Salim Solaiman

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Wall Street's myopic PROFIT Hunger pushing big Firms to abandon R&D , is it good or bad for mankind ?

Across industry consolidation over past couple decades , convertes small family owned firms into cortporate giants through mergers or acquisitions. Despite having it's downside , that process came up with an upside , which was bigger muscle for individual giants to invest in R&D for their own competitive survival from which mankind also got benefited to some extent as innovations got much more speed and big giants commercial muscle helped innovation to reach bigger population quicker than ever.

Though innovation always suffered from having slower speed as our ethical standard and regulatory frame work always had far less speed compared to innovation. Moreover due to psychological reason also diffusion of innovation is slow in society always which is on discussion in other thread here.

http://www.ted.com/conversations/3479/why_does_the_diffusion_of_inno.html

Behind the scene in recent time Wall Street become the BOSS of BIG Corporate Giants. The myopic hunger for PROFIT of Wall Street pushing big Firms to abandon R&D as their non core function , which should be taken care of somebody else !!! As process of innovation is uncertain, sometimes slow , needs lot of fund. To make BIG BOSS Wall Street happy big corporates freeing up those money to put somewher else to gain immediate profit. Recent trend in Healthcare industry is the proof.

That means innovation will suffer from funding problem as was echoed in passionate talk of Nina Tandon at Columbia University.

http://www.youtube.com/watch?v=uQ5aiUGg1Yo

In this era when Innovation become ever costly & commercialization become far more complex, we can't push innovation to individual labs of scientists like Thomas Alva Edison or Alexander Fleming, when it was cheaper and simpler.

In such situation it seems to me in near future Innovation can come at much slower pace due to funding reason, and mankind will miss the benefit of the same.

Agree or disagree?
Or you have other perspective of same ?
What is your idea abo

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    Jul 13 2011: Bad!

    Wall Street is Bad for every one except them!

    Wall Street is EVIL.

    There is not a single Human working on Wall Street and we should abandon it period!

    Profiteering is the real Evil in this world!!!
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      Jul 13 2011: I agree with you.....
      Let's think of a better model which is currently only profit focused !!!
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        Jul 13 2011: It is not really a model that we need.
        What we need is to protect the basics of live and make them accessible to every one.

        The basics of live is food and shelter.
        That must be guaranteed and as such children should be educated by growing food and understanding nature.
        A society can only function if it has a proper agriculture as a backbone and proper housing.
        On the back of this we can build an education system where people are educated to the best of their abilities. This way we ensure the evolution of our society.

        Food and shelter must be protected from greed, Food is NOT a commodity!

        The current model of inflation greed corruption and theft is based on the Occult.
        This has to end or humanity will perish!

        You will see that every politician from Berlusconi to Merkel Putin Obama and Cameron are Freemasons.

        They are in charge so it is their fault and they are corrupted by Wall Street.
        Freemasons are Satans little helper and must be brought to light and justice.
        Wall street is Satan.
        And every one that works on Wall Street and makes insane profits brings suffering and pain to Humanity.

        Expose them and bring an end to this Occult Dictatorship.

        Free Food.
        Free Housing.
        Clean Air.
        Clean Water.
        Free Education.

        And we can make this world a paradise again.
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          Jul 13 2011: I am on the same page with you.

          PROFIT is the nicer name of GREED which is driving our society so long causing all the problems and concern you mentioned which are very basic needs of humankind.

          Now that GREED has extended it's agressive claw also innovation that actually brought us today's level technologically scientifically.

          To solve the problems you mentioned we also need social innovation / reform soon.....
  • Jul 15 2011: Salim, I think your observations are accurate. I took an MBA course in bioscience management. In at least the biotech industry, there has been a trend of large companies abandoning R&D only to go out and buy up smaller startups in order to upgrade their product pipelines. While making a profit is definitely a requirement for survival, unfortunately it seems to have become the sole purpose of most companies, at the risk of sacrificing innovation, since it's possible to make money without offering radical innovation.
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      Jul 15 2011: You came exactly to the point what the debate is about.
      I am aware of that trend about the industry your referred to. Guess similar is happening other industry as well, which sometimes they say in nice word as "outsourcing". But my gut feel (which may be wrong, and love to be wrong) is they are abandoning R&D to a great extent , and going out with a shopping list and bag in hand to shop around.
      But how the small fishes in the pond , will get their food to deliver items shoppers are looking for? Due to that worry which was also visible in Dr. Nina's talk in youtube, opened up this debate.
      Your contribution is greatly appreciated.
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      Jul 15 2011: Again, At Houston points to another strategy that must be short lived. As long as the start ups are being bought out there will be those who are cashing in and selling their companies to bigger fish. All major companies are playing that aquisitions game even though the outcomes are often not as positive as the leaders would have the shareholders believe. In its way this is the ghettoization of R&D. Most startups are working on shoe string budgets and losing a great portion of their percentage of the companies that they started with their brainchild just to get initial financing.
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        Jul 15 2011: Debra , thanks for your thoughts :)
        You are aware sometime this buying selling game is only done to push up the share index only. It's not uncommon BIG FISH bought a small innovative FISH than killed the whole small fish , so the small piece of innovation is also gone ...............

