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IBM Chief: All CEOs Reluctant To Invest In R&D
theodp writes "In his Centennial Conversation at the Computer History Museum, IBM CEO Sam Palmisano emphasized the importance of investing in R&D, even in a down economy. 'Shareholder expectations for higher returns don't diminish when the economy stutters,' said Sam. 'And yet, Tom Watson Sr. actually increased research investment during the Great Depression.' Palmisano added, 'I will tell you that my own instinctive reflex isn't to continue investing $6 billion a year during the worst economic downturn since the Great Depression. In that regard, I'm like all CEOs.'"
The problem with R&D is that many company executives that make these investment decisions typically have trouble seeing the chain of innovation that heavy R&D investment brings to the table. Most companies right now (or at least a majority, in any case) expect instant-gratification on every damn investment, forcing every R&D department to constantly justify its existence through operational and productive changes, which almost always involve cutting costs somewhere.. and that's just not the way the fucking world works. If you want to rake in revenue, you're going to have to invest in R&D, and people may eventually figure that out.. hopefully.
vos nescitis quicquam, nec cogitatis quia expedit nobis ut unus moriatur homo pro populo et non tota gens pereat.
Not only is the modern corporation and its CEO unwilling to pay for R&D, they are unwilling to pay for the Technical Debt of their existing systems.
Software developers who work in production support know they will only be able to fix individual defects that have been targeted by the business customers. So, any production system becomes a series of code compromises. Developers fix individual issues and never do a broad refactoring of the code base. So, when a developer comes to a page, sees it's a collection of compromise/hacks, there is no stomach from the business to taking the time to refactor the page. So, instead, the developer holds his nose and adds another hack. Horrible.
So, developers do the refactoring on the sly. If they are really honorable, they come in on their own time and implement architectural improvements on their own dime.
No one in business understands it idea of Technical Debt and the value in future bugs prevented of paying that debt off.
...that cannot think beyond the next quarter's profits. And hasn't that worked out well for the economy? We used to be a country of inventors and innovators. Now we're a country of servants and finance dickheads who neither invent or implement new technology. We went from a country of Hewletts and Packards to a country run by the likes of Carly Fiona.
Please do not read this sig. Thank you.
Quite the opposite. I'm willing to bet R&D would create a booming economy.
Of course there can't be any math to support this, it's subjective to the technology developed. But I think it would be easy to agree that if you make the "next big thing" that you will earn a lot of money.
Gee, the quote in the summary makes it look like he's not in favor of R&D, but right after that he says "But I also know that if you fall behind, it becomes very difficult to catch up."
He also talks about the evolution of R&D "a deep commitment to both R and D means that it's not only important to innovate it's equally important to innovate how you innovate. "
In the end of course, like any long term investment, it take guts to spend on R&D when the returns are far from certain.
Corporations are lousy organizations for anything long term or big. 1st, they really do not have the resources. 2nd, they warp everything for profit. With the current legal climate, there's not much point in private research, as they'd try to lock up everything and then some with patents, copyrights, and so on.
Not saying the profit motive is bad, but for some things it is not the best guide. Why did we go to the Moon? Not for profit! Why was the Titanic operated so recklessly? A huge engineering project such as the Panama Canal couldn't be built by a single corporation. That was done by the US government. The transcontinental railroad was built by 2 private companies, but only with a great deal of help from the government in the form of land grants, military protection from Native Americans, and Civil War training and experience in running large organizations and operations. Some of the leaders of the UP considered cheating. They looked into whether it would be worth purposely making the route longer, much longer than necessary, in order to grab more land. Such thinking is all too typical, and the UP is hardly the only corporation to consider such schemes. Hoover Dam was another effort that could not have been done solely with private resources. The people had to negotiate all the details of water rights, power generation, and land use before turning over the work itself to private industry. The Channel Tunnel, the Erie Canal, the Transatlantic cable, and the Internet were similar. Most large civil engineering projects are government organized.
Intellectual Property is a monopolistic, selfish, and defective concept. It is "tyranny over the mind of man"
When there is an economic downturn it is due to the fact your current process of getting money is no longer viable. In order to change to a viable process of getting money you must start by looking for a new process. In the world of technology this requires researching technology.
Having to work for a living is the root of all evil.
Actually, American corporations are awash with cash. They could very well afford more R&D, and don't need the shareholders.
There is no risk of failure in many cases. Simply, the habit is to hire psychopath as CEOs, who are really good at squeezing the lemon. This works in times of boom, but when a crisis comes along, and some real insight is necessary, as well as long-term thinking, there is no one.
The culture of the deification of the CEO-psychopath is what is killing America.
Here is a little secret.
CEO's are not in it to bring profits for a company. That is not their job. Their job is to boast the share price at all costs. Its taught in finance 101 in any college.
