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Center of Excellence - the R&D in BPO (Part 2)

Even though we cannot clearly state which company should have R&D and which COE, there are substantial differences between Research & Development units and Centres of Excellence, which motivate different naming.

In my previous blog I introduced the idea of copying the approach used in the production environment - the Research and Development - to the BPO as an extended service environment.

Following the definition of an Organization for Economic Co-operation and Development, R&D means "creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications."  This part of definition is applicable for both COE and R&D and is core to recognizing the department within the whole organization. The Hackett Group says that Centre of Excellence is the unit, which "enables the organization to consolidate expertise and employ standard approaches in dealing with such things as project management, pricing, cost analysis and value-based decision models" .

As you can see the objective of the effort taken by R&D and COE slightly differs, just like it differs between manufacturers and service providers but in both cases it focuses on increasing the level of knowledge used to develop a new product or service to fulfil customers' demands.

The research is done here in order to acquire knowledge of the observable facts or a defined pragmatic objective. However R&D covers also such activities as experimental research or experimental development where a physical object is being created in order to try out its properties or features and collect feedback. In case of services it is often impossible to conduct experiments on the living process, especially those recognized as core or critical for the client's business. Moreover the research often focuses deeply on culture and society, diving deeply into the legal and regulatory requirements (such as finance law, labour law, international accounting associations' rules etc).

Line of demarcation

I would really prefer to be able to draw a clear line distinguishing companies with R&D units from companies with COEs. As mentioned above, the easiest way would be to divide manufacturing companies (pharmaceutics, electronics, or beverages such as Nestle) with their own (or outsourced) Research & Development units, and service providers (consulting ones, like KPMG or outsourcing like Infosys BPO) where Centers of Excellence are more visible. Such a division however gets blurred in the case of companies which offer much more than mere physical products. A good example is the General Electric Company, which established the Controls & Power Electronics Center of Excellence. In this case COE focuses clearly on the technological development and innovation for their production devices. Thus it is closer to the R&D's rather than to COE's definition. A completely different approach is presented by BMW AG where COE is devoted to the customer satisfaction and branding with a program dedicated to car dealers and salesmen. It this case however we meet just the improvement and incentive program to enhance sales for fastidious customers of the luxurious goods.

Perhaps we could also consider the division that is not based on the company category but on the place where the COE unit is situated within the organization. According to the Hackett "COE can either be complementary to or part of a Global Business Services organization" , thus as the contradiction R&D should be a standalone unit providing services to other units.

Even though we cannot clearly state which company should have R&D and which COE, there are substantial differences between Research & Development units and Centres of Excellence, which motivate different naming. Given all that, we can still say that R&D is a centre where excellence is delivered. And still we can say that the Centre of Excellence is dealing with research and development. Thus we can assume that COE evolved from R&D, but still R&D strives for excellence. And the importance and values generated by these units are unquestionable.

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