A recent article in Industry Week on portfolio management in a down economy did a great job of summarizing all the mistakes dumb companies make in a down economy in blind efforts to conserve cash. As I have said before, and as the author clearly notes, companies that cut research-and-development during a downturn “don’t have anything new in their product portfolio that is of interest to their customers” when better times eventually return. This means that if you think times are bad now, they’ll only get worse when the up-swing starts and your competitors, who didn’t cut R&D, are introducing new, in-demand, products while you’re trying to push the same old, same old from two, three, five years ago.
While it’s understandable that R&D funding might have to be (slightly) reduced, there are right ways and wrong ways to go about it. The right way is to key (in) on the projects that exhibit new technology, gain entry into new markets, or are of greater interest to your customers. Similarly, a great technology without a current market should also come under scrutiny. Maybe development should be delayed to when you have more spare dollars to throw at it (as all great technologies will eventually find a market). And avoid these common mistakes outlined in the article:
- Failure to reconcile the portfolio with resources.
Make sure you can support the key portfolio projects to the full extent they need to be supported.
- Failure to look outside the four walls.
There are broad external forces that will ultimately decide which products will sell when the market up-swings and which won’t.
- Failure to innovate.
Some companies get complacent with an existing portfolio and focus only on product extensions rather than disruptive innovations.
- Failure to understand the customer.
If you can’t satisfy your customer, someone else will.
- Failure to utilize common business sense.
Yesterday’s metrics and data don’t tell the whole story about today, and definitely don’t tell the whole story about tomorrow. Don’t overlook the knowledge and experience your sharp people will provide and blindly rely on an unproven tool. Tools optimize scenarios … they don’t create them.