A short perspective on the linkages of R&D with Business Value Creation

1. ‘BUSINESS’ OF R&D
A short perspective on the linkages of R&D
with Business Value Creation

2. © Ravikant M (2015)
Lingering questions
• How does my research work relate to my company’s
overall business?
• What direction of research fits the vision and long term
objectives of the company?
• What are the various ways in which research helps the
top and bottom line of my company?
• How can I approach in determining the value created by
my research?
• Corporate R&D versus ‘off the hook’ research?

3. © Ravikant M (2015)
How do we define an Organization?
Organization
Collection of
Business units?
Collection of
products?
Collection of
Markets?
C.K.Prahalad and Gary Hammel (HBR 1990) : Rethinking the
corporation as a collection of CORE COMPETENCIES
The case of GTE Vs. NEC
1980 1988
GTE : telephones, switching and transmission,
digital PABX, semiconductors, satellites, defense
systems and lighting products
Sales : $9.98 B
NEC : Comparable computer business, but no
telecommunications business
Started focusing on computing and mainframe
business and leveraging for communications
business
Sales: $3.8 B
GTE : Became a telephone operating company
with positions in lighting and defense
Closed down semiconductors
Sales : $16.46 B
NEC : Conceived itself as a ‘Communications
and Computing’ company
Acquired competencies in semiconductors and
followed C&C strategy to evolve
Sales: $21.89 B
Source: The Core Competence of the Corporation, C.K.Prahalad and Gary Hammel, Harvard Business Review May-June 1990

4. © Ravikant M (2015)
What is core competency?
• A Core Competency is a deep proficiency that enables a company to deliver unique value to
customers1
• It is the common thread across almost all the BUs or departments
• In hyper competitive market dynamics, core competencies with companies are what differentiates
them from each other – Source of Sustainable Competitiveness
• Companies with identified core competencies can then adapt to changing dynamics by developing
and acquiring new competencies and stay market relevant
Company (main products) Hypothesized core competency
Intel (microprocessors) Miniaturization
Apple (phones, laptops, tablets) Designing user experience
Honda (four-wheelers, two wheelers, lawn mowers
and generators )
Engines and powertrains
Canon (copiers, laser printers, cameras, scanners) Optics, imaging and microprocessor controls
3M (magnetic tapes, photographic films, post-it notes,
pressure sensitive tapes, coated abrasives etc.)
Substrates, coatings and adhesives
technology
Philips Optical media
SEMCO (Industrial mixers, HR mgmt, Cooling towers) Managing complex operations
Google ?
Tata Steel ?
1: Insights, Management Tools, Bain and Company

5. © Ravikant M (2015)
Invisible Vs. Visible
Visible to
competitors
Invisible to
competitors
Source: Entrepreneurial Insights, Strategy Frameworks (2014)
* Identifying and developing core competencies requires long term focus,
resources, and strategic intent

6. © Ravikant M (2015)
Business Opportunity
Churning the Ocean Vs. Targeted Approach
Size, Growth rate,
Demand
Customer behavior
Sustainability/Product
life cycle
Legal and
Environmental
regulations
Market Characteristics
FirmCompetitors
Supplier
power
Buyer power
Substitutes
Entry Barrier

7. © Ravikant M (2015)
When competencies meet opportunities..
Core
Competencies
Business
Opportunities
Corporate Strategy
Michael Porter: Emphasized the ‘Fit’ between an organization’s Strategy
and its activities
C.K.Prahalad and Gary Hammel: Argued for ‘Stretching’ or ‘Leveraging’
resources to achieve the proposed strategy – realizing full potential

8. © Ravikant M (2015)
... but what is Strategy, exactly?
Company Strategic Intent
Walmart Lowest cost, everyday
South West Airlines Meet short haul travel needs at low cost
GE Be the number one or two player in industry, else divest
SEMCO Get into business with high complexity (highly engineered) with
Niche/Premium position and low replicability
Google ?
Tata Steel ?
Three basic competitive strategies:
• Cost leadership
• Differentiation
• Focus/Niche/Premium

