Daily Archives: August 9, 2009

Will This Recession Yield The Return of the R&D Lab?

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If you listen to the doom and gloom economists, this recession, despite Obama’s many stimulus packages, is still going to be worse than the Great Depression. As such, as noted in a McKinsey Quarterly article from late last year, it might be useful to derive innovation lessons from the 1930’s. Despite the usual executive behavior of acting “cautiously” and delaying investments until the economy returned, some companies made deep investments in R&D and innovation in the 1930s. DuPont boosted R&D and developed neoprene (synthetic rubber) which was in every automobile and airplane manufactured in the US by 1939. Hewlett-Packard and Polaroid were established. Radio Corporation of America returned to profitability as it shifted towards the television market. At least 400 in-house R&D labs were established between 1929 and 1936. And many of these companies, who were able to attract skilled workers upon the destruction of their un-innovative counterparts, flourished.

For almost fifty years, the R&D labs were the center of innovation, and, arguably, of economic growth until the outsourcing, offshoring, down-sizing and right-sizing crazes hit us. Now they are almost non-existent … and the economy is floundering. Maybe I’m imagining it … but I think there’s a correlation.

Besides, think of the new innovations that might appear if the R&D lab returned. New computational models and architectures for cloud computing that will enable the creation of customized true end-to-end supply chain applications in weeks and not years. New low-energy cooling technologies that would dramatically decrease the costs of refrigeration. Better, cheaper high-efficiency solar panels that can be installed on your hybrid fleets. Cheap 3-d model creators and portable fabrication labs for new product design (like the Sun Modular DataCenter or the Google Container Data Center, but for engineers!). And I’m not even being imaginative yet …

Anyway, long story short, there are three things you should take away:

  1. Only acquire IT from solution providers who are still spending on innovation
    A lot of the smaller solution vendors aren’t doing so well now, and they’ll be hard pressed to compete when the rebound occurs and the innovative providers are releasing new solutions and they are still selling the same solution they had five years ago.
  2. Only source critical, custom components from manufacturers investing in new production technology and process improvement.
    The global decline in consumption has resulted in a significant drop in new production. The manufacturers being hit hardest are those unable to offer lower prices or added value. These manufacturers are generally those running old technology and utilizing inefficient and out-of-date processes. Like the IT providers who are not innovating, some won’t survive. Those manufacturers who have been investing in new technology to create higher quality products faster and cheaper and in lean & six sigma process improvements are generally more stable and more likely to be around for the long haul.
  3. Create a Center-of-Excellence
    Do your own R&D on best practices, market trends, and emerging technology. Then share that knowledge across your global operations. You’ll outperform your competition and become organizational superstars.