I have the privilege of advising and coaching a number of technical and business leaders in a cross-section of the manufacturing and services space, and it’s very clear that there has been a shift.
Not that long ago “grit” and “hard work” were enough to make your firm successful. Now I’m finding leaders asking themselves just what changed…and what they can do to win at this new game.
In just the last few weeks, I’ve heard the following from leaders in complex firms:
“I’ve never seen it like this – we simply cannot keep up.”
“We’ve sprinted really hard, and still the needle is not moving.”
“My peers are always pointing fingers back to R&D, expecting us to make up for their shortfalls in marketing and sales.”
To sum up, these leaders find themselves caught in a vortex I call the Hamster Wheel. At first, running the wheel gives a sense of mission and progress – even perhaps results. However, the more you put in, the more it asks of you. Until finally, you need to jump off – exhausted.
These experiences are very real, vivid and exhausting. One client firm had enviable sales growth, which the engineering team was unable to fulfill. Another firm had a portion of the product portfolio that provided an outsized percentage of earnings, and its competitiveness was slipping. Another had annexed several R&D teams and was struggling to get them integrated.
Many leaders I speak with are breathing hard, looking at the wheel….
What’s Going On?
The common thread in the quotes above is that the R&D team has lost its connection with being able to confidently land products and services in front of the client that creates fresh value. This problem shows up very slowly and usually takes some time to discover. Usually, the sales level remains robust, but margins come under some pressure. As things get more serious, we find it harder to win new business and competitors are getting some contracts that not that long ago would have been ours.
The discovery process starts with some data. Usually, someone either in the CFO’s office or marketing starts to look at the business case records and the revenue and contribution margin of the latest new solutions the firm has produced. When viewed through this lens, the data confirms what people have felt – the new solutions are not earning what they used to.
Now the Hard Part – Why
There are two reasons that R&D teams find themselves in this position.
#1: Focusing on the Wrong Metrics
The first reason is that the measurements that served them so well when the product or service was “hot” no longer push them in the right direction. When things are moving well, most firms favor activity-based metrics over results metrics. After all, it’s easier to measure time-to-gate review or successful sprint cycles than it is to measure product market fit.
Because of this, it can create a strange tension among the senior leadership team – actually paying bonuses to functional leaders when they successfully complete an activity even though the larger firm’s performance did not excel.
Getting on track: The fix for this scenario always involves taking a deliberate step back from the internal view of the client’s needs so that you can really focus in on the real drivers of value. Not uncommonly the client isn’t even completely clear on where value can be gained, so this process takes hard work, trust and empathy to create real insight. Building a cross-functional team made up of members of the internal team and trusted client/partners who can lead this discovery work will create shared understanding and ownership.
#2: Spreading Themselves Too Thin
The second reason usually relates to the complexity of the portfolio. It is very easy to over segment the portfolio and build a wide variety of products and services that hit many specific niches but are ultimately unserviceable.
In this case, the team is just too thin to be able to keep every product fresh and competitive. Instead, work is required at the product level. This is done by taking an end-to-end view of the firm and the client to assure that we’ve truly built an aligned solution that is a win for R&D, Distribution and the Customer.
Getting on track: This is some of the most challenging work a product leader can take on. It starts with an application-focused P&L snapshot to understand which applications the firm delivers that the client derives the most mutual value from. Once you have this, you can start to both eliminate and consolidate the bottom of the list applications, saving the R&D team a great deal of time and resources.
Getting the Mezzanine View
Getting to a solid view of this issue takes a combination of internal and external cross-functional diagnostic work. Getting an objective view is essential. Done well, this will pull information from each of the firm’s leaders, as well as from the up and downstream partners.
I frequently help leaders do the cross-functional review to diagnose this kind of deeper, systemic question. If you’d like to talk about what that looks like, along with some insights I’ve gathered along the way, please reach out to me – either directly at 847-651-1014, or use this link to pen a 20-minute chat directly into my calendar.
Related posts you can benefit from…