Now imagine you are the CEO. You can invest in R&D and have your shareprice get cut down by almost half in this recession and risk your job for not using the money to hire more marketing and sales people, but if you stay on for 5+ years you will make tons of money and create long term value. Or you eliminate R&D and your company will die within 5 - 7 years right? As CEO you get a 20 million bonus for selling your prized assets that make you money for short term gain and your stock price goes up a good 35%. You do not think such CEOs who do this stay right? They jump ship within 2-3 years with a golden parachute. Even better with that track record you go on raiding the next company for even more money and become a guru and genius to stroke your ego. 90% of CEO's would pick this and let the next CEO take the fall when they go out of business or fade to the competion. Meantime you buy a yatch and retire or buy a bigger one as you ruin the next company, etc.
This is how the real world works.
If this needs to change we have to stop having Wall Street reward short term behavior and start punishing companies like HP who do retarded things for long term shareholder wealth. I do not know how and do not think it is our job to do this. Steve Jobs was fired from Apple initially because of R&D and a lack of results. Wall Street hated him for his long term ideas and R&D. They wanted the mac done cheap like a generic PC. HE came back and risked everything for the IPOD as most CEOs refused to work for Apple thinking they were dead.
http://saveie6.com/
Sorry, but no. You can manufacture in China, but doing R&D there will lead to a disaster.
In China, working to spec is the be-all-end-all way to do something. I had my share of work with Chinese companies, and they will do everything to your specification. Exactly. This. Way. Which is good if you have a finished product and just need it assembled a billion times. It gets completely out of hand the moment you try to let them decide anything. Because they will invariably choose the way that's cheapest to do. Don't be surprised if the task is "add another button" to find the button inside the device, unreachable, because it was simply easiest and cheapest to put it there.
In a nutshell, never ever let a Chinese company design anything. Invariably, you'll end up with a product you can't use.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
What puzzles me to no end is that they didn't even lose their divine status when they had to grovel for MY (and your, don't feel left out) money to keep their company from failing because they themselves are utter failures as managers. I wouldn't trust the management of my spending money to those duds, let alone a company where thousands of people are working hard.
These people proved they cannot manage, they cannot run a company and they cannot handle money, yet they not only keep their job, no, we (as taxpayers) get to pick up the tab for them and those friggin' morons continue moving from one blunder to the next without remorse or regret.
Care to explain to anyone why these people are supposedly worth the money they rake in? I refuse to call it "earning", they most certainly didn't earn it. But I guess if I post what I think they'd earn instead, in this day and age this might be grounds for a lawsuit.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
It's so amusing to me when people trump up the "outsourcing" solution. I have had to deal with many many overseas outsourcing companies, some with shoddy talent, but some with some extremely bright and talented individuals as well. Unfortunately, none of the endevours bore fruit. Why? Because no matter how hard you try, you face the tyranny of distance. Not just geographical location, differing timezones etc., but cultural distance. This is why numerous banks are bringing their overseas talent onshore, rather than outsourcing cheaper overseas. Oh yes, and before everyone gets all huffity and up in arms about bringing workers in to work cheaper etc, note that these guys aren't cheaper. In fact, they are more expensive than their local equivalents for the business due to visa's, relocation costs and finally in some cases, their negotiated wages. Remember those bright sparks I was mentioning before? Well, they're these guys, and hence why at the end of the day the outsourcing companies don't have many of the bright sparks left, because you get what you pay for, and some companies are willing to pay more than others.
It will be a simple matter of a few years until a substantial portion of work comes back onshore as more companies understand the distance issue (and of course, talent becoming more expensive overseas), but there will be fewer seniors available to train the juniors.
At the end of the day financially for the effort and risk expended, the intelligent manager knows it is better to land R&D talent onshore rather than funding a research lab overseas; Unless of course, it's simply a bottom line fudge to get the shareholders to agree that you've met your 2 year KPI, and burying a nice little landmine for the next sucker CTO to find and rebury when he steps on.
Science advances one funeral at a time- Max Planck
A very important fight/evolution in society is the evolution of democracy in the corporations. Not just worker representation (it is a good idea to have worker representative on the board, if only to provide dissenting voices when decisions are taken) but real shareholder representation. If I own stock in a company, the CEO is basically my employee. If he is incompetent, I should be able to fire him. The shareholder assembly should work like a parliament, responsible for setting the objectives and the regulations internal to the corporation, and the board is really the executive power.
Notably, the salary scale should be voted on. The CEO would then stop stealing shareholder money (because their outrageous salaries are stealing -- they sure did not add that much value), and long-term strategy would be encouraged. Most shareholders are in for the long haul, and they expect dividends more than stock-price upticks. If they don't it's their own damn fault.
And as this structure would never arise while the CEOs are in charge, it should be mandated by the government: the government allows the corporation to exist, and grants it certain rights. Thus it is reasonable that it decides how it should be run. Not the decisions, but who has the power. And the power should go to the owners.
R&D Expenditures for Tech Companies. As a percentage of revenue, Microsoft is highest (14.6%), followed by Cisco (14%) and Google (12%). Apple is down at the bottom with 2.3%.