Speaker of Verhaert at the 8th edition of our Innovation Day on October 21st 2011.

1. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 2
OUTSOURCE PROJECT OR INSOURCE EMPLOYEES?
HOW TO OPTIMIZE YOUR
PRODUCT DEVELOPMENT
CONFIDENTI
AL
Peter Roels
Recruitment Coordinator, account manager on
site technical consulting
Peter.roels@verhaert.com

2. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 3
Innovation
The term innovation derives from the Latin word innovatus, which is
the noun form of innovare "to renew or change,"
stemming from in—"into" + novus—"new".

3. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 4
Innovation is essential
for European companies to survive
Innovation
• Key strategic pillar in any organization
• New and improved product offerings for existing and future
customers
Innovation
• Create new output
• Create new value
• Improve chances for success
Europe intends to invest 3% of BNP in innovation. Today in Belgium it’s at 2%!!
What are the key reasons that blocks us ?

4. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 5
Overview
• Why don’t we realise this objective?
• How can external partners help?
• 2 models with common practices and some reflections
• Way forward: managed innovation services, concept & case

5. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 6
CONFIDENTIAL
Two major issues

6. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 7
Issue 1: Open job vacancies
• Will become more & more important:
• Bottleneck jobs
• Competition between
companies
• Aging population - babyboomers
major retirements

7. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 8
Issue1: Article “Knack ” last week

8. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 9

9. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 10
Issue 1: Future development in competence sourcing
Future evolutions 2011 - 2015:
• Engineers become more scarce
• Stress on recruiting market
• Future employees will commit less to a company
• More engineers will become freelancers
• They will provide their competencies to companies
for a project and limited time
• Rapidly increasing competition from BRIC countries

10. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 11
Issue 1: Optimize the availability of the crucial
development competences
Will there be sufficient R&D / engineering capacity?
We know the answer……
So, how to survive in European R&D environment?
• Will those engineers prefer to work for our company or will they go to other
industries?
• Do we have enough critical mass to have all the potential disciplines and
specialisms in-house?
• Do we provide enough challenges to keep those people motivated ?
• Do we provide the right environment and context te keep their knowledge
state of the art.
Do you have some doubts?

11. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 12
Generations XYZ Einstein

12. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 13
Generation Einstein
Communicate with 21st century generation
10 suggestions for new management
1. Let them find solutions for questions that interest them and
that they know enough about. Give them responsabilities in
line with their talents
2. Stimulate informal communication within the organisation. It
reduces hierarchy and increases creativity. Not equality but
equivalency.
3. Give space for entrepreneurship where employees can use
and develop their competencies and capacities. Make sure
that they can contribute to improvements with their own ideas.
4. Organise small scaled worksettings. It stimulates
entrepreneurship, bureaucracy is reduced and links with
intimicy and security what is important for the new
generation…
5. Introduce and facilitate the possibility to work independent
from time nore place . It gives them more flexibility and
responsability

13. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 14
Generation Einstein
Communicate with 21st century generation
10 suggestions for new management
6. Organise a stimulating prestation culture. The new generation
does not mind to show what they have realised, they are
ambitious.
7. Make sure the work matters, that it is meaningful
8. Create an environment where employees sense co-ownership
on the successes of the company and that they have the
possibility to develop themselves at full length.
9. Work in flexible mixed teams for important issues. The next
generation is network- and group oriented.
10. Check it their personal ambitions are in lite with those of the
company. It is their responsability to develop their own career
path themselves. But it must be clear what they can contribute
to the organisation’s future..

14. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 15
Issue 2: 7 Success Factors to Innovation
Based upon: Thunderbolt Thinking, Inc. http://www.thunderboltthinking.com
1. Culture must embrace innovation & risk taking – everywhere!
2. Innovation must be aligned with mission & goals.
3. Who is the beneficiary of this innovation? Always tie into resident benefits.
4. Accept risk and a climate where mistakes are o.k.
5. Emphasize exploratory thinking, idea generation, and experimentation.
6. Solid interpersonal relationships & teamwork – support!
7. Cross-functional collaboration & communication – use all of your varied resources!

15. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 16
Issue 2: Innovation's Nine Critical Success Factors
by Joseph Sinfield, Elizabeth Altman, Scott Anthony, et al.
1. A compelling case for innovation.
2. An inspiring, shared vision of the future.
3. A fully aligned strategic innovation agenda..
4. Visible senior management involvement.
5. A decision-making model that fosters teamwork in support of passionate champions.
Breakthroughs
6. A creatively resourced, multi-functional dedicated team.
7. Open-minded exploration of the marketplace drivers of innovation.
8. Willingness to take risk and see value in absurdity.
9. A well-defined yet flexible execution process.

16. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 17
Issue 2: Take into account the soft side of
innovation management:
• Organisation
• Empowerment
• Culture
• Open communication
• Diversity
• Multidisciplinarity
• Prepared to take risks
Is your organisation the ideal environment
to innovate succesfully?
Do you have some doubts?

17. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 18
CONFIDENTIAL
Organisation models
How can external parties help to overcome these issues?

18. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 19
Hire temporary R&D employees
1st model : Reenforcement of your R&D Team
Should be a complementary asset:
Capacity, competence, culture, ….

19. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 20
Hire temporary R&D employees

20. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 21
Hire temporary R&D employees / General practice
When?
• Project workload high & deadlines (too) near
• Resources: extra (wo)man power
• A limited time
• Fast solution for staffing problem
• Flexible: easy to get rid of
• Generally accepted within companies

21. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 22
What does customer look for?
• Very specific skills
• Focus on technical capabilities (e.g. proE, C++, ...)
• In support of the customer’s team - well mastered
competencies
• On higher lever: project management skills
• Been there done that candidates
• Little training – quickly up and running
Hire temporary R&D employees / General practice

22. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 23
Hire temporary R&D employees
We are looking for manpower

23. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 24
Hire temporary R&D employees / general practice
Remarks – attention points
• People to be managed by hiring company’s managers
• Difficult to acquire and consolidate their experiences and knowhow and to
embed this within the company
• Fast selection process
• Quality sometimes does not match the requirements
• Focused on what hired employee can, less on persons capabilities and
competencies
• Monthly basis’ notice
• Flexibillity with the resolution of 1 FTE….

24. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 25
CONFIDENTIAL
Some reflections on hiring R&D staff
What about our key-issues?

25. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 26
Hire temporary R&D employees / What about our
key-issues?
Structural shortness on engineers
Why do we continue to react on short term needs
when we tal about a long term and structural
problem?
Soft issues as key succes factors:
Why do we keep focussing on technical
capabilities we know other factors matter?
Do we realy have the capabilities and capacitity to
manage our people?
Internal
organisiation
Flexible shell
Competences
Technical know-how
Capabilities Attitudes

26. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 27
R&D subcontracting
2nd model : outsource R&D in projects / workpackages

27. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 28

28. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 29
Does your company outsource R&D? General practice
Flemish companies reluctant to outsource R&D
13
56
63
66
21
41
30
38
0
10
20
30
40
50
60
70
R&D ICT HRM Finance &
Admin
Flanders
France
Uitbesteding in Vlaanderen in kaart gebracht - K.U.Leuven. HIVA/CESO, Vlerick Ugent - 2009
%

29. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 30
Outsource your R&D / general practice
• 60s and 70s: companies started to realise the benefits of outsourcing
activities
• Driven by cost of maintaining leadership in all aspects of a vertically integrated
business
• Started with non-core, support activities: HR, IT, facility management, …
• Moved into mainstream: customer service, distribution, …
• Now many major companies outsource manufacturing and product provision
… but R&D - surely not R&D
• For technology led companies, R&D has generally represented
the core competency to hold on to

30. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 31
Outsource your R&D / general practice
Quite some companies consider R&D entirely as their core competence
Issues:
• Not invented here
• Loss of control
• Drain of in-house expertise
• Impact on people and organisation
• Trust / guarantees
• Outsourcing = expensive
Risks:
• Partial loose capability to innovate
• Harder to keep up with technical evolutions
• More difficult to keep up with current market,
actual and future developments

31. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 32
Competencies / general practice

32. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 33
CONFIDENTIAL
Some reflections on subcontracting R&D
What about our key-issues?

33. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 34
Outsource your R&D
The general practice is to limit
collaborations and partnerships in
R&D to the operational level.
However the key succes factors of
innovation show clearly importance
of the tactical and strategical
levels.
Strategic
Tactical
Operational
Levels in Innovation & R&D management

34. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 35
Outsource your R&D
Isn’t this the solution to manage the tactical aspects on innovation management
• Reversed learning curve
• Learn efficiently = innovate efficiently
• Methodologies
• Product development process
• Multidisciplinary
• Project management
• Risk management
• Managed Cost
• Communication & information
• Milestones and deliverables
• Experienced in break-through innovation
Are those tactical aspects handled in your organisation.
Do you have some doubts?

35. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 36
Outsource your R&D
Incremental innovation?
• development of existing product
• existing market
Radical innovation?
• New technologies
• New product
• New markets
outsource
internal

36. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 37
Outsource your R&D
Is it just about capacity or are their strategical aspectsdriving the
subcontrcating / outsourcing process?
• Re-organisation
• Refocus
• New markets
• New technologies
• Access to new IP
• Access to specialist expertise
• Building expertise
• Filling capability gaps

37. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 38
Outsource your R&D
Outsourcing R&D - Alternative approaches / models
• Strategic partnering
• Joint ventures
• Manufacturing led development
• IP led
• Contract innovation and development
• Contract resourcing
• Academic institutions

38. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 39
CONFIDENTIAL
Managed Innovation Services

39. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 41
Embedded
Systems
Applied physics Mech & Ind
Design
System
engineering
Test & modelling
NPD
New products
development
NPI
New products
introduction
FEI
Front end of
innovation
Innovation and
R&D
management
Strategic
Value vs Risk management
Tactical
Multi disciplinarity ,Options, Added
value
Operational
Experts , SW &
infrastructure
Consultancy
Subcontrcating&Projects
Hireing/
workpackages
VERHAERT Managed Innovation Services

40. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 42
Outsourcing, hiring or recruiting?
• testimonial
• External specialised knowledge for execution of non-core
activities
• When proper employees do not have a possible career path
• Retain sufficient flexibility and consolidation of fixed
contracts in all circumstances
• Project work

41. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 43

42. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 44
CONFIDENTIAL
Final conclusions

43. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 45
Conclusions (1)
Succesfull Product Development requires the right competencies at the
right time
Use “Labour” and “Work” as a” scarce and expensive” good when
necessary
Create an agile organisation by setting up a flexible shell:
• Focussing on the core activities
• Flexible employment
• Outsourcing (external as well as inhouse)
• Shared Services – Centers of Excellence

44. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 46
Conclusions (2)
• Often implemented as a short-term solutions, however the problem becomes
structural.
• Therefore outsourcing should be managed from a more strategic –long
term perspective.
• Tactical aspects of R&D is often underestimated and should be covered.
• Mix of different and coordinated collaboration models e.g. Managed
Innovation Services should be explored.

45. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 47
Questions?

46. CONFIDENTIAL
INNOVATIONDAY 2011 Slide 48
Hogenakkerhoekstraat 21
9150 Kruibeke (B)
tel +32 (0)3 250 19 00
fax +32 (0)3 254 10 08
info@verhaert.com
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