management of R&D within organizations, link with corporate strategy and strategic planning, operational activities.

1. RESEARCH & DEVELOPMENT
Indrajeet kumar
Gaurav kumar
Karanveer singh
Nitish kumar
Deepak saraf
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2. STRUCTURE
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Introduction
Background: The management of R&D within
organisations
R&D and the link with corporate strategy
R&D strategic planning
R&D operational activities
Allocating funds to R&D
Summary and recap

3. WHAT IS R&D?
 “R&D is the purposeful and systematic use of scientific
knowledge to improve man’s lot even though some of its
manifestations do not meet with universal approval.”(Twiss,
1992)
 “To develop new knowledge and apply scientific or
engineering knowledge to connect the knowledge in one
field to that in others.” (Roussel et al., 1991)

5. R&D IN BUSINESS
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Critical for marketing
Competition has made R&D important
Consumers trends, needs, demands
No guarantees that higher spending on R&D will lead to:
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high profits
greater market share
more creativity
better products and services

6. CONT…
 Investigative activities that a business makes a deliberate
decision to conduct
 Intention is generally strategic (future growth)
 Aim is to make a discovery that can either lead to the
development:
 new products or
 procedures, or
 to improvement of existing products or procedures.

7. R & D IN PHARMACEUTICALS
Research = basic experimental research
 Eg identification of possible chemical compounds
 Theoretical mechanisms
 Universities
Development = exploitation of discoveries
 Mainly private sector
 Proof of concept
 Safety testing (eg drugs)
 Delivery mechanism ( eg how to administer a drug)

8. WHY IS R&D IMPORTANT?
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Crucial to survival
Fast changing environment
Continuous technology change
Competition
Changing consumer preferences
Fundamental to “marketing”
Advantage is markets come from:
 Understanding what markets need (MR)
 In case of technology - selling what is possible to make
 Efficient production processes

9. CLASSIFICATION OF RESEARCH

10. COMPONENTS OF R&D
 Basic research:
 general in nature, apply to a broad range of uses and technologies
 Universities and large corporations
 New scientific discoveries eg antibiotics
 Applied research:
 Apply existing principles to find new solutions, application of
science
 Moving basic research towards new products eg Dyson vacuum
cleaner

11. COMPONENTS OF R&D
 Development:
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Focuses on products and commercialising these
Several prototypes may be developed
Design improvements occur
Trials, modifications and improvements occur
Technical service:
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Service support systems around existing products and processes
Cost and performance improvements
Modifications to specifications to improve costs
Marketing considerations

12. WHO ARE THE KEY PLAYERS?
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Companies
Governments eg CSIRO
Universities
Future oriented
Long-term activities

13. R&D IN INDUSTRY
 More about application of old science and new science to
produce new products
 R&D is continuous process, difficult to define start and end
times
 Measure outcomes in terms of new products
 Large proportion of R&D in industry is technology based
 The diversity of technology means no one firm can gain
expertise in all areas. So there is greater reliance on
alliances

14. TRADITIONAL R&D
 About gaining competitive advantage
 Technical developments in industries such as chemical,
electronics, auto, pharmaceuticals, was responsible for
economic growth of nations
 R&D was seems as a staged process: moving from research
to engineering to manufacture
 Large investments in R&D such as the space race, which
resulted in many products and fueled economic growth

15. UNIVERSITY VS. INDUSTRY
RESEARCH
 Universities provide the fundamental and basic research,
which tends to be more general
 Universities concentrate on pursuit of knowledge
 Industry research focuses more on:
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product development
new technologies
understanding of technologies in existing products
technologies in manufacturing
application of knowledge for commercial purpose

16. BUSINESS STRATEGY
 A parallel support infrastructure required to ensure business
success
 Need to Match R&D to market realities and opportunities
 Study and forecast state of the operating environment
 Capacity to adjust to changes eg climate change
 Risk analysis
 Capability analysis

17. I N T E G RATING R& D TO OVE RA LL BUSI N E SS ST R AT EG Y
 R&D should not be independent of business strategy
 R&D is part of the business support infrastructure
 AIMS:
 Provide support of existing businesses by keeping them
competitive and supporting efficiencies
 Drive new businesses and opportunities eg 3M’s discovery of
temporary adhesive led to creation of Post-it notes.
 Broaden and deepen technological capability for long-term benefits

18. EXTENDED PRODUCT LIFE CYCLE

19. R&D EXPENDITURE (MEAN) ACROSS
INDUSTRIES

20. R&D IN ORGANIZATIONS: EXPENDITURE
( IN 2 0 0 5 )

21. C L ASSIF IC AT ION O F N EW PR O D U C T D EVEL O PM EN T
( D IF F ER EN T IN D U ST R IES)

22. STR ATEG IC MAN AG EMEN T OF R ESEAR C H & TEC H N OL OGY

23. STRATEGIC ROLE OF R&D

24. R&D STRATEGIC PLANNING MEANS
DEVELOPING A TECHNOLOGY
PORTFOLIO
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Core technologies
 Central to all or most of the company’s products
 Complementary technologies
 Additional technologies
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Peripheral technologies
 Whose application contributes to the business
 Emerging technologies
 Long-term significance

