There is a problem I’ve seen far too many times, and it wreaks havoc with too many great companies. Your company has been performing well, but sales are plateauing. You see execs on your feed boasting their newest solution or touting a glossy case study of how some Fortune 100 customer loved their product. You’ve done everything in your power to mature your organization and scale to meet demand. But what’s keeping you up at night isn’t your customer service, marketing, or sales. Sales are lagging behind because R&D can’t build that new feature or product, let alone a platform, fast enough.
R&D is the biggest expense in your organization. Crunchbase found that out of 123 startups that successfully exited via IPO, the average R&D spend was 20% of revenue. You may be at this threshold, yet you can’t seem to execute on delivering solutions that move the revenue needle. As a matter of fact, you’re not even always sure what they’re spending so much time doing. It just seems like every time you discuss a new feature it takes three times as long as you think it should.
It feels like you’ve grown too large and slow to be agile, and your business development is taking a hit because of it. If this is you, you may want to read further.
Innovation often slows as your R&D org matures
A common, albeit frustrating phenomenon, is the “sweet and sour” of scaling an R&D organization. As your business matures, so do your R&D practices. You’re building all of these components and processes into your development: automation testing, CI/CD, production monitoring, the list goes on. These are all great signs of a mature development pipeline, but the proof is in the pudding: it all adds work to R&D’s plate.
As you grow, the rate at which you innovate compared to the amount of effort you sink into technical debt and maintenance dips. We call this the Innovation Fraction, which is the rate at which you innovate relative to the total output capacity you have as an R&D organization. When your innovation fraction continuously gets lower, it’s almost always a leading indicator for how your net new sales perform in the market.
Sure, you could spend time scaling up your R&D, but what is the end goal that gets you across the line for solution delivery? All of this, and we still haven’t even made it to the real, underlying problem. That problem is that you’re looking at your R&D through the wrong lens in the first place.
The “build-it-yourself” rut
Your company is growing larger. You’re expanding into new solution verticals and supporting an ever-growing customer base. Yet you’re still in the mindset of being a custom software center, responsible for building everything yourself.
When you think of your value chain, you’re stuck at the far left: responsible for gathering, molding, and assembling all of the raw materials. I think the disconnect that happens in companies is that they sometimes forget that they’re a solution provider, not a custom software shop. Your customers are buying your finished product; they need it to be on time, complete, and the best it can be.
If you were an automotive manufacturer, would you have the same approach? Would you be responsible for standing up the machinery to make your own tires, radios, or seat belts? Those are important to completing a car and necessary, but you would trust the experts to build those things and you would focus on the unique aspects of the car that make your car stand out. You would reuse or buy what’s in the market.
The first-gen Tesla Roadster was just a Lotus Elise with a battery – because they knew that to ever get to market, they needed to ramp up production by sourcing some components. They were, and still are, in the business of selling cars.
Businesses every day use components to build their solution. It’s this modular approach that allows them to scale quickly. It’s faster, it’s cheaper, and it allows you to sell solutions instead of custom software.
Modular approach: Thinking of your R&D as a solution center
Companies that innovate and succeed have one thing in common. They deliver on their products and solutions. To do that sometimes requires a shift in mindset to building what you’re most capable of while pulling in the right resources to complete your solution.
Rethinking yourself as a solution center can free you to start thinking of how to incorporate modular solutions into your business and product. I’m not here to say it’s an overnight transition. The people in your R&D department are your team members, and you hired them for a reason. Helping them embrace automation and prebuilt architectures and components will free them up to focus on what they’re best at, and free your business to accelerate the delivery of solutions that drive revenue and growth.
Shifting to this modular, platform-centric approach is what has let the automobile industry deliver higher-quality products in less time, for less money. You can do the same in software. Focus your efforts on delivering revenue-generating solutions to your customers, and lean on a strategic partner to provide you with the components, architecture, and automation you need to get the job done.
More insight on accelerating development? Follow Modularis
At Modularis, we help companies accelerate the development of their software products, and make sure those products are built right, built fast, and built to last. Follow us at modularis.com/modblog for more insights. To get started, give me a buzz at (888) 872-9701 or email me at singha@modularis.com.