Expert answer:What outcomes do you expect with using these types
Answer & Explanation:Feed R&D–or Farm It Out.docx Write a 2 page paper noting what types (example quantitative method and qualitative method) of research you would use for a business project to be successful. What outcomes do you expect with using these types of business research?please see attach file Book information: Business Research Methods, 12th EditionAuthor: Donald R. Cooper, Pamela S. Schindler
feed_r_d__or_farm_it_out.docx
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Section:
THE HIGH-PERFORMANCE ORGANIZATION
HBR CASE STUDY
RLK Media built its reputation on brilliant innovation in high-end consumer electronics. But with customers
defecting to mass-market products, RLK has to rethink its approach. Will outsourcing R&D save the
company or destroy it?
HBR’s cases, which are fictional, present common managerial dilemmas and offer concrete solutions from experts.
“OK, JUST SIT THERE. No, right there, in the La-Z-Boy. Don’t move.” Lars sank into the battered Naugahyde chair at
the edge of the audio-engineering lab, wondering vaguely if there was anything on the cushions that might stick to his
suit. As CEO of RLK Media, he gamely participated in these periodic demos. It was a good way to connect with the
R&D team–and, besides, sometimes they actually surprised him.
Lars checked his watch and then settled his gaze on Ray Kelner, RLK’s founder and chief scientist, who was fidgeting
at a workstation. “Ray, can you get this show on the road? I’m out of here in ten!”
“Two seconds, Lars. Two seconds!” Ray cursed under his breath as he snapped a patch cable into an Ethernet
switch. A tangle of wires looped from the workstation to a top-heavy rack of audio and video hardware. Duct-taped
braids of colored cables snaked across the floor. Lars wearily surveyed the mess. This better be good, he thought.
Another gorgeous camcorder nobody wants, and we’re sunk.
“Comfortable? Good. Now–put these on.” Ray handed Lars a headset with goggle lenses and a ribbed aluminum
frame. He slid the headset into place. As the engineering team looked on, Ray snapped a Firewire cable into a port
on the goggles. Swiveling around to his keyboard, he tapped in a command and watched a blur of code scroll up the
screen. “Showtime,” he whispered to himself.
Nothing. Lars sat expectantly for a few seconds and was reaching to take the headset off when a crisp, panoramic
image formed before him, a desert scene with distant mountains. Nice graphics, he thought. He had just opened his
mouth to speak when the deafening scream of jet engines exploded from the back of the room and rocketed inches
over his head on the tails of twin fighters, as they hurtled out in front of him toward the horizon.
“No way!” Lars shouted, ripping the headset off and shooting to his feet. “Where the hell did that come from?” The
assembled team burst into whooping applause.
“Neat, huh?” said Ray. “It’s directional sound — an entire home theater surround sound system built into the headset
frame! And only you can hear it. I told you you should see this before the board meeting.”
“I knew you were tinkering with this, Ray, but I had no idea,” Lars replied. “This could be huge.”
“Yeah, but I’ll tell you what’s really going to clinch the deal.” Ray lifted a paperback-sized device from the rack and
held it aloft, wires dangling. “This,” he said “is the engine–and it makes the iPod sound like your grandmother’s AM
radio. Shrink this baby down, crank out the compression code, write the directional sound drivers, and nobody’s going
to be able to touch us. You can put a thousand movies, HD TiVos, music videos, vlogs, games — anything video -in
your pocket and watch them anytime, anywhere with earthshaking surround sound–” Ray paused for dramatic effect.
“And you can have it by Christmas 2006. All I need is to double my software team.”
In fact, Ray wasn’t so sure he could pull it off that soon. The project had been plagued by software snafus, and it was
just plain lucky the demo had gone as well as it did. But, he reasoned, if he got a green light to hire the celebrity
engineers he had in mind, he’d at least have a decent shot.
As Lars considered the pitch, his executive assistant appeared in the doorway, beckoning furiously. “Look, Ray, I
can’t stay,” he said backing out of the lab. “But we’ll talk. This is good. This is really good.”
And, he thought, it could make or break the company.
Out to Lunch
Lars stepped from RLK’s cool offices into a blast of July air. Squinting into the sun, he walked hurriedly to his waiting
limo. Keith Herrington, RLK’s chairman, was in town for an emerging-technologies conference and had invited Lars to
lunch on short notice. Lars wasn’t looking forward to the meeting. The swordfish, he thought, wouldn’t be the only
thing getting grilled.
As the car headed down Route 128 toward the Pike, Lars ticked off the high-tech start-ups that had made it big on
America’s Technology Highway. Not long ago, RLK was running with the same pack.
