East Meets West as German Company Revamps R&D

FOR decades, the traditional formula for success seemed to work: Gather great scientific minds together in a think tank, allow them an unlimited budget, and wait for their passionate research to produce a breakthrough.

But fierce international competition combined with the rapid pace of technological change is teaching many companies hard lessons. Waiting too long, reacting too slowly, or wasting time trying to invent the wheel are all mistakes that can cost a company its financial health - or its existence.

Telenorma GmbH, one of Germany's leading telecommunications technology companies, recognized that to avoid such problems it needed to restructure product divisions, reduce bureaucracy, and rethink its approach to research and development.

In 1990 the board of directors brought in Matti Otala, a native of Finland, to oversee R&D operations and two of its main product divisions. Dr. Otala has held top positions at renowned electronics companies such as Nokia in Helsinki and Harmon Kardon in New York and Nagoya, Japan.

Surrounded in his office by stark white walls, framed photographs of peaceful seascapes, and one well-used exercise bike, Otala says his years in the Far East have taught him the importance of teamwork and the value of the human spirit. The experience, he adds, confirmed his belief that the Western style of management often ignores its most important resource: individual initiative.

This, Otala says, is because Western management hierarchies put "few in charge of many ... and then give these few the power to dictate and the hierarchy to execute these orders, thereby killing the organization's overall creativity."

In contrast, Japanese managers function more as coaches whose task it is to train their teams and then see them through to victory.

Since 1990, Telenorma has removed one complete layer of middle management and reduced its administration personnel by one-third. The company also introduced what Otala calls a "friendlier line of command."

AT a time when low profit margins are threatening to squeeze others out of the industry, Telenorma reported a 1991 sales volume of around 2.8 billion marks (US$1.8 billion), 10 percent higher than 1990. The company is a subsidiary of Robert Bosch GmbH.

At a March computer fair in Hannover, Germany, Telenorma unveiled three products, including a sophisticated network-management system, that were direct results of the "just-in-time R&D" system Otala introduced.

The system dictates that production-process development, product development, and marketing preparation must take place simultaneously. When used properly, just-in-time R&D allows a company to beat competitors on two fronts: It yields a better product, and it brings the product to market faster.

In an age when product life cycles are only a few years from drawing board to burial, these advantages are crucial.

Rather than merely copying the Japanese, Telenorma decided to seek the best of both worlds and modify Eastern production practices to meet Western needs. The result was a series of test projects designed to convince both the company and its critics that European firms can cut costs, maintain quality, and increase productivity rather than move production to the Far East.

A survey of Telenorma employees shows that the majority prefer to work in such teams permanently.