February 19

Turning A Corporate R&D Centre Into A Business

Everything was looking good at the corporate R&D centre, we merged with the Varity Corporation of America, we had ambitious plans and then the axe fell!

In 1995, I was the manager of the Control Systems Department (35 people) in the Group Research Centre for Lucas Industries plc. The centre was a traditional R&D organisation of 220 engineers & scientists with an impressive track record for engineering breakthroughs that included the development of the engine controller for Concord and the invention of engine management.

My own project successes at Lucas corporate R&D centre included the development of a prototype autonomous vehicle for Ford, adaptive cruise control and electric power steering. However, the centre lacked a business focus and was not seen as a key enabler for Lucas strategy.

Autonomous R&D programme 1994

Overall the company was faltering as the automotive industry consolidated and the UK automotive position diminished. In 1996, Lucas merged with the smaller Varity Corporation of America and their CEO, Victor Rice became CEO of Lucas Varity plc with a combined turnover of £4.7 billion. Victor was a tough but fair leader with an entrepreneurial bent who radically reshaped the company for the better.

However, in the shake-up, my boss the R&D Director left and Victor asked me to draw up plans for closing down the Group Research Centre that was located in the Midlands.

His reasons were that he disliked the concept of centralised funding (our corporate budget was £11M pa); he felt that R&D should be conducted closer to the automotive centres in Germany and Detroit; and he wanted to increase the level of technical investment in Asia.

Although I understood the reasons, it was a huge blow and I resented the loss of such an outstanding technical competence that had taken years to create. Therefore, as well as the closure plans, I drew up an alternative plan to turn the place into a profit centre by creating a consulting and engineering service business.

After some negotiation, my plans were accepted, which was the start of my real problems. We had only two months of corporate funding left, the internal business units were unwilling to buy our services because they wanted to strengthen their own technical capabilities, I had never run a business before and the R&D staff were not very entrepreneurial – things did not look good.

As general manager, within two months I had:

  • heavily restructured the centre
  • vacated two floors of our building, which we then rented out to the Electrical & Electronics Division
  • and sold off any surplus equipment.

Our marketing plan forced us to focus on core skills that were of most use to the company. Our big break came from the Diesel division where we secured £1M of funding – our only funding commitment at the start of our first year!

Whilst the technical team delivered the Diesel programme, the management team made a big push for external funding. First, we pooled contacts and then approached the external companies where we had good relationships. Thankfully, the centre had a strong technical reputation and we quickly won contracts from Schlumberger, Bookham, Sagem, JCB, Peugeot, VW and Renault.

In parallel to a tough delivery schedule, we transformed our project processes, strengthened our systems engineering and solutions competence, and became highly customer focussed – our centre became a lean technical project factory. We also introduced a stage-gate project pipeline and drove many more concepts into mainstream product development within the Lucas Varity divisions so as to better secure downstream funding. As Victor had intended, our new behaviours were now well aligned with long term overall business success.

By the end of the first year, we had turned over £5.75M and our profits were £133K better than our budget. Our customers liked the new approach and pretty soon we were swamped with work, even from the initially reticent internal divisions. What a team and now they were very entrepreneurial too!

Advances Magazine

Today the consultancy is called CONEKT and turns over about £15M pa and is a highly prized competence within the business. Product successes included electric power steering, adaptive cruise control, common-rail diesel injection, improved Boeing 747 rudder control, new power generation systems for aircraft etc. etc. between them they have added billions of pounds to the business top line.

As for myself, two years later I was made Automotive R&D Director when all the automotive businesses were combined into one £4 billion division under John Plant, with additional technical responsibilities in Detroit and Germany.


Tags

corporate r and d, ibm global services, lucas industries, lucasvarity, technical centre, turning r and d centre into a business, who says elephants can't dance


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