It was a familiar story: Fresh out of MIT in 1985, Ray Kelner had launched RLK Media in a converted muffler repair
shop in Waltham, ten miles west of Boston. The lab’s radical speaker designs quickly attracted affluent audiophiles,
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who would pony up $20,000 for a pair of RLK’s custom-made towers. In the 1990s, Ray recruited the company’s first
CEO, who rapidly parlayed RLK’s single-minded focus on pricey, handcrafted, highly branded products into a billiondollar business. After expanding the company’s offerings into other high-end consumer electronics — amplifiers,
receivers, and audio- and videodisc players — he had left RLK at the top of its game for a better package at a bigger
company.
Lars Inman filled the vacancy in 1998, moving east from a Silicon Valley peripherals business. Soon after taking the
helm, he had led the acquisition of Opticon LCD Labs, positioning RLK to compete at the high end of the emerging
home theater market. But he’d underestimated the ability of the Japanese consumer electronics giants to lure away
RLK’s core customers with their increasingly high-quality, competitively priced products. Unable to compete in the
fast-growing, high-volume home theater business, RLK, Lars knew, had to refocus its energies on its core
competence: innovation.
When Lars arrived at Olivier’s Bistro, Keith was already seated. The maître d’ ushered him to a table by the window
overlooking Newbury Street.
“Lars. Good to see you.” Keith extended his hand across the table. “Glad you could make it.” As a waiter circled with
water and menus, the two exchanged pleasantries. Lars was just beginning to relax when the chairman leaned
forward and fixed him with a let’s-get-down-to-business look. “Lars, I know you’ve been working like a dog. Do you
even go home on weekends?”
“Sometimes,” Lars lied.
“Here’s the problem. To be frank, it doesn’t really matter if you’re working hundred-hour weeks. Your margins have
evaporated. You’re missing your numbers. The problem is not that you guys aren’t working — the whole damn place is
like a bunch of college kids pulling all-nighters. The problem is people aren’t buying the old product — no matter how
good it is — and you don’t have anything new. Even Sony’s doing an end run around you.”
“I’m aware of that, Keith,” Lars said testily. “But we’ve still got brand equity. People still recognize the quality. RLK is
synonymous with high-end audio-video design. And they get that we design and build our own products in our own
facilities right here in the U.S.”
“But they’re still not buying. What I want to know, Lars, is what’s the plan? Brand equity isn’t going to save the brand.
What, exactly, are you going to do? Invent the iPod? It’s a little late for that, don’t you think?”
“Well, we have a very promising product in the pipeline,” Lars ventured, unsure of how much he wanted to say about
Ray’s prototype. “Actually, it’s a new direction for us, a new technology, and it’s going to completely change the
game.” Lars figured he might as well go for broke. “I haven’t done the arithmetic yet. But we’ll need to expand R&D–”
Keith thrust out his hand. “Hold it. You need to what?”
“Ray’s been developing this video headset with directional sound,” Lars explained.
“Directional sound? What’s that?” Keith was clearly annoyed by the trajectory of the conversation. “Let me get this
straight. While every damn company around you is downsizing and outsourcing R&D, you want to expand? What you
need to do, Lars, is stop tinkering in the lab and do some marketing! Find out what the customers want and give it to
them. I don’t want to put too fine a point on it, but if you can’t stop this slow bleed and turn the company around in a
year, we’re going to bring in someone who can.”
The waiter glided up to the table and turned attentively toward Lars. “Have you had a chance to decide on your order,
sir?”
Lars considered for a second. “I’ll have the grilled swordfish,” he said. “Well done.”
Doing the Numbers
Lars turned the iVid headset over in his hands and glanced at the boxy engine sitting on his desk. It wasn’t exactly
beautiful — it was ugly, in fact — but he knew what it could become. Over the years, Lars had marveled at how Ray’s
engineering and design teams could collaborate like bees in a hive to deliver one gorgeously built product after
another. It may look chaotic down there, he thought, but the deliverables were always stunning.
There were two quick raps at the door. “Come on in, guys,” Lars said. The door swung open, and Ray, in his
signature jeans and long-sleeved T, strode in and dropped into a chair. Denise Tan, RLK’s CFO, followed him in.
“Thanks for coming up, Denise, Ray. Grab a seat.” He gently put the headset down. “I’ll get right to the point. We all
know we’re not the only ones working on iVid technology. Pycosonics, among others, is fairly far along. But we’ve got
unique product development expertise located under one roof, a prototype that’s proof of concept, and an audio
technology that no one else, as far as we know, is integrating into the product. The question is, How do we put this,”
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he hefted the engine for emphasis, “into a package that’ll fit into your shirt pocket and get it in Best Buy before
Pycosonics or anyone else?”
