Why invest in R&D? Get the strategic perspective.

1. STRATEGICSTRATEGIC
PERSPECTIVES OF R&DPERSPECTIVES OF R&D
INVESTMENTINVESTMENT
A.S.Rao, asrao@alpha.nic.inA.S.Rao, asrao@alpha.nic.in
Scientist “G”Scientist “G”
Department of Scientific and IndustrialDepartment of Scientific and Industrial
ResearchResearch

2. overviewoverview
• Technological environment
• Exciting new options
• Strategy theory
• Re look at Strategic options
• Illustrations
• Conclusions

3. Technological environmentTechnological environment
• Globalisation
• Time compression
• Technology life cycle
• Technology integration

4. GlobalisationGlobalisation
• Spread of manufacturing/ service/ R&D
facilities- China- manufacturing hub,
India-ITES
• Implications : improvements can come
from anywhere. Track technology
developers and facilitators on a global
scale.
• Competition: Telecom equipment-China,
IT product/IP-Israel, Auto components-
Thailand, Small aircraft-Brazil, Animation-
Philippines, Ready made garments-???

5. Time compressionTime compression
• Higher resource allocation to technology
development-more players, bigger
budgets
• Shortening of development time
• Shortening of product life cycle
• Shorter payback period demanded by
capital market
• Implications- larger amounts needed for
speedy development and even larger
efforts needed to recover costs quickly.

8. Technology integrationTechnology integration
• Combine technologies to develop
new product
– strategic alliances
• Combine technologies to
commercialize a product
- access to complementary assets

9. ALLIANCES BETWEENALLIANCES BETWEEN
COMPETITORSCOMPETITORS
Alliances forged by rival firms can take
on 3 different forms .
• Complementary -GM-Toyota NUMI,
• Shared-supply-PRC V6 engine
Renault -VW
• Quasi-concentration- Airbus

10. New optionsNew options
• Living without collaborator
• Reversing the dependency
• Entering early stage of TLC
• Forming Strategic Alliance

11. Strategy theoryStrategy theory
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SIGNALS ABOUT
THREATS AND
OPPORTUNITIES IN
THE ENVIRONMENT
(What could
we do?)
WINDOW OF STRATEGIC OPTIONS

12. SITUATIONAL ANALYSIS
WINDOW OF STRATEGIC OPTIONS (DESIRED)
STRATEGIC OPTIONS (AVAILBLE)
INVESTMENT IN DEVELOPING OPTIONS
STRATEGIC
CHOICE

13. ExamplesExamples
• TVS-Suzuki
• Xerox-Fuji Xerox
• Early stage TLC
• Strategic Alliances

14. TVS-SuzukiTVS-Suzuki
• Collaborator not supportive of Indian
firms’ desire to export in his name
and introduce new models
• Option- go alone
• Option was available because of prior
investment made in developing
manufacturing and design
capabilities

15. Fuji XeroxFuji Xerox
• Collaborator not considering him as
equal
• Option: prove he is equal if not
better, developed small size
photocopiers, receives more royalty
in reverse direction
• Option was available because of
investment made in technology
absorption

16. Early stage TLCEarly stage TLC
• Advantages of entering TLC at
growth stage as against Maturity
stage: more time to make money,
use technology as differentiator.
• Prerequisites: Capability to bring out
product innovations
• Option available only to those that
invested in deign and development

17. Strategic alliancesStrategic alliances
• Many firms collaborating with
competitors to manage technology
integration : Sony-Erickson
• Prerequisite : ownership of
complementary capabilities
• Option available only to those
players that occupied critical patent
spaces.

18. ConclusionConclusion
• Strategic analysis, Environment
analysis sensitizes management of
the opportunities and threats but
awareness does not in itself bring a
solution. It is not uncommon to find
Indian companies having good grasp
of the opportunities and threats to
their business, but are unable to do
anything to change the course, as
they practically have no choice.
• Strategic choice is the fruition of prior
investment made in R&D