How do we get a handle on this complex problem?

We are talking about a 1.5 bn USD division which is independently run in a 7 bn USD IT company. This division does the most technical R & D services work in that company. It has its own go to market, delivery operations and business enablement structures. It functions as an outsourced R&D to several marquee companies, and has over 370 customers. The President of the division and all but one of his 8 direct reports are all home-grown. It is significant in the context of the fact that 10 years ago, this division was just 150 MN USD. If you went one step down, i.e. 2 levels below the president, 80% are home grown, some of them from campus to those managing 100 MN USD business today in the delivery functions. In the go to market functions, this will be more like 2/3rds are home grown. At the skip level to the President, there are large client dedicated delivery or client leaders. At the fourth level, usually it is client leaders or folks who are technology directors.

This division is perhaps the largest number of R&D engineers under one roof and third largest in terms of revenue, despite the high offshore-centric business. The division works across the industry spectrum, whether with Aerospace, Automotive, Semiconductor, medical devices, software platforms, fintech, consumer devices, telecommunications, network devices, office automation industries. The technology width is also very high, whether mechanical engineering, platform software engineering, hardware and system engineering, embedded software or VLSI. For a leader here to earn the respect of the client or his own team, expertise is crucial.

The industry itself is going through a bit of re-invention. There is both revenue pressure and margin pressure and often we find divergent approaches from the major players in the industry whether to conserve costs or try to grow revenue, notwithstanding the platitudes they mouth for the market. Client contracts are getting complex with multiple conditions. More importantly in this outsourced R&D space, the clients themselves have learnt to set up their captive R&D and

grow them. In the last 4 years, one can say that the headcount in the captives grew faster than the headcount in the R & D services companies.

The chairman as well as the CEO are trying to pivot a more non-linear revenue strategy around this division and its capabilities and credentials. Already 20% of the divisions revenue is not based on effort or hours put in by the consultants. Across the multiple divisions, this division has done lots of client product team carve outs and several inorganic acquisitions, typically 2 to 10% of the divisions revenue, so you can say not dramatically large ones. Usually they have been integrated and grown but there could have been perhaps a spectacular leverage, which did not happen. Part of the reason was the cultural distance that prevented a significant bonding necessary to co-innovate and co-create the future.

The budding managers and the engineers under them would any day love to work on products directly, so the personal vision and the organization mission aligns well, but can they really do it? Havent they become too much of a services beast? Also a product company focuses and specializes, but in this division, the aspiration is to own several products across the spectrum and create interesting commercial models between the customer and this division, which will involve payment based on sale, the right to manage the product lifecycle and the liability for product support. Products can be software platforms, mobile devices, engineering tools, security software. So it is too ambitious in its heterogeneity.

Sri and his 4 colleagues who are the second level reportees to the President of the division have been tasked to think about the next 3 year leadership development and management game plan for the division. Sri and his colleagues are technical and understand business, but are unsure quite a bit on how to start and frame the development and management framework. It seems there is a lot to do and it overwhelms them to think have we identified all the drivers and levers, all the goals and objectives, can we really deliver those?

It seems to take quite an amount of bandwidth and at this juncture they are wondering, what help they can get from you. What will you advise them and why.