“Packaging isn’t really the issue,” Ray replied. “I’ve got the best mechanical and electrical engineers and designers in
the business. What I don’t have is the software firepower I need. When I started this company, you didn’t need
software engineers to make consumer electronics. Today, you can’t get out of the starting gate without them. We
haven’t kept up. If you want to put an Omnimax theater into a four-ounce headset, we can do that — but I need ten of
the best embedded-software engineers on the planet, starting with Gary Bell and Lucy Velman at VerisData.”
Lars turned to Denise. “What would a crew like that cost, fully loaded — salary, benefits, hiring bonus, options?”
“Well, if you’re talking about Gary Bell–” Denise did a quick calculation, “You’re talking a minimum of $250K salary,
30% benefits on top of that, 50 grand signing bonus, probably another $250K in options. First year, for ten of those?
Over $6 million?”
Lars wrinkled his brow. “Denise — do we have $6 million around here somewhere?”
“If we had to, we could find the money. But we’d have to deliver the product in, I’d say, 12 months — absolutely no
more than 18 — and it would have to be an instant hit. If Ray can’t deliver, or the product stalls on launch, we’re
bankrupt?” No one spoke. “But what if we outsourced this? That could save us time and money we don’t have.”
“Whoa there, Denise. Time out!” Ray wheeled around in his chair. “First, we’re not talking about writing inventory
code here. Nobody’s ever written anything like what we need. This is rocket science, and we’re starting from scratch.
You can’t farm this out to a bunch of high school grads in Bangalore–”
“Cut it out, Ray,” Lars interrupted. “You know better than that. You’ve been fighting outsourcing tooth and nail for
years. But it’s not 1995. There are boutique software shops in Gurgaon that have more PhDs per capita than you do
downstairs, and they’re not writing code for coffeemakers. These guys are doing embedded avionics software. And
the price advantage is one to five. Sometimes one to ten.”
“OK. Even I buy that. But here’s the thing: My designers and engineers don’t work in cubicles. They’re spread around.
They sleep on the floor. They talk to each other. They fight with each other. They keep each others’ creative juices
flowing. We’ve got an ecosystem down there. That’s the ecosystem that invented the multichannel headset, the auto
space-tuning speaker, and the RLK AVRouter. And it’s the one that created the iVid prototype that, if we do this right,
will put RLK back on the map. If you put my software group in Bangalore — I don’t care how good those guys are — it
just won’t work. Trust me. Outsource this, and you can kiss the iVid goodbye.”
The Deal in Delhi
Lars peered out the cabin window as the plane descended through the gritty haze over India’s sprawling capital. Ray
had put up a spirited fight — as he had for years — against the outsourcing option, but the harder Lars looked at the
numbers, the less viable RLK’s insulated R&D culture seemed. His competitors were outsourcing increasingly moresophisticated engineering and design work, in some cases quietly handing off virtually every aspect of product
development to Asian engineers. On the other hand, RLK’s competitors didn’t tie their brand to American design, and
they didn’t have RLK’s unique creative culture to contend with.
A driver with a hand-lettered sign was waiting for Lars when he cleared customs. He led Lars through the midmorning
throngs to a cab parked at the curb not far from the airport’s main entryway. Lars had been warned about the ride
from Delhi to Gurgaon, but as the cab careened south on the NH-8, he clenched the hand rest tighter with each near
miss. Gurgaon, an exploding metropolis of glass and steel high-rises, was home to Inova Laboratories, a small R&Doutsourcing firm with a reputation for exacting standards — among other things. Lars had approached Rajat Kumar,
the lab’s young chief executive, about the iVid project, and the proposal he’d received a few weeks later had
convinced him that he needed to visit the labs himself.
“Lars Inman! Welcome to Inova.” Rajat clasped Lars’s hand in both of his. “It’s a pleasure to put a face with the voice
on the phone. Your flight went smoothly, I trust?”
“Smooth as could be,” Lars said, as he took in the gleaming lobby. “But the drive from the airport–”
I know!” Rajat laughed. “It always gives visitors a fright. Here, come to my office. Let me get you a spritzer, and we
can chat. Then I’ll take you on a tour.”