        With that intial financing they also lose their soul.....

        As you wished , I also wish so that this startegy lives really very short for the sake of innovation.
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          Jul 16 2011: Salim, you make an interesting point. Killing the competition by buying the innovations to squash them borders on immoral in my view. The very idea that one group of people can steer the growth of human innovation by buying it out only to destroy it is more than sad. I have seen acquisitions that were designed to cut the legs out from under competitiors as well. When the R&D pipeline is unproductive companies just buy entire product lines to keep them ahead of a third competitor and they often take the patents or 'recipes' and then close the acquired company. We have let the sharks run the tank but I once saw an interesting video from an aquarium in the us. The Sharks were ending up as carcasses on the bottem of the tank because they had introduced an octopus (metaphor for internet and people acting to expose the sharks) and the octopus drowned and ate the shark for breakfast!
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        Jul 16 2011: Debra , definitely that should be immoral to any concious human being. Thses kind of things never comes in to media though for many days I am skeptic about media.

        Other thing also happen, a Big Firm buys a small company as that came up with some innovation which is very attractive. But that small company also may have some other R&D project ongoing which are at different point. As the Big Firms buys the smaller one, it finds all other projects of that small company is not a startegic fit to their big R&D portfolio , so they just shut those down.

        Well these are all business decisions which is necessary to be taken for the sake of shareholder's interest or the bosses of Wall Street.......but mankind can miss some of the innovations which could be great help for all.....

        Don't know what could be the solution in this fiercly profit driven model of business in future.
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          Jul 18 2011: I guess that I think the public should have a say in investing in start ups that come from academic work that arises out of publically funded institutions. Why should companies be able to gobble up the ideas and lock them down. Its too bad that viable research couldn't have the equivalent of 'angel investors' that nurture start up companies which can bring good new ideas to market. These ideas should be copyrighted or patented with preference for the originator of the idea and the academic institution.
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    Jul 14 2011: If you want to learn something about the downsizing/ off casting of R&D you should read Lafley's book. The former CEO of Proctor and Gamble championed this cause. He decided to bring the concept of R&D to daily life rather than from a particular department. He had divisions working together to develop Crest White Strips, he had marketing cooperate more closely with competitiors and with distributors. The concept was basically that innovation has to be more closely connected with the customer.
    R&D spent millions on developing what they 'could' do rather than what anyone would buy.
    Having said that, however, who imagines that 3M, Dupont or others who are known for revolutionary new products will eliminate their R&D for long. All companies run on and profit by competitive advantage.
    This is simply another path that businesses will follow and we will all say 'how could they have thrown the baby out with the bathwater?" in a few years.
    The real problem to my mind is that rather than develop things in the lab, the companies will go into the real world and appropriate ideas from the creative poor and profit from them rather than partner with them so that both sides prosper.
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      Jul 14 2011: Hi Debra
      Good to have you here.
      I will check that book. Yes , innovation shouldn't be limited to R&D that I fully agree and also getting ideas from different stakeholders in the whole value chain is necessary these days when innovative products has much shorter life cycle due to inter an intra, supplimentary category competitive pressure. Getting ideas at early development or even pre-development level from stakeholders and then developing product might help for quicker diffusion of innovation , which is good for commercial success of innovation.

      But I am not sure once R&D is outsourced those things will be there or not, as main target for those outsourcing companies is to offer cheaper and quicker outcome while maitaining thier own profitability. So in this case profit issue comes twice , first orginal company profits by paying less through outsourcing then that recipient company have to make profit out of that less money of the original company. Ultimately for R&D there will be lesser money, while the truth is now a days R&D is far more expensive even if year to year devaluation of money is not considered.
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      Jul 13 2011: Hi Ed
      Thanks for your optimistic insights. Yes the role of "Wall Street" might get decntralised to other part of the world but my worry is that whether this shift of power also bring a change shift in mindset as well, which is very myopic now towards very near term PROFIT. Like you I also want to be optimistic about that.....