9. © Ravikant M (2015)
So what if we know the strategy?
Each and every activity within an organization must supplement its strategic
intent – Alignment
Source: From “What is Strategy?” by Michael E. Porter, November–December 1996

10. © Ravikant M (2015)
R&D
Strategy
Company
Strategy
Technology
Forefront
Core
Competencies
Business
Opportunity
Internal Alignment
External Alignment
How does R&D come into picture?
R&D specific
inputs/aspects

11. © Ravikant M (2015)
Industrial R&D Strategy paradigms have
been changing….
Source: Bertrand Quelin, ‘Core Competencies, R&D Management and partnerships’, European Management Journal (2000)

12. © Ravikant M (2015)
….and a shift is seen in R&D portfolio
management
Portfolio of
projects
Rapidly
changing
Tech. Env.
High
Uncertainty
Low
Interlinkage
Changing
resource
requirements
Portfolio of
Competencies
Cross
linkages to
other units
Focus on
learning curve
Evolving with
Tech.
forefront
Customer
Confidence

13. © Ravikant M (2015)
How does R&D contribute to company’s
Competencies and influence its Strategy?
Improving present
capabilities
Defining and acquiring
short term
competencies
Driving the long tern
vision and objective
• Keeping a tab on
prospective
technologies
• Acquiring strategic
technological
capabilities
required for
maintaining
competitiveness
• Contributing to
formulation and
implementation of
strategy
• Ensuring
continuing
customer value
• Enhancing visibility
and intangible
benefit to customers
• Act as a reservoir of
knowledge
• Help in determining
the long term
strategy
• Anticipate the
technological
paradigm changes
and develop
competencies
aligned to them

14. © Ravikant M (2015)
The concept of Value
Organization
Immediate
customer
End
Consumer
Value Value
$$ Acts as a channel
Customer/Consumer derives utility from the value provided and exchanges
wealth against it
Value
Functional
(Tangible)
Aspirational
(Intangible)
Utility

15. © Ravikant M (2015)
Identifying value provided at each step of
the value chain is important!
Company Value provided
Starbucks The coffee experience
BMW Social status
Apple Unparalled design and user experience
Indigo Right on time
Airtel Fast/Reliable network
Tata Steel ?
Every activity done in an organization should have the same objective –
Providing the identified and intended value to the customer/consumer
Value-driven approach to R&D

16. © Ravikant M (2015)
The problem of inter-departmental
perception gap
Source: Frances Fortuin et.al., Alligning R&D to Business Strategy, 2006

17. © Ravikant M (2015)
So what? Where are the answers?
• How does my research work related to my company’s
overall business?
• What direction of research fits the vision and long term
objectives of the company?
• What are the various ways in which research helps the
top and bottom line of my company?
• How can I approach in determining the value created by
my research?
• Corporate R&D versus ‘off the hook’ research?

18. © Ravikant M (2015)
I think, therefore I am…..
A Researcher!

19. © Ravikant M (2015)
Resources used/further readings
1) The Core Competence of the Corporation, C.K.Prahalad and Gary Hammel, Harvard Business Review May-June
1990
2) Core Competencies, R&D Management and Partnerships, Bertrand Quelin, European Management Journal Vol. 15,
No. 5, 2000
3) http://www.bain.com/publications/articles/management-tools-core-competencies.aspx
4) http://www.strategos.com/aligning-rd-with-the-companys-business-strategy/
5) http://www.strategos.com/organizing-for-game-changing-innovation/
6) http://www.strategos.com/innovate-with-purpose/
7) http://www.strategos.com/ideas-to-impact-focus-on-late-stage-innovation/
8) http://www.strategos.com/ideas-to-impact-focus-on-late-stage-innovation/
9) http://www.strategos.com/keeping-the-customer-in-focus/
10)https://www.executiveboard.com/blogs/6-myths-of-corporate-rd/
11)http://www.entrepreneurial-insights.com/core-competencies-overview/