TCS Daily

The Global R and D Arms Race

By Dominic Basulto - August 15, 2005 12:00 AM

When Microsoft filed a temporary restraining order in late July to prevent a high-level Internet researcher from accepting a similar position at Google, the reverberations of the move were felt throughout the tech industry. This was about more than just non-compete agreements within the tech sector or another attempt by Microsoft to flex its muscles against a smaller and more nimble competitor. With the battle between Google and Microsoft for Internet dominance looming in the background, the move signaled that any U.S. technology company hoping to remain competitive with global rivals and exploit new market opportunities -- whether it is Internet search or China (or both!) -- must make a commitment to hiring, developing and rewarding top-level R&D talent. The lesson is clear: technology companies must first win the battle for R&D talent before they can win the battle for market share.

The cliché that "the company's most valuable assets walk out the door each night" has never been truer. Time and time again, companies with the best R&D talent win the battle for market dominance. Consider the examples of companies like Google and Yahoo, which have ramped up efforts to lure away top-level researchers in order to launch new Internet initiatives. In an effort to gain a market foothold in the Internet search market and catch up with frontrunner Google, Yahoo recently announced plans to poach top R&D talent from IBM's Silicon Valley research lab. In the second quarter alone, Google hired more than 230 high-level researchers and engineers, including the director of eBay advanced technology research. As a recent article in Business Week ("The Revenge of the Nerds") breathlessly pointed out, companies ranging from unproven tech start-ups to Silicon Valley giants are now trolling campuses in search of the best talent in the world.

Much as General Electric is considered a top recruiting ground for future CEO candidates, companies like Google, Microsoft, Yahoo and IBM are among the top places to recruit top technology talent. During the Jack Welch era, companies knew that managers trained at GE possessed the types of attributes and management training to make an immediate difference in the senior executive suite. At one point, no fewer than ten CEOs of major U.S. public companies were GE alumni, including the CEOs of Honeywell and Home Depot. With China looming in the distance as a DEFCON 1-type of competitive threat in the tech sector, companies realize that they must recruit at Microsoft and Google just as they once recruited at General Electric. In any benchmarking survey of the top firms in recruiting and talent management, the names Microsoft and Google are always at the top.

From a macroeconomic perspective, it is clear that R&D spending matters. The U.S. spends 2.59% of its GDP on R&D, while the European Union designates a relatively paltry 1.93% of its GDP to scientific and technological development. China, by comparison, spends only 1.3% of its GDP on R&D spending. Clearly, countries (like companies) can only become leaders in a global knowledge-based economy by paying more attention to innovation and creativity. With that in mind, both Europe and China are trying to catch up with the U.S. by increasing their R&D spending. More than just pouring millions of dollars into R&D initiatives, companies must adopt a comprehensive view of talent that places a premium on the ability to come up with new ideas and new business approaches.

The fact that R&D talent is in such demand is perhaps not so surprising, considering the potential impact that creativity and innovation could have on the next round of global economic development. According to a recent book by Daniel Pink, "A Whole New Mind: Moving from the Information Age to the Conceptual Age," the key competitive differentiator in the coming years will be the ability of companies to tap into right-brain thinking. Factors like creativity, intuitiveness and design will be more highly prized than linear, analytical thinking. Being able to see the whole picture will be more important than being able to crunch numbers.

To see how this might play out in the technology sector, consider that IBM is revamping its business consulting unit so that researchers can work side-by-side with front-line consultants to solve business problems. This is an excellent example of how to bring right-brain thinking into the trenches. At Yahoo, too, the importance of bringing talent front-and-center has long been a major strategic focus: the company's Chief People Officer works hand-in-hand with the COO to leverage talent throughout the organization and create a truly world-class workforce. By moving their talent to the front lines in the R&D war, companies are able to integrate their talent strategy with their business strategy, giving them the best chance to leverage the innovative thinking of their best researchers.

As companies look for new ways to open up new markets and explore new types of growth opportunities to keep the all-important stock price on an ever-upward trajectory, the battle for top R&D talent will surely continue to play a vital role. Are companies actively adding new talent, or are they shedding top talent like unwanted baggage? The companies that are recruiting new talent and devoting more resources to R&D are precisely those companies that are building long-term competitive advantage. Investors in the U.S. tech sector, take note: in a global knowledge-based economy, the company with the better talent wins.

The author is a TCS contributing writer.


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