Tackling the inadequate Nortel R&D model

Nortel CTO - John Roese in Antarctica
Unlike his missing in action Cisco counterpart, Nortel CTO - John Roese discusses the ongoing challenges of improving the Nortel R&D model in his most recent blog entry: The Transformation of R&D at Nortel Inadequacies of the previous Nortel R&D Model:

Nortel spent over 50% of its R&D budget on late-lifecycle products.
R&D spend as a percentage of Nortel revenue was much too high.
There was very little reuse of technology going on across the Nortel businesses.
Nortel R&D lacked common processes.
The employee satisfaction scores of Nortel R&D teams were getting worse.
Without stabilization and strength in its R&D organization, Nortel could not reasonably expect to execute on its business strategy to lead in the era of hyperconnectivity.

Comprehensive and positioned for the long term, the main challenge of revitalizing the Nortel R&D Model required following: Three Major Pillars

1. It was imperative for Nortel to create a balanced, responsible and stable R&D operating model. Accomplishments so far:
Nortel R&D spend is now in the 14-15% of revenue range.
Nortel R&D budget is 20-60-20. 20% is late-lifecycle spend. 60% is focused on growth and mature product activity. 20% is now directed to emerging new technologies and markets.
3% of R&D is now devoted to start-ups within Nortel.
Developed a skills-based R&D site strategy.
2. Creating the framework for world-class Nortel operations and process excellence. Accomplishments so far:
Created a common Nortel engineering group. This group, consisting of thousands of R&D personnel, was created to provide a common foundation that could be leveraged by the Nortel business unit R&D teams. Under this group, Nortel centralized platform work, common components, common management, silicon development, tools and R&D processes that could be leveraged across a range of Nortel product teams. This build once, use many approach goes directly to creating efficient reuse in Nortel and allows them to avoid hundreds of millions of duplicate spend in each area.
Created a centralized R&D operations role under the leadership of one person who reports to the Nortel CTO and oversees R&D operations – on a consolidated basis – across the company (with all other Nortel R&D leaders reporting into him on a dotted line). This consolidated management chain allows Nortel R&D to collectively act as one, make rapid decisions and to develop cross-business unit processes to, again, drive efficiency and scale.
Made the decision to adopt the CMMI process and operations approach to institutionalize continuous improvement in Nortel R&D. CMMI is generally seen as the gold standard for process, and the results of a disciplined process and operational structure are well understood. Nortel has now completed much of the baseline, have begun the efforts, and are starting to see the results. CMMI is a long-term Nortel commitment to process efficiency and quality, and unlike other initiatives in this list, is much more evolutionary than revolutionary.
Nortl added (or, in some cases, re-established) a set of new (and missing) functions to the company. For example, Nortel has reconstituted a core industrial design group creating centralized Design to Value and Design Cost Reduction groups to drive cost reductions and margin improvement.
3. The recognition, cultivation and celebration of Nortel's world-class people talent. Accomplishments so far:
Launched a new Nortel Fellows program, which recognizes the best Nortel technical experts.
Nortel held their first annual technical conference last summer, bringing together 300 of Nortel's top technical people to collaborate and invent the future.
Last fall, Nortel held a number of formal recognition events for Nortel patent creators. This IPR recognition was driven by the importance of IPR to Nortel’s future and its passion about recognizing and thanking Nortel technical teams for the extra time and effort they take to invent and capture those inventions - essential to a healthy R&D environment.
This year, Nortel launched a Distinguished Member of Technical Staff recognition program (the level below a Fellow) and is revamping their technical ladder (career path) to ensure that top technical talent cannot only work at Nortel but can progress their career there.
Dramatically accelerated their new graduate hiring with about 1000 new grads entering Nortel last year.
For the first time in quite some time, Nortel is seeing a statistically significant rise in R&D ESAT and Nortel continues to be able to attract world-class talent globally.

The ability of Nortel to operate R&D more effectively and at lower cost, to contribute to the improved operating margin of the company, and to create a stronger technical position for the company is certainly not done by any means with the process, but the approach is structured and world-class. Do YOU agree that Nortel is making progress in revitalizing its R&D model?

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