25. TYPES OF TECHNOLOGY
 Core: central to most if not all products of company. Eg
photographic technologies are core to the photocopying
industry
 Complementary: eg microprocessor technology and paper handling technology in photocopying (lifting, turning,
stapling etc)
 Peripheral: eg computer software. The photocopying
industry is using software to add features and benefits to its
products, eg security, emailing etc
 Emerging: In photocopying more use of telecommunications
as standard features, pdf

26. WHAT TO SPEND ON R&D?
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Inter-firm comparisons
A fixed relationship to turnover
A fixed relationship to profits
Reference to previous levels of expenditure
Costing of an agreed programme
Internal customer-contractor relationship

27. KEY POINTS
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R&D can be managed and is managed
Technology for today, tomorrow and the future
R&D operational activities
R&D Project evaluation

28. R & D: AN EXAMPLE
What It Is:
 Research and development (R&D) aims to create new
technology or information that can improve the effectiveness of
products or make the production of products more efficient.
How It Works/Example:
 Let's say company XYZ is a pharmaceutical company that
produces pain relieving medication. XYZ has several
competitors, so the efficient production of medication is
essential for it to maintain or expand its share in the market. In
order to continue to produce effective medication, XYZ needs to
allocate much of its resources, both financial and human, to
the development of more effective pain relieving medication.
Use of these resources is called research and development.

29. WHY R & D MATTERS
 Research and development is more important to some
companies than to others. For example, a computer software
company would spend much more on R&D than a retail sales
company would. Technology companies survive by developing
more ef fective technology than their competitors. A company
like Apple (Nasdaq: AAPL) has many employees that work in
R&D because Apple competes in its market by first developing
and then releasing devices that are better and more appealing
than ones created by competitors.

30. CONTD…
 Research and development especially af fects investors in
technology or pharmaceutical companies. Since Revenue is
generated by selling products that depend on being more
useful and more advanced than similar products sold by
competitors, development of revolutionary technology can
drastically increase the value of invetments in that
particular company. Therefore, investors need to pay
attention to research and development news, because the
discovery and development of better technology begins with
having a successful R&D department.

31. FORD FIGO :EXAMPLE
• The case outlines the research and development behind the
Ford Figo- small car. The case unfolds the steps taken by Ford
to identify the target customer, decide the features of Ford
Figo to meet the needs of target customer.
• Ford conducted marketing research to understand Indian
customer for its new product Figo. However, the challenge
before Ford was how to launch and market Figo in the highly
competitive Indian small car market.

32. ISSUES TO BE UNDERSTOOD
 Understand issues and challenges in launching a new
product.
 Study the multi-pronged introduction strategy of Figo.
 Understand various issues and challenges in target
marketing.
 Analyze Figo's marketing strategies and explore ways in
which the marketing should be evolved to keep the brand
relevant to the target audience.

33. R&D DEPARTMENT FUNCTIONS
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Development of new products
The primary function of the R&D department is to develop
new products, which are essential if the company is to
generate profits in the medium and long term. All products
have a finite commercial life and this is particularly true in
the microelectronics sector, where new technological
developments are occurring continuously.

34.  Maintenance of existing products
 Existing products must be maintained to ensure that they
can be produced to specification. For example, a component
required for an existing product may become obsolete. When
this happens R&D are expected to find an alternative quickly
so that production of the product will not be delayed.
 A serious example of a product maintenance problem is
when a key component is discontinued, such as a
microprocessor, which may result in a complete software
rewrite and electronic hardware redesign.

35.  Enhancement of existing products
 The commercial life of a product may be increased by
enhancing it in some way, giving it extra features, improving
its performance, changing its appearance, or making it
cheaper to produce, etc.
 Many companies enhance their products - it can keep their
product ahead of the competition and spreads the large
capital outlay associated with developing products over a
longer period.

36.  Interfacing with production
• While a new product is being developed, development staf f
and production staf f interact to ensure that the product is
manufacturable. The intention is to ensure low cost
production and short production times, while maintaining
quality standards.
• The R&D - Production interface is vital - not only does it
ensure low production costs, but by reducing production
times it should be possible to increase output and therefore
income, on a monthly basis.

37.  Technical aspects of regulatory compliance
 It is a legal requirement that products used in the
Community must comply with the relevant Directives. The
R&D department is primarily responsible for ensuring that
this is the case, but senior management are liable to fines
and/or prison sentences for serious cases of non compliance.
 Electromagnetic compatibility (EMC) is a major
consideration when designing new, electronically based
products.

