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CHAPTER 8: RESEARCH AND DEVELOPMENT, image, image, image, image, image,…
CHAPTER 8: RESEARCH AND DEVELOPMENT
1. DEFINITION
Stages of R&D
Basic research:
Development of scientific knowledge
Ex: Study the structure and function of the BCR-ABL protein
Applied research:
Application of scientific knowledge
Ex: Finding a safe and effective BCR-ABL inhibitory compound
Development of a new product or process
Product development:
The relevant consumers
Tailoring of the product / process
Ex: Imatinib entered the product development stage, becoming one of the cancer treatments.
Patents and Consequences:
Basic research:
Difficult to protect
Knowledge spillovers
Applied research & Product development:
It can often be protected by patents or copyright.
The purposeful and systematic use of scientific knowledge.
2.R&D MANAGEMENT AND THE INDUSTRIAL CONTEXT
Managed according to the specific heritage and resources
R&D as % of sales = (R&D expenditure ÷ total sales income = 100%
3. R&D INVESTMENT AND COMPANY SUCCESS
Private sector expenditure on R&D is increasing
A long-term investment
Firms that invest in R&D tend to outperform those
5. STRATEGIC PRESSURES ON R&D: THE TECHNOLOGY PORTFOLIO
Core Technologies
Central to most or all products
Dominates R&D labs and strategic thinking
Complementary Technologies
Additional technology essential for product development
Peripheral Technologies
Not directly in products but contributes to the business
Emerging Technologies
New to the company but with long-term significance
4.CLASSIFYING R&D
Basic research
Work of a general nature.
The laboratories of universities and large organisations
Scientific papers for journals
Producing new technologies
Curiosity-driven basic research
Virtually no concern for the market
A need for new products and new service
Applied research
The application of science
Many new products emerge
Large companies and university departments
Development
Overcoming a technical problem associated with a new product
Improve a product’s performance
Technical service
Cost and performance improvements.
Design changes to products to lower the manufacturing costs
6. WHICH BUSINESS TO SUPPORT AND HOW?
Technology Leverage and R&D Strategies
Growth
Maintenance
Types of R&D Activity
Survival Research
Conducted when exiting the business
Ensure interim survival
Competitive Research
Conducted to sustain the business
Maintain competitive technological position
Technology Mastery
Improving products and processes relative to competition
Requires significant R&D, staying updated on technological developments
Break the Mould
Creating a technological advantage
Requires high levels of novelty, creativity, and basic research
7.ALLOCATION OF FUNDS TO R&D
Factors Influencing R&D Budget
Short-term performance fluctuations and availability of funds
Long-term strategic technological needs
Managerial judgment and negotiation
Key Factors for Fund Allocation
Expenditure by competitors
Company's long-term growth objectives
Need for stability
Distortions introduced by large projects
Inter-firm Comparisons for R&D
R&D Spending
Varies greatly across industries
Similar within industries
Data for Comparison
Competitors' R&D spending
Number of research personnel
Purpose
Determine appropriate R&D investment
Based on a fixed relationship to turnover
Percentage of sales
Stability and growth
Based on a fixed relationship to profits
Undesirability
Ignoring R&D as an investment
Reference to previous levels of expenditure
Starting point for discussions
Used in conjunction with other methods
Costing of an agreed program
Allocation for individual projects
Negotiations
Internal customer-contractor relationship
Business units pay for research
• Building knowledge base
8. EVALUATING R&D PROJECTS
Benefit Measurement Models
Derived from a group of well-informed managers
Subjective assessments of projects
Quantitative or qualitative models
Types of models: mathematical, scoring, decision-trees
Financial/Economic Models
Most popular project selection tool
Limitations:
Emphasis on financial formulas
Short-term bias
Limited accurate future financial data
Portfolio Selection Models
Fit with business strategy
Balance the product portfolio
Dimensions of balance
Newness
Time of introduction
Markets
Comparing Success Rates
Different scenarios for companies based on the likelihood of success
Low success rate: Avoid R&D.
Medium success rate: Research and development by one company.
High success rate: Both companies invest in R&D.
