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

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.

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.