Unlike some of the sprawling job shops that India was famous for, Inova was small and particular. With a ten-person
executive team and 100 elite engineers, it had built a reputation for speed, precision, and specialized knowledge of
video and audio compression and displays. The company also had a reputation, Lars reminded himself, for being
headstrong, as evidenced most recently by its breakup with consumer electronics giant Pycosonics. Inova had
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delivered the client’s gaming headset software, as required by contract, but pulled out of negotiations for future work,
citing — at least as the trade press reported it — creative differences. Inova may be fickle, Lars thought, but when it
severed ties with Pycosonics, it kept a lot of intellectual property. Even with noncompete terms in effect, IP leakage
from the Pycosonics work to the iVid project would be inevitable. That made Inova the obvious shop for the job.
Rajat ushered Lars through a smoked-glass door and into the spacious main lab. Under bright fluorescent lights, rows
of cubicles stretched the length of the room. Flat-panel monitors glowed in each pod, and the soft buzz of clicking
keys drifted upward. Somehow, Lars thought, it seemed more like a library than a lab.
“This is where it all happens,” Rajat said, with a sweeping gesture. “But let me introduce you to Vinita Nair, our chief
scientist. She’s the woman that makes the trains run on time.” Rajat steered Lars down a corridor between the pods
to an open area of workstations at the far end, where four engineers were gathered around a monitor. “Vinita,” Rajat
tapped the nearest on the shoulder. “Lars Inman’s here. From RLK.”
“Just a moment,” Vinita responded, holding an index finger aloft as she studied the monitor. She tapped the screen.
“There’s your problem. You didn’t decode the iframe when you inserted the clip.” She straightened and turned toward
Lars and Rajat. “Mr. Inman,” she said, shaking Lars’s hand. “I’m a great fan of your RLK 20s. I have a pair in my
home. They still sound superb. The technology has aged well indeed.”
Rather a backhanded compliment, Lars thought, as they headed for the elevator. The tour circled through Inova’s
three floors of software development, testing labs, and offices. At each stop, as Vinita explained the functions of her
teams, Lars was struck by the pervasive order. Even in the systems integration labs, where hardware and racks of
test equipment crowded the benches, each item had its place.
Back in Rajat’s office, Lars pulled Inova’s dog-eared proposal from his briefcase and clasped his hands on the table
in front of him. “You have a disciplined group here, Rajat,” Lars said.
“And a creative one, I hope you would agree.”
“Yes, creative and, to be blunt, rather famous for its autonomy.”
“You are referring to the dustup with Pycosonics. That was unfortunate, but they didn’t seem to grasp where our
business began and theirs ended.”
“Let me explain,” said Vinita. “My engineers are the best in the world. Twenty of the 100 you saw have doctorates.
We have one of the lowest turnover rates in the business and a global reputation for innovation. We don’t just write
code, Mr. Inman. We invent it. We’re disciplined, process oriented, fast, and, yes, independent. We’re an R&D lab,
not a job shop.”
“But you do do contract work.”
“Yes,” Rajat jumped in. “And if we join with you to develop the iVid technology, we will exceed your expectations. We
will give your engineers ideas they might never have thought of. It’s a give-and-take process. We will teleconference
with your team as often as necessary to get the job done and work hand in hand with your mechanical- and electricalengineering people to create a perfectly integrated system.
“But we are equal partners in the product development process, and, as such, as you saw in our proposal, we’re
willing to put our money where our mouth is. We are so confident we can deliver, we charge much less than our
competitors do but take a 5% royalty on the products we develop with you. Contract with us, and in two weeks you’ll
have a fully staffed software-engineering function working 24/7 on your iVid. And if your team can keep up with us,
you’ll be volume manufacturing in under 12 months. Pycosonics won’t know what hit it.”
…
Stirring his drink as the plane cruised west over the Atlantic, Lars ran the numbers again in his head. He could
procure the software skills he needed from Inova for one-fifth what they’d cost in the States. But there were
transaction costs and royalties to consider.
If he hoped to beat Pycosonics to market, outsourcing to Inova, rather than bringing people in, seemed to be his best
bet — if the two teams could get along. If the marriage failed, not only would he lose the race to market, he could
irrevocably damage the R&D culture that had been RLK Media’s soul from the start.
Should Lars outsource R&D? · Five commentators offer expert advice.
RLK’s CEO, Lars Inman, sees innovation as the salvation of his company. Its chairman, Keith Herrington, sees the
solution in divining customers’ needs. They’re both right. Instead of asking, “Should we outsource to get the iVid to
market ahead of competitors?” Lars needs to go back to basics and ask, “What do our consumers want, and what are
our strengths and assets?”
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Ultimately, Lars’s strategy must connect what’s needed with what’s possible. Certainly RLK should exploit its brand
equity as an innovator and the innovation capabilities it does have. But Lars needs to abandon the notion that what’s
possible is narrowly defined by what chief scientist Ray Kelner — with or without outsourcing — can deliver.
La …
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