed from bureaucracy.

It is not independent ship. But a lifeboat which can sail independently-close to the ship. Upon finding direction, it can rescue some more people in the mother ship.

The Key Elements:

PASS (‘P’roduct manager + ‘A’rchitect  + ‘S’ales person + ‘S’eed fund & resources) model involves all the core elements required to make the idea work. Attach a junior team.

Create a self contained capsule out of the 4 elements.

  1. Product manager – Define: Owns business plan, product features and the target market segment. First role required to initiate this capsule creation. Technical people who lean more on requirements engineering and product architecture could be oriented towards this.
  2. Architect – Create: The owner of product/solution delivery. The people who perform standard architect roles would straight-away fit into this.
  3. Sales Person – Sell: Go-getter on the road. This role might require some searching. However large organizations with the issues I raised, always have people with good selling skills.
  4. Seed fund and resources
  • Funding:
    • The organization can provide the seed fund.
    • The senior employees in focus can be offered part of their current salary only. In return – they can get stock options. This ensures that there is ownership and the need for monitoring is much less
    • Overall, the cost may not be too high since employee takes only part of the salary. The energetic employees, who feels stagnated, get low risk opportunity to be entrepreneur.
  • Resources
    • Such start-up teams could use the same resource pool of the organization
    • This would include infrastructure and the entry-level members.
    • With funds, there is flexibility to outsource as well
  • Legal support
    • Create semi-autonomous entity
    • Support such as keeping it clean in terms of IP, business interest conflict etc.
    • Help in getting legal protection during customer acquisition phase

The advantages of this structure over current innovation management mechanisms:

  • For the organization –
    • This ensures that parent company’s liabilities reduce when customers are acquired.
    • Gets to learn adjacent businesses virtually free of cost
    • Not much of innovation management needed once you create the structure. Current ways are anyway not helping much. Why not try this?
  • For Employees –
    • Frees the hands of the senior members/founders.
    • The founder members have flexibility to accept high risk for high returns

This appears long and painful considering the pain of creating separate legal structures and so on. But you may not believe  – it will do wonders.  

Advantages:

1. No Fooling Around:

If employees and the organization sign up for such arrangement, it is quite clear – no one is fooling around. There is risk, but not something that would ‘kill’. At the same time, no one can just ride the ‘corporate wave’ of innovation to their promotions. There is sound platform for ‘authenticity’.

2. True Opportunity of Entrepreneurship: As capsule, they need not be bound by usual demotivators – appraisals, comparisons and bureaucracy. Gets the best of both worlds – branded company’s comfort & security  and the flexibility of start-up culture.  They truly work as entrepreneurs.

2. Opportunity with Safety: Further, they still could get parachutes – after fixed period – say 3 years, they could give up and get back to standard roles. If it succeeds, the benefits are obvious. If venture fails, employee can return into mainstream tasks.

3. Cost-effective way to fill leadership pipeline: Even if the venture fails, both employee and the organization would still win. All the valuable exposure gained by employee will be useful for the organization. Such pool of people would feed into the leadership pipeline.

4. Sales competencies – IP and Hi-Tech: By and large, R&D centric organizations love to create something. But less enthusiastic/competent on selling aspects. This model addresses the basic issues and builds selling abilities.

As I have seen, selling IP and new solutions do not have major success stories from most R&D organizations.  If the venture fails, you have people who possess both technical and selling skills. It is a killer combination for growth.

5. Building Ecosystem: The model builds a chain of suppliers for the parent organization. Also the ‘PASS CAPSULES’ establish their own network. This builds very useful ecosystem for any kind of expansion.

To Conclude…

You can influence your organizations for the approach. Depending upon the risk appetite of the organization and people, various aspects can be tuned.

I am sure it can work in Indian IT. Possibly elsewhere in the world too. I know that post-2008 crisis American companies put people on Furlough instead of large scale lay offs. It helped everyone.

This will be worth a serious and innovative try. It can make history.

Don’t you think so? Curious about your views!