The secret to preparing for coming out of a downturn is embedded in the concept of positioning. Most often companies streamline their operations during a downturn. They get rid of skunk works and concentrate their R&D on bonafide new product areas. Therefore, you must match your products to your customer's advancing technology. The usual and natural way to do this is in new product introductions.
New products are the de facto result of a company's positioning strategy. It should be targeted at those needs and desires that represent the position that the company wishes to occupy. The backdrop of the customer's desires and needs shifts rapidly in high-tech markets. In other words, market position is a moving target. Suppliers must continually evolve their technology in order to hold or improve their position in the market. That is why R&D spending as a percent of revenue is usually 10% to 15% for high-tech companies. The chart is compiled from 13 high tech, US companies for for a typical period a few years ago.. I tried to look at a broad cross section of software, internet equipment, semiconductor, and semiconductor capital equipment companies. We can see that R&D spending has averaged between 10% and 17%. This same range has persisted for the 30 years that I have followed the industry.
The problem with positioning is that it is usually done in a "field of dreams" fashion. Product development is done without addressing any segment or niche. Market research must be done in order to understand what the segments are and how they are evolving. Here is how to position your company for the upturn.
Nothing is done in a vacuum. Today's high-tech managers must continually update their skills and knowledge base, both in the industry in which you compete and in the management science which you bring to your position. Take advantage of industry trade organizations, mangement associations, local colleges and universities.......oh yes, and consultants.
Do you have time for all of this? Make time. You can't afford not to.Return to REM home page.
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