Protect your R&D

Written on the 5 June 2009

Entrepreneur, consultant, educator and author Dr Tom McKaskill has established a reputation as one of the world’s leading authorities on exit strategies for high-growth enterprises.

YOU may lose the odd battle but make sure you have enough ammunition left to continue to fight.

In business, this means ensuring that you protect that part of your business which gives you long-term competitive advantage - normally your research and development capability. If you are in the product business, this might be your ability to design and launch new products or to source new innovative products from others. If you are in the service business, this might be your creativity in being able to innovate to launch new services or processes to attract new customers or retain existing ones. Whatever it might be, in a downturn, you need to ensure that you retain this capability so that you can survive and support growth when the economy recovers.

When the going gets tough we often need to cut back on our overheads and this often leads to retrenching staff in the product and service development areas. But this often undermines our long-term core strength. Therefore, we to seek out some creative solutions for retaining the best of our development staff through the rough patch.

The first thing we might ask is – what else could they do which would offset other costs or generate revenue? Could you take on external research and development (R&D) work? One company I worked with employed an external business development manager to seek out R&D work from local businesses in the area. Over a period of six months this work was built up to 30 per cent of the company’s workload and gave it a degree of resilience, which they would not have achieved inside their own business.

In one of my own companies, we had a large R&D team of about 15 staff, all who were critical to the on-going development of our software products. Most had several years of experience with us which meant they were very knowledgeable of both our technology platform and our application products. The loss of any one of them would have resulted in high recruitment and training costs to find a replacement. Rather than let that happen, we sought work with our customers so that they would be able to cover their own salary during a period of downturn.

Cross training is another safety net you should be employing. To the extent that it is possible, have members of your R&D group work across a number of projects and in various capabilities so that you have a succession plan in place. You might also seek out external providers who can be brought in at short notice to assist in a recovery until you can rebuild capability.

The key to protecting core competency is to have thought though the problem of a downturn well in advance and to have put contingencies in place. You need to have a game plan for each member of your core team. Such a plan might also require additional training so they can be used in a different capacity. The overall objective must be to protect your core capability through hard times, so that you are well placed to grow and prosper when the recovery comes.


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