38.  Quality
• A product quality plan is produced for new products as they
are developed, principally by R&D and the quality
department. However, if the product is being developed for
an external customer, the customer's quality department
must also be heavily involved. The quality plan may allow the
customer to return a whole batch of products as a result of a
small number of samples failing the customer's quality
tests.

39. SUMMARY
Typical R&D functions that we have described are:  Development of New Products - usually the primary function of
R&D
 Product Maintenance- probably the most important secondary
function of R&D- short term income is important
 Product Enhancement - helps keep the company products
ahead of the competition and extends the life of products
 Regulatory Compliance - a legal requirement - products sold in
the European Community must carry the CE mark
 The Quality R&D Interface - quality is a major issue and R&D
are heavily involved in ensuring new products attain the
required levels of quality
 The R&D structure we have outlined is typical of an SME - job
descriptions help to define the structure of a department
effectively.

40. BEST PRACTICE IN INNOVATION
 Understand customer & market needs. How?
 Culture of innovation> vision, leadership & support.
Commercial imperatives to innovate, flexibility.
 Open innovation- collaboration model, partnerships
 Funding. Willingness to invest in R&D, balance current and
future needs.
 Execution. Commit resources, continuous improvement,
benchmark, goals, strategy.
 Creativity. Skills, knowledge base, learn, change
 Intellectual property. Manage and protect

41. INNOVATION IN CONSUMER GOODS FIRMS
 R&D is often associated with high -tech firms that are on the
cutting edge of new technology
 But many established consumer goods companies spend large
sums of money on improving old products.
 For example, Gillette spends quite a bit on R&D each year in
ongoing attempts to design a more effective shaver.
 On average, most companies spend only a small percentage of their
revenue on R&D (usually under 5%). However, pharmaceuticals,
software and semiconductor companies tend to spend quite a bit more.

42. MANAGING & MONITORING OF R&D
 requires special skills
 covers issues ranging from technical matters to management
techniques and overall business environment
Management of R&D projects requires attention to the
following
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Performance
Timing
Cost
Personnel

43. CORPORATE R&D
 Corporate research and development is the principal
corporate asset for long term technological competitiveness.
 Corporate research activities can be classified by the purpose
of research:
To support current businesses
To provide new business ventures
To explore possible new technologies

44. OBJECTIVES OF CORPORATE RESEARCH
 Extending product life cycle – through improvements in
production processes,
 lowering production costs,
 increasing market share,
 profit margins, etc.

45. R & D PROCESS
R&D projects tend to go through the following stages:
 Basic Research & Invention
 Applied research and functional prototype
 Engineering prototype and testing
 Production prototype and pilot production
 Product testing and modification
 Initial production and sales
Stages a, b and c are usually called ‘Research’ while
stages d to f are called ‘development’

46. TECHNOLOGY GENERATION
Technology generation involves
Monitoring and evaluation of R&D projects,
Funding of R&D,
Training & Development of resource personnel
Interactions at all levels,
Management policies and support,
Availability of support structures and incentives at government
level,
Timely collection and interpretation of technical and other
information, etc.

47. TECHNOLOGY DEVELOPMENT

48. IN-HOUSE R&D
 managed and headed by a well -qualified and experienced
chief/head directly reporting to the top management
 this unit has to have very close contact/interaction with other
departments within the company
 strength and facilities in the inhouse R&D deptt. would
depend upon the technology policy of the company

49. COOPERATIVE R&D
 A group of companies in a particular industrial sector
promotes an R&D center as a society or a non -profit making
company
 expenses are met from the contributions of the participating
companies (as a fixed percentage of their turnover) as well as
grants from the govts
 more suitable for projects, which are not of secretive nature

50. R&D COLLABORATION
 A company may collaborate with another company in areas of
common interest
 collaborative R&D ef forts are becoming common in developed
countries mainly due to high costs and shorter technology life
cycles
 A firm may also collaborate with public or private funded R&D
organization on a case -to-case basis where R&D results are
shared mutually and so are the expenses

51. RESEARCH SOCIETIES
 Large corporations or industrial houses may set up
independent research societies
 Suitable for broad interests of the promoting companies in
line with national interests
 Govt. extends several concessions for such societies and
provides several tax concessions and fiscal incentives
 Cancer drugs, AIDS vaccines, Bird -flu vaccines, MAIT,
NASSCOM, Centre for Science & Environment, etc

52. RESEARCH COMPANIES
 Large corporations of technoprenuers may promote research
companies, specifically for conducting research and
development
 The development costs and reasonable profits are recovered
from the sale and transfer of technologies
 Very common is US and other developed countries but is yet to
gain recognition in developing countries
 Inputs in R&D organizations
Traditional Inputs - money, materials, manpower, facilities, energy
and management
Intelligence-Based Inputs - science, knowledge, skills, information
and existing technologies