As the year comes to a close, we’re all preparing to turn the calendar page – and looking forward to a new decade. But the tools that got us here will not be effective going forward. And honestly? When we look back, we’ll wonder why we hung on to these old notions so long.
You see,Taylorism, which is building a firm’s organization using the paradigm of an assembly line with interchangeable parts, remains deeply codified into the thinking and application of many companies. When leaders continue to use these principles they build risk into the firm at the organizational, team and individual levels. The organization’s risk is that the customer is only served at average levels, locking in only average returns. At the team level, groups will continue to be at cross purposes, burning effort with needless internal friction. Finally, and very importantly, talented individuals will experience frustration and burn out, leading to the turnover of some of the firm’s key resources.
So while there are many firms tasking R&D and creating value, it is in that interface that fortunes are made and lost.
I’m helping several larger firms update their R&D organizations for the new economic and talent-short world we currently live in. These firms live in different verticals including manufacturing, government technology, and retail.
In each case, there are unique challenges and tensions that need to be addressed. But when you take a step back, there are common themes that emerge that are the product of perspective and experience.
Getting Some Perspective
Until the 2000s, the R&D organization playbook used to be pretty straightforward. The organizing vectors used to be technology, geography or business unit. Many firms overlayed a “horizons” template that designated where portions of the group were intended to focus – Horizon One being the next 12 months, Horizon Two the next 36 months and Horizon Three beyond 36 months. Underlying that was the ubiquitous rule of thumb for resource allocation: 70% box one, 20% box two and 10% in box three.
So the recipe was this:
- Set up dedicated resource pools, task them and go
- Argue vehemently about shared service overhead and cycle time
- Right size from time to time
Then, agile came of age in the early 2000s, (after being initiated in the 70’s) and with it the notion that projects needed to be built differently came alive. We are still grappling with the changes driven by moving all or a key portion of R&D from waterfall to agile.
- Waterfall is a linear sequential process that very much parallels the assembly line strategy described above. It was built on the scientific management framework and codified in many firms with elaborate “stage-gate” processes. In short, these processes put the emphasis on the discovery of perfect end requirements and then lines up deadline-based execution.
- Agile, by contrast, is a nonlinear iterative process that keeps the client’s needs front and center and allows for the sequential discovery of additional insights that are taken into account at the end of each “sprint.” Each sprint is set up to do those tasks that will add the most value for the client as we currently understand them. The next sprint is built from this work and any key insights gained. The endpoint is when the team has delivered to the value and requirements outlined by the client champion (see link here).
In short, waterfall is amazing when you know precisely where you are going, while agile is by far the best tool to work your way through both technical and needs uncertainty. Purists of both processes argue that each is superior on its own merits as a process (for more see links here and here). But the bottom line is that most firms use elements of both.
What is important for all firms to realize is this: the notion of a team being assigned for the life of a project is pretty much in the rearview mirror.
The best firms, much like an NFL team, are finding ways to get their best talent applied to the right problem at the right time. By breaking the work into “sprints” and reprioritizing to customer value at the close of each segment, we allow teams to remix and gain the advantage of talent doing their best work at the right time.
It’s About Exposing the Tensions
There is much being written about the tension within firms caused by this shift. What is missing in many of these discussions is that it’s not about R&D. The firm exists to create products and services for the end client that create value – full stop. In doing this creative work that lands in tangible value, many tensions come forward around predictability, talent utilization and accounting. Spread these across the three vectors cited above (geography, business and technology) and you have a very hard to balance matrix.
What Must be True
To get to the heart of a good organization model, we need to get focused on the key “must-haves” and bring those to bear in the best model for the firm (and its clients).
1. Activate Talent: We are solidly in the information age and our firms’ most skilled (and scarcest) assets go home every night. We need to build our organizations in ways that unlock the best talent and lock it onto the highest value customer problems. The talent shortage will shift to firms that do not take this seriously and build teams that people would volunteer to work on.
2. Create Predictable Outcomes: There must be a leader in the firm that can speak specifically and confidently about outcomes. This {tangible event} will happen on {this date} and with {this cost, feature set, quality level}. This places a lot of tension on the agile and “not” agile portion of the firm to work very closely to allow the firm to make and meet promises. Firms that can meet their promises will win in the new decade.
3. Meet the Socio-Economic Needs of Stakeholders: Each member in the value chain must be whole: the creative talent, the investor in the firm, the community that firm resides in and the end customer. In any system, if the economics don’t work – neither will its designs. Firms that neglect any portion of the stakeholder equation see adverse consequences at Internet speed.
All This Starts at the Edges
When we work on this with clients we start from the outside in, carefully mapping the pressures and tensions that their clients are facing. We then work with the business teams to be sure those challenges are built into the asks of the R&D team.
Leaders I have worked with have seen significant gains in the speed and profitability of their projects, and perhaps most importantly, have seen engagement and job satisfaction improvements, as well. We know that engagement is a leading indicator of customer satisfaction (link here).
Bottom Line? We can’t afford a legacy playbook from a talent, process and economic viewpoint.
If you’d like to talk about what this might look like for your firm, please give me a call at 847-651-1014, or use this link to pen a 20-minute chat directly into my calendar.
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