IBM Chief: All CEOs Reluctant To Invest In R&D 321
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.'"
Without R&D investment, innovation WILL falter (Score:5, Insightful)
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.
IBM benefitted from massive government spending (Score:3, Insightful)
the social security system was one of the most massive IT projects ever undertaken in history, when it came about in 1930s. IBM made massive amounts of money off of that project.
the German Census of 1936 was a massive operation and brought huge profits to IBM, as well as Hitler's grand plans for a massively centralized healthcare system which required vast amounts of data processing.
then there was the Soviet Union, which ran a planned economy - meaning that massive amounts of data had to be sifted in a centralized fashion. IBM was there too.
then there was Japan....
so its kind of easy for IBM to spend on R&D in the 1930s, considering that every government on the planet was pouring money into it's coffers.
Re:"Even in a down economy"? (Score:4, Insightful)
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.
MBAs == incompetent & short sighted (Score:2, Insightful)
I think the Harvard Business school mentality is the most short sighted though process around and I think will be the cause of the fall of western civilization.
The focus is on short term profit with no long term thought for long term health -- it is the bonus system based on short term gains which generally are at the cost of long term health of the company.
Executives slash & hack at R&D for short term gain & bonuses. IBM is alive today because of the R&D done in the 80's & 90's and they cashed in on intellectual property.
I have worked at too many high tech companies and seen this MBA infection -- it has destroyed every company I have ever worked for despite the talent working for them.
Wake up to the real problem.
Re:CEOs Unwilling Even To Pay For Technical Debt (Score:5, Insightful)
If they are really honorable, they come in on their own time and implement architectural improvements on their own dime.
Stop right there. That's not honor, that's foolishness. Give up your life, family time, whatever, for a corporation that couldn't care less if you dropped dead right now. Furthermore, shit like that hides the true cost of the work being done, and increases expectations on under resourced staff.
Re:"Technical debt": Accurately describes (Score:2, Insightful)
R&D by the people, for the people (Score:5, Insightful)
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.
Re:Without R&D investment, innovation WILL fal (Score:3, Insightful)
I'll use an example (not necessarily the best example but a good enough one to certainly support your point): Apple.
Apple invests an enormous amount of resources into R&D and it is paying off (to say the least). The most important resource that they're clearly investing into R&D? Time. While they're certainly interested in making lots of money now, they've clearly made the investment into making lots and lots and lots of money over the long haul. Thus, they are developing products until they are just right. Rumour has it the iPad was shown to Steve Jobs back before the iPhone at which point he put the iPad on a shelf and said "we can make a phone out of this." My point? The iPad had been in development (in one stage or another) for many years before it was launched. Most other companies seem to give their designers and engineers a year, two max, before they expect to see a product on store shelves. Apple is taking several years to polish a product before showing it to the public.
So many companies want to do what Apple is doing but they seem to think that means "release products and make tons of money." No. What Apple is doing is making a solid commitment to R&D and releasing polished products that people want (among other things but the majority of those other things come after the R&D). Until other companies start to similarly invest time and effort into R&D, they will never be able to "do what Apple is doing."
As you said, if you want to rake in revenue, you have to invest in R&D. That simple.
Re:CEOs Unwilling Even To Pay For Technical Debt (Score:2, Insightful)
Re:Without R&D investment, innovation WILL fal (Score:5, Insightful)
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.
Re:Without R&D investment, innovation WILL fal (Score:5, Insightful)
Re:Without R&D investment, innovation WILL fal (Score:3, Insightful)
What is the point? (Score:2, Insightful)
I'm not sure what you are trying to say with that link.
Plainly Apple has out-innovated all of the companies higher on it in the list (with I would say the exception of IBM). So does it matter if R&D spending is a lower percentage when they seem to be doing quite a lot more with less?
I think the reason for the disparity is that Apple is doing more focuses research, IBM is all over the place ad Microsoft too. So I don't think Apple's supposedly lower R&D spending will hurt them much in the long run, especially when they seem to be so much better at D than anyone (even IBM).