(Summary: As the recession’s pain recedes, semiconductor companies have an excellent opportunity to take advantage of the economic crisis to drive productivity improvements throughout their R&D organization.)
The line “never let a serious crisis go to waste” was made famous a year ago by White House chief of Staff Rahm Emanuel, who was speaking to business leaders. For the semiconductor industry emerging from a sharp recession, now is the time to capitalize on the motivation implicit in Emanuel’s quotation.
Consider, first off, the proven benefits that companies get when they take advantage of a recession. A Bain & Company study found that:
- Twice as many companies move from laggards to leaders during a downturn than they do during good times.
- The majority of those companies that take steps to make that move sustained their gains long after business came back.
For those that don’t, the numbers are discouraging:
- One-third of banks and two-fifths of big American industrial companies fell from the first quartile of their industries in the recession of 2001-02, according to a McKinsey study referenced in The Economist.
There’s plenty of advice for companies willing to take advantage of a business slump. Dave Jones and Pierre Loewe, writing on ChiefExecutive.net, advise managers to re-assess “unarticulated” customer needs and redraw their industry ecosystems.
I’d amplify another of their key points: buttress your core competency. Today’s semiconductor industry is a different place than it was before the recession. The search for differentiation in core competencies needs to be focused at product development. This is crucial for fabless companies that don’t have their own manufacturing to create differentiation. But it’s also important for formerly “fabbed” companies making the transition to fabless.
Out with the old?
Some semiconductor companies emerging from this recession will be tempted to apply old templates to new designs. With understandable caution about hiring more engineers in the short-term, the tendency will be to do more with less—to demand more products faster with fewer engineers.
What will happen?
Unrealistic schedules and budget overshoot, for one thing. For another, the urge to crank out more products to take advantage of resuscitated demand will lead to portfolio-management problems.
It doesn’t have to be this way. Productivity improvements and best practices are commonplace in manufacturing; there’s no reason they can’t be employed in R&D. It would be a shame to waste a golden opportunity to exploit this moment in history, and, to finish Emanuel’s quotation, to take the “opportunity to do things you think you could not do before.”