R&D Structure in a Changing World Subcommittee Tom Tirpak, Larry Schwartz, David Kashdan (Co-chairs) IRI Meeting 2005 Tucson, AZ

Subcommittee Name Presenter; Location, Slide 2 Overview Objective/Scope  To combine IRI ROR research on “Innovation Games” with the body of knowledge on R&D organization structure, and thereby identify trends and actionable guidelines for managing R&D structures and competencies that support an organization’s market and technology strategy. Dates  Start: 2/2004, SIS in November, Planned Completion: 12/2005? Value Proposition  Improved R&D effectiveness.  Increased alignment with corporate strategy.  Provide framework for discussion about organizational issues

Subcommittee Name Presenter; Location, Slide 3 Participants Co-Chairs  Tom Tirpak (Motorola)  David Kashdan (Eastman)  Larry Schwartz (Intellectual ASSETS Inc). University Partners  Roger Miller Montreal Polytechnique  CIMS/NCSU Members  Thanks to the ~25 participants

Subcommittee Name Presenter; Location, Slide R&D Structure in a Changing World Status:  CIMS/NCSC survey completed, 66 participants in 16 industries  MINE Survey in process, ~150 interviews in 2 business sectors complete.  RTM article outlined  SIS planned (November, 2005).  Remain in Phase III

Subcommittee Name Presenter; Location, Slide 5 CIMS/NCSU Summary 66 Interviews (2/3 IRI Companies) 16 Industries

Subcommittee Name Presenter; Location, Slide 6 Our Investigation Collected Data using survey form and websiteCollected Data using survey form and websitehttp://

Subcommittee Name Presenter; Location, Slide 7 Spectrum of Organizational Structure CorporateDecentralized Revