Commentary by Praveen Gupta

A Dangerous Trend in R&D

Sometime ago, I read that a new technology officer of a leading computer manufacturing company has discontinued R&D projects that go beyond 2-3 years. The top 20 or so projects were retained for generating short term revenue. Leadership in other companies have adopted the similar strategy to productize R&D. To an extent I believe R&D must become more business focused, efficient and productive, however, I do not believe R&D should be required to generate revenue in the short term. Instead, R&D organizations must become a source of profitable revenue growth, not only in short term but also in long term. There is a difference between revenue growth and revenue generation

For the sake of next quarter, corporations are forsaking future. First no R&D has been so efficient that it can produce additional revenue in just one or even two quarters. Secondly, their designs have been marginal at best for reproducibility. To accommodate design marginalities manufacturing organizations generally struggle for sometime resulting in wastage of precious time and losing potential competitive advantage. Thirdly, even if the new products are released due to reprioritization, early launchers in most cases cut sales of their own profitable products and causes operating loss due to poor initial profit margin. Hence, the R&D projects prioritized for short-term gain are very unlikely to produce desired results.

While no one would undermine the value of immediate cash flow, we need to continue to invest for long term sustenance. Every major firm must continue to invest in R&D for short term as well as long term. Real challenge is the sensible allocation of R&D investment. The R&D must take a 15 or 20-year perspective, and define a portfolio that would include some research on fundamental (F) discoveries, platform (P) development, derivative (D) products, and create plug-in opportunities for partners to innovate variation solutions (V) on their platform and derivative products. The timeline for F, P, D, V innovations vary from longer term 15 years to on demand in real time. Such breakdown of innovations would allow a sensible allocation of R&D resources. Just totally shutting down the long term research is a very short-sighted strategy, or senseless act. Such acts leave no room for survival, killing any chance for long term competitive advantage. Short term acts are no strategy.

What do my readers think? Any comments, please?

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