Impact of component shortages on R&D

In Apple R&D and Steve Jobs Methodology: User Centric Design, we discussed how digital technologies let Apple focus on user experience. The ability to focus on user experience, in turn, made Apple succeed where Japanese manufacturers failed – because Japanese companies focused primarily on components.

Apple’s success has had a big impact on the industry landscape. There has been significant consolidation in component manufacturers. More importantly, other companies have increased their focus on user centric design. The result is that everyone is demanding the same set of components from a decreasing pool of suppliers. The balance of power is now shifting again – from system designers to component manufacturers.

The article Getting Through the Shortages: No More Being Choosy in Nikkei Electronics has some very interesting data for R&D managers and strategy developers: “

The shortage in key components that began in summer 2009 is shaking the electronic equipment industry, and bringing about major change in the balance of power between equipment and component manufacturers. In response, equipment manufacturers are beginning to take action to ensure continued access to essential components at low cost.

Here is a great graphic from the article showing an strong increase in profits at the component manufacturers:

So, what are the lesson for R&D managers:
1. Plan and design modular products: If one component becomes hard to obtain, you should be able to swap it out with another. Modular products are always a great idea, but in case of supplier concerns, they become even more important. The article had a great example of HTC Desire that shipped with an OLED screen, but had to be converted to LCD because of supply problems at Samsung.

2. Find commonalities between products: If you can use same components across all your products, your volumes will increase and it will give you a greater clout with the suppliers. This is a challenge for R&D, because common parts will inhibit complete performance.optimization for each products. Here is the graphic from Nikkei:

3. Secure supply by prepaying for parts: Self explanatory. But still important for R&D managers because you will be locking in a particular component for a long term. Designs around them will need to be robust enough to accommodate the parts from the long term supplier.
There is a lot more about R&D strategy and planning at the R&D Management Blog.

Article first published as Impact of Component Shortages on R&D on Technorati.

The psychology of change management

I have discussed the problem with process improvement and change management in the past. We have seen that 90% of cost cuts obtained through organizational change are reversed within 3 years. It has been shown that senior executives are much more likely to imagine that change management projects are successful than middle managers. I liked this 2003 McKinsey article that has a different take on the problem: The psychology of change management:

Companies can transform the attitudes and behavior of their employees by applying psychological breakthroughs that explain why people think and act as they do.

The article suggests that there are four conditions to make changes stick:

A purpose to believe in: The leaders have to develop and describe a story of why the change is needed and why it is important. The story needs to be communicated to build a sense of purpose within the organization around the change. People are more likely to change their individual behaviors if they believe in the purpose (especially when change might cause some people to loose power / benefits).
Reinforcement systems: We have talked about this previously. Metrics and rewards needs to be aligned to make change stick. However, psychological research shows that people get bored of rewards. Rewards alone are not enough to change behavior over the long-term. Hence, the other four conditions have to be satisfied.
Skills required for change: Changes do not happen because many people do not know how to change. We have seen research suggesting extended involvement of mentors (such as six sigma black belts) to make sure change happens and sticks. This will only work if the organization launches a few, highly visible change programs, with a clear purpose.
Consistent role models: I have seen many change management projects fail because the senior managers did not actually change their behavior. Their words were different from their actions. People can easily see the difference between a real change and one in name only. Again, we have seen research that shows that managers need to stay involved in the change for a long time to make results stick.

Overall a great article and worth reading….

Social networks helpful in improving R&D efficiency?

MIT Sloan Review article The “Unstructured Information” Most Businesses Miss Out On has some interesting benchmark information on the role of social networks in driving knowledge collaboration (and hence efficiency) in R&D environments. The article details an interview with, K. Ananth Krishnan, the CTO of Tata Consultancy Services. As you might remember, I have not been very impressed with the role of social networks in complex R&D. TCS seems to have great success using social networks to share knowledge between geographically disconnected employees:

Well, let’s talk about the use of social webs inside the enterprise. Here at TCS, we are having a lot of success in saying that if you’re dealing with a particular problem and you need help, you go into our social platform and you just ask. You type in a question saying, “This is a problem I’m having. Has anybody solved this before?” And you might get five responses in 30 seconds from people who have done exactly what you tried to do, and they have their solutions.

That is great. Can we replicate this trend in any R&D environment? What are some of the challenges involved in using social networks effectively in an R&D environment? Mr. Krishnan points out one:

Of course, three responses might say one thing and two might say something totally different. So you still have to use the intuition and the judgment.

So, one key problem with social networks is not knowing the veracity or accuracy of solution provided. The other key problem is ability to describe the problem in sufficient detail that someone could suggest a meaningful solution. Let us dig in:
Mr. Krishnan is in the IT business where a more or less common language / jargon is shared between all employees. Most physical system require multiple disciplines (mechanical, electrical, etc) that all speak different jargons. Furthermore, most problems occur at the intersection of different disciplines. It is extremely hard to describe such multidisciplinary problems in sufficient detail in a social network. Even more importantly, there are only a handful of people who could understand the problem and provide a realistic solution. Social media would probably not be the most effective means to reach those people. We should probably consider project networks?
That said, clearly, homogeneous environments such as software development or ASIC design can benefit from social networks. TCS seems to be very enthusiastic about it:

We are today probably one of the largest users of the social web inside the enterprise, and we have improved our ability to look at the structured and the unstructured opportunity. In the last three years we have really launched into the exploitation of the social web as a means for ideation, as a means of finding the expert, as a means of learning. We use the web to form groups to look at specific problems and tapping into a collective intelligence.

TCS seems to have a key innovation in the use of social networks here: They use unstructured information from the social network to supplement structured information and to drive discussion. I think that is a key requirement for the success of social networks in the R&D environment.

All those things supplement the way we look at our structured information, and they get some of these subjective insights into what we should be doing as a business.
For example, I have a blog inside the company, and I just finished writing a blog post which will go live tomorrow morning on the ideation process. There are a lot of things that I as the CTO of India’s largest software company should be looking at. Obviously, I don’t have the bandwidth to look at all of them. So I’m asking my readers to help me find out what am I missing. What are the three things they feel I should be paying attention to? Hopefully I will get a few hundred responses, and then I and my staff will go through and make sure that we pick the top three from there.
I do this quite often to supplement what I’m reading from all the other sources of information. The kind of insights that our business leaders might need for creating a new service offering or going after a new market or whatever, many of those get validated by this softer data.

So, I seem to be coming to the obvious conclusion that all tools can be helpful or harmful. It depends on how one uses them. Hence, if R&D managers want to use social networks, they have to get involved, show the team how to use the social network by example, structure the interactions on the social network AND give it adequate priority (probably by using it themselves).