      About Singapore , you rightly said regulatory environment & also ethical environment there are still more Innovation friendly , that Singapore took to keep there Economy dynamic when they have next door giant emerging economic powerhouse China. Singapore rightly identified it's strategy to move in to innovation as they will not be competitive with China if they remain manufacturing focused which it was before , because of the huge economy of scale and skilled labour power China has.

      Main challenge for Singapore to be in forefornt of Innovation is to quickly develop infrastructure to support R&D and also availability of ample talent (i know many will love to relocate even that may remain a challenge). Next challenge will be the funding which is still controlled by stock markets.

      Wish that also will change soon to speed up innovation hence betterment of mankind.
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    Jul 30 2011: Please tell me which firm you talk about? in general big firms mostly buy out research! Who has time to do research in the world of capitalist value system?!
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      Jul 31 2011: Thanks for interest. It's not any individual firm its a looming trend accross different industries, would you mind to check the links already pasted in different post below of this discussion.

      I disagree about your generalized comment, in recent past & still to some extent Big Firms invest in R&D of their own considering that as a competitive edge, which right now tend to diminish that's why this discussion is.
      If Capatilist system has got only one strength, that is "innovation" driven by competition which is hugely encouraged and rewarded (in terms of business return once successful).
  • Jul 24 2011: I approve of your perspective on mankind will miss the benefit.although this topic is beyond me,as i am a quality engineer in a factory which produce HP printer, I think innovation is very important for our society improving. BIG Corporate Giants should input much funding to push innovation. in our country, we have many BIG project such as "shenzhou VII spaceship","High-speed train" that is charged by our country for much money rather than individual team. we will make every effort to innovation for our life better and better.
    regarding cortporate mergers or acquisition,i think it is a trend due to "Matthew Effect", we here has a saying-Great trees keep down the little ones.in chinese is"大鱼吃小鱼,小鱼吃虾米".
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      Jul 24 2011: Thanks Niu Zhen for your thoughts. Yes similar proverb we have in my language bangla that says "small trees can't grow under the shadow of big trees"

      But here it's a bit different scenario , BIG TREEs have given some jobs to the small trees without any support that needs big investment which that small trees don't have. Sometimes when the small trees come up with some new ideas , BIG one buys the whole small tree and take only that prospective piece of idea that fits in to BIG ones business interest and kill rest of all other ideas or project of the small tree.

      What kind of innovations are going on in your field in China? At manufacturing China is leading , what about innovation ?

      Really interested to know about China.
      • Jul 24 2011: thank Salim Solaiman for your sharing,since our country is a developping one same with yours,we have to study and study.and we have few innovations in manufacturing industry,although many products marked"made in China".
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          Jul 26 2011: That's your humbleness , China is far ahead of my country Niu Zhen.
  • Jul 18 2011: I am a English learner called wallace Niu in shen zhen city in China, although i have no much knowledge on this topic , i will spend much time to read this till catch it.
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      Jul 18 2011: Hi Niu
      We all are learner as life is journey of learning if one take it in that way. Thanks for your interest in this thread. This discussion is for that reason to learn from each other.

      You know I know nothing about chinese language , would really love to learn your language once have time and opportunity.
      • Jul 19 2011: Hi,Salimthank you for your quickly answering to me,if you want to learn chinese language,i think i am available.chinese is my mother language. Now,I want to learn English due to my work,in my daily work, i receive many English email,and also many US customers come to visit our factory.although i have not studied English for about ten years, i will visit this web and make more friends.study harder and make progress every day. in chinese express is "好好学习,天天向上"which reading"hao hao xue xi,tian tian xiang shang".
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          Jul 24 2011: You are welcome Niu Zhen.
          Yes reading and exchanging views can provide you learning English better.
          So whats your view about the subject here ?
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      Jul 18 2011: learning english by reading about corporate profit hunger. that is imprinting at large! :)
      • Jul 19 2011: thank you! i will learn english by reading ,listening and writing skills.
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    Jul 16 2011: I think today more then ever the idea of profit is the poison of both business and the planet. The creation of obsolescence in order to drive demand and revenue has created a culture of greed and an increase of unneccesary need that pollutes the planet both figuratively and literally.
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      Jul 17 2011: Yes Dan , agree , what could be a better model for our business , innovation, environment as whole humankind ?
      Any thoughts ?
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    Jul 12 2011: a company that does not get involved in R&D quickly falls behind. innovative startups take over. that is why big corporations never stop R&D, but usually they spend a LOT on it, in order to prevent startups to get ahead using new inventions.
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      Jul 12 2011: Krisztian you are right but that was a trend of recent past but in recent present time lot companies are spinning out their R&D considering it to be their non core function , specifically in healthcare. They think some small specialist research lab will do that once they find something good they either will buy the molecule or the whole company depending upon the attractiveness of innvovation in commercial scale.

      But how those small research lab will run costly R&D projects of this era without adequate funding , who will going to take the risk of investment behind that uncertaininty that onec big firms used to do traditionally as you rightly said.

      That's the reason of this discussion. Thanks for your contribution.
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        Jul 12 2011: i would like to see some statistics on this.

        however if it is true, it can be still explained with the recent economic "boom", which means lot of resources were invested (wasted) into the boom sectors: real estate, derivatives and government bonds. the world went crazy in the recent years, there are no savings, and people consume themselves into debt.

        so in short: profit hunger is surely not the reason. profit hunger actually promotes R&D, not hinders it. capital wasting trends destroy it.
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        Jul 12 2011: "While expense reductions had previously been centered on manufacturing, purchasing, administration and sales operations, R&D is now included in these efforts."

        this underlines that not the profit motive, but other forces are behind this particular cut in costs. R&D is the last to fall, since it is absolutely necessary to maintain market lead. if companies cut R&D costs, it indicates big trouble.
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        Jul 13 2011: your articles are not about reducing RnD costs, but outsourcing RnD. that's a good thing. if a country is stupid enough to hinder RnD, the punishment for it is RnD shifting abroad.
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        Jul 14 2011: Salim, I strongly disagree with your view. I used to work for a US fortune 500 company and while all companies are looking to reduce costs, R&D is actually the sector where they invest.
        Stopping to invest or even reducing it, would be suicide in our competitive world. Coming constantly out with new stuff is at the very core of any successful company.
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          Jul 14 2011: Harald, it's the trend I am talking about which is visible now. Big Firms for quite sometime to keep their share index up , was going through cost cutting measures, identifying so called non-core functions then outsourcing those. Until recent past R&D was considered as main function as you rightly said and they used to keep it out of the scope of outsourcing.

          Don't get me wrong by taking me as someone against outsourcing as a whole. If outsourcing is done to get things done by someone else more efficiently and effectively even at lesser cost , I am more than fine with that.

          R&D from my perspective doesn't fall in that category as it's the soul of organisation to bring new technology , innovation for their own competitiveness from which finally humankind will be benefitted.

          Some of the big Global Companies I know outsourced some of their non core functions ( not R&D in this instance) and now they are struggling to get things done as per their own standard. So it's visible now new consultancy firms grew who terms them to be expert in "Service Level Agreement (SLA)" , that gives the overall indication what's going on.

          Can any SLA really drive innovation from outsourced company ? I see innovation , R&D as a matter of passion.

          Just my personal example, these days whenever I buy something from the BIG names which used to ensure certain level of my expectation when those were manufactured by themselves , now I find lot of deviation in negative way once they outsourced the manufacturing.

          I would be more than happy if your view become true. Thanks for your time & contribution in this thread.
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        Jul 14 2011: Salim , you need to understand that cost reduction is not the real problem, RnD reduction would be. if they find a way to do it more cheaply, it is good. with outsourcing, they can still do RnD, while reducing cost.
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          Jul 14 2011: Yes Krisztian , definetly cost reduction is not the problem & that's all the time we need to look for as well. Getting it cheaply would be great as well !!!

          My worry is going for cheap may create resource crunch for R&D interms of infrastructure and talents that's it.
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      Jul 14 2011: Hi Salim, ok, I agree about outsourcing in general. Many companies are doing that already for quiet some time, especially when it comes to such functions as HR, finance, maintenance, IT, maintenance, etc.
      However, at least the companies I know, don't outsource R&D, because R&D is like to soul of a company. It gives it it's identity based on it's creative accomplishments. This doesn't mean that certain activities within R&D might be outsourced (e.g. a company might use a university to run some studies supporting it's internal R&D.
      In general, outsourcing has it's pros and cons. The pros are usually cost reduction, reduced liabilities, etc, while the cons are mainly loss of control. As long as you have all processes under one roof you fully control the outcome. Once you start using third parties you give away part of this control and that sometimes results in not foreseeable problems.