How to End

We mean to end well whether or not a research unit has ever succeeded in the past; whether or not the unit has ever been able to launch a blockbuster+ product (Why?). To end well means we want both parties satisfied with the outcome. By end well, we refer to ending a membership+ in the franchise program, along with any firm-funding that may come with the membership. End-game+ means the current legal entity is shut down and a new legal entity may (or may not) emerge to continue operations.

Note: the firm continues to control ownership in all Intellectual Property developed up-to-this-point using its funds.

There are three stages to end-game:

Research Unit management needs to be warned well in advance if their trajectory is carrying them toward a possible end-game, they need to be able to state their case for continuation (if desired), and they need an orderly transition plan should the decision go against them.

Notification of Intent to Review

Almost every research unit will at some point be notified of intent to review. Very few will progress according to the original plan. Units receive notification for any of several infractions:

  • Unfavorable shifts in one or more of the 5-P’s
  • Spending projections will carry them below 30% ownership before they reach their first blockbuster product
  • Work outside the scope of the original funding mandate
  • Persistently poor share price or product valuations+

Notification is not an existence-threatening event. Most of the time it signals+ the need for a change in direction or refinancing of the ‘loan’ that provides research funding. A few instances will signal the need to prepare for shutdown.

For management of a research unit none of the above should come as a surprise. All the above indicators are tracked continuously. Your independent evaluator+ will be whispering in your ear. You know when you’re opening yourself up to notification and will have had ample opportunity to redouble efforts or to proactively institute changes.

You receive plenty of warning when your research is no longer considered to have blockbuster potential. If this is true, it’s very important for you to come to this conclusion first, and not to have this verdict reached during the decision process. If this is not true, if you think the research still has blockbuster potential, you need to prepare a robust defense. We place the consequences of this conclusion on the shoulders of management in the research unit (see here).

The notification process gives you time to prepare. You can institute changes, contest the findings, or declare you no longer will retain membership. Ideally we both walk into the decision process with the outcome already decided.

End-game Decision

Two questions often arise in an end-game decision: 1) why do you need more time – why is this new news, and 2) why do you maintain you still have blockbuster potential despite our findings to the contrary? The answer to the first question is found in findings from the science or technology that could not have been known when the schedule was first made. The answer to the second question is found in mistakes made in earlier findings: this is the research unit’s appeal process, so-to-speak.

There are many possible mechanisms for making this decision (e.g., up-or-out, forced ranking, three-strikes-and-your-out). We seek one with the following features:

  • Does not require a long time for preparation
  • Does not require a prosecutor’s role
  • Provides an unbiased setting for the defense (research unit management) to state their case
  • Allows for plea bargaining
  • Allows for nuanced decisions – this is not a binary go, no-go decision
  • Provides continuity of understanding of past decisions with this research unit (e.g., in cases of probation)
  • Allows for continuous improvement of decisions based on repeated experience

The management of the research unit and the funding agent+ must sense independence and fairness in the decision. A few of the above features are discussed more fully below.

Nuanced Decisions

We separate the baby from the bathwater. We separate the contributions of management, the team and the science in our review of research unit performance. If management is weak, we may swap out the management. If the particular thrust in the science is unproductive, we evaluate whether or not a different thrust will be more productive. If the work is out-of-scope, we reevaluate the blockbuster potential of the original scope and may make (small) adjustments as needed. The end-game decision mechanism looks for ways to reinforce or rebuild the blockbuster standing of any research unit, and only in failing this decides to end membership in the franchise program.

Continuity of Understanding

When the research unit was first formed, timing to the first (discontinuous) blockbuster product could only be roughly estimated. It is not uncommon for the timing for the first blockbuster product to vary between 3, 5, or even more than 10 years. If we estimated three years and it’s really taking ten, it should come as no surprise, but we must clearly document the rationale for the change. We do this to avoid ‘serial excuses’, where research management learns to develop new excuses for each new delay. Why wasn’t this new excuse discernible the last time you requested a delay? We distinguish variability in direction and timing from lack of direction and timing.

Continuous Improvement

The way I really taught myself to become a day trader was I would write down all my reasoning for the trades I was planning for the day. I would include all my stopgaps, all my goals for stock movement, and even my own temperament for the day. Professional Day Trader Colleague (2008). Personal Communication


Our decision mechanism may be as simple as a Judge Judy but this cannot be determined until we better understand the passions and motivations of Judy. How do we ensure Judy remains independent and committed to ever-increasing levels of competence in her role? This is a topic for a future home page discussion.

Plan for orderly transition

End well means we make it possible for the research unit management (or employees) to go off on their own and be reasonably successful: to start a firm dedicated to sub blockbuster+ pursuits. For purposes of our discussions we call these transitional firms: transitioning from firm-financed to investor-financed operations. The firm does retain ownership of Intellectual Property developed using its funds. But in general the research unit becomes a separate legal entity.

It takes time to find outside sources of funding, and the firm provides 12-18 months of maintenance-level funding in the interim to allow this to happen. The firm plays a traditional Venture Capital role, seeking other investors to buy out its interests. Done well this can be a very attractive opportunity for outside investors: the cachet of being an ex-member of the franchise program should carry great weight in the search for new funds.

The entity continues as a member of the franchise program (status = transitioning) during its search for new funding and has access to many business and legal resources of the franchise. Membership continues to have great value.

We take great pride in the success of our ex-members. We take seriously our obligation to get them on their feet with new pursuits. Their success redounds to the benefit of our reputation. Most importantly, their success removes the fear in other research units to admit when Mother Nature has left the building. As discussed, only with the assent of those being assessed can you measure interim progress in a way that doesn’t itself undermine progress. Doing end-game well allows us to reliably measure interim progress during mid-game+; to move away from cheap heuristics+ in our measurements.


End-game done well ensures the following results:

  • Employees of the research unit sense a level playing field from kickoff to the closing bell
  • Employees of the research unit receives ample warning, and had both the means and the time to do everything possible to avoid shutdown
  • Clear signals are sent to all research units on how to avoid shutdown

End well also means we are openly punitive toward those who did not play by the rules; who did not alert us when Mother Nature left the building+ or who did not contribute to franchise membership (i.e., free riders+). Follow the rules and you avoid a precipitous shutdown: you get transitional support should shutdown come your way.


Home Page October 2010