Feed R&D- or Farm It Out?––Case Analysis
Many Strategic issues are presented in the Case “Feed R&D-or Farm it Out” which are all interwoven.
This case discusses the RLK media and the managerial problems it is facing. The major discussion in this case is the outsourcing decision and its impact on different departments like R&D, HR, marketing and overall process of the decision making.
The Chief Executive Officer of RLK media, is fronting one such crossways. The profits which are earned from the current products are not being sustained to R&D by RLK media. The company will not have broad scope, and it has to slender its scope if the CEO is not able to develop a business strategy that helps internal improvement, production, innovation and the sales
The internal environment of the firm is being strongly influenced by the external situations which have extremely changed from the past. Absent contact with the customers who are buying their products. And there is only one significant product which seems to be in the pipelines.
There is an increase in competition. The companies like Japanese giants are competing with the company. And the competitors are offering quite reasonable and good prices for similar products. (Nohria N. , 2005)
There are numerous further strategic problems which are presented in the case such as:
The CEO of the RLK Company, Lars Inman thinks that innovation is a way to recovery for the company. The Chairman thinks that satisfying consumer’s needs may be the possible solution. In their context, both are right. In place of asking a question like, “To get a competitive advantage do we need to outsource to get iVid?” Lars is in a need to think that, “What are the actual needs of our customers, what do they desire, and what are our competitive strengths.
Eventually, the strategy of Lars must be able to attach what’s the need of the time with what’s possible in the time. Definitely, the brand equity should be exploited by the company as a trend setter and innovator. And the capabilities, is possessed, to innovate should be utilized. But the thing is Lars should give up, completely, the concept that what is possible in the time can be delivered by the scientist Ray, whether they outsource or not.
The world should be invited in by starting the innovation process of the company. The ideas should be implored aggressively where ever there is any need. In an inventor’s laboratory, the future offerings of RLK may exist in a shape of prototypes, they could be having a meeting with a VC in Silicon Valley, or they could be with a competitor.
For a firm like RLK, going out in this pattern may appear like a tall order, but it must be seen how it worked for P&G.
Most of the Western executives face many risks when they estimate offshore outsourcing choices and Lars dangers, dipping into such trap. Mostly, they do not think broadly of outsourcing as a method to do cost savings and other such operating results. In its place, they must calculate this choice from a strategic point of view: Lars must evaluate this thing that whether outsourcing R&D will assist the company to speed up the building of its own unique competencies. (Nohria N. , 2005)
And it should be determined by him whether mutually both the parties will succeed in mounting deeper abilities, if the association finishes once this project is completed, then they would have had they selected other associates or not at all worked together. An incentive is created by the aptitude of great joint benefit to continue a relationship. And this decision on mutual benefit also reduces exit costs.
So it’s the time Lars should decide where there will be a competitive edge for RLK in the future and he should make an outsourcing relationship with all these things in mind.
For gaining the competitive advantage in product innovation, focusing on the product design and seeking high-class abilities in a software engineering form outside, can be one option.
Developing a unique ability in software design can be another option in which Lars finally would want to introduce the talent of software engineering. In both of these options there are many good reasons for outsourcing to a software firm. Like the firm such as Inova for the project of iVid.
An outsourced relation will help RLK in many ways. It will give RLK an understanding about different software abilities needed. RLK will also involve in collective learning by outsourcing. It is not a smooth process, but it has a large potential and productivity.
A careful and proper management is needed to change a destructive friction into a force that eventually gives rise to innovation. Several attributes are shared when different well-managed teams working together with high level of creative friction. Attributes like a common and clear goal, aggressive performance. Actions are taken to resolve the disagreements.
When teams work together, there is a common basis for problem solving and communication. There is relevant, proper, adequate and equivalent skill set. And mutual respect among members arises.
In the partnership between Inova and RLK, many components for the creative friction seem to be in place. The teams will be helped by the iVid prototype in design negotiations and engineering. With the deadline for launching the product there is a distinct goal and also the implied action points are clear. Both the teams have the necessary skills and an equal level of skill–though the CEO of RLK will be wanting to do more because of attentiveness related to the capabilities of Inova, as he’ll require to be very convincing in selling them to his own Research and Development team. Whether the mutual respect required by the productive friction can be gathered by these dissimilar teams, is uncertain. The Inova team calls this relationship as a give and take relation, and this thing is encouraging. But if the same approach is adopted by RLK, even then they will get productive friction.
Though, the two teams are possessing skill sets that are world class, but the nature of skills is different. Also the national cultures, work styles and environment is different. And they are located at a wide geographic distance. The geographic distance can be minimized by latest technologies, but the rest of the issues stay as they are. A common ground and trust are needed for continuing this partnership and Lars should make sure that both the teams spend enough time together to build the trust. Even the schedule seems to be aggressive, both the teams need to remain slow at the outset. And this will help them go much faster in the coming future.
Because of the challenges and risks of this partnership and to bring both the teams together, the CEO and the senior members of his Research and Development team need to have a plan to give much time travelling to India, especially in the starting of the project. (Oshri & Kotlarsky, 2010)
There are six positive attributes that RLK’s middle managers must have in order to show good results in outsourcing its R&D. These attributes are:
Recommendations: I recommend that Lars needs to hire some more software engineers to give strength to the Research and Development of RLK and meanwhile, hand over some of his leaders in Research and Development to Gurgaon to get trained in Inova. Lars should suggest Ray a two-way Research and Development model that should be acceptable so that he comes to an agreement to make partnership with Inova. Once this is done, both RLK and Inova will be able to get cost advantages for RLK by working collectively. And also to launch its new product i.e. iVid.
Middle Level Management. (2009, July 03). Retrieved May 07, 2014, from www.boundless.com: https://www.boundless.com/management/introduction-to-management/management-levels-and-types/middle-level-management/
Nohria, N. (2005, July). Feed R&D or Farm it Out. Retrieved May 07, 2014
Nohria, N. (2005, July). Feed R&D or Farm it out? 17-28. Retrieved May 07, 2014
Oshri, I., & Kotlarsky, J. (2010). Global Sourcing of Information Technology and Business Processes. Zermatt, Switzerland. Retrieved May 07, 2014
Outsource Or In Source R&D. (2011, 05). Retrieved May 07, 2014, from researchomatic: http://www.researchomatic.com/Outsource-Or-In-Source-RAndD-72647.html
Overby, S. (2010, January 28). Outsourcing Problems? Middle Management May Be to Blame. Retrieved May 07, 2014, from www.computerworld.com: http://www.computerworld.com/s/article/9149931/Outsourcing_Problems_Middle_Management_May_Be_to_Blame
Overby, S. (2010, February 04). Outsourcing Problems? Middle Management May Be to Blame. Retrieved May 07, 2014, from www.cio.com.au: http://www.cio.com.au/article/334385/outsourcing_problems_middle_management_may_blame/
Ramanathan, T. R. (2009). The Role of Organisational Change Management in Offshore Outsourcing of Information Technology Services. Universal-Publishers. Retrieved May 07, 2014, from http://books.google.com.pk/books?id=luZd6PF6i0IC&pg=PA109&lpg=PA109&dq=middle+managers+in+outsourcing&source=bl&ots=HQf1FFVOJf&sig=pFNafKCPe0XsIuzEtXOsaWd9Do8&hl=en&sa=X&ei=Lj9rU9CYEoK8Od6sgdgL&ved=0CHQQ6AEwBw#v=onepage&q=middle managers in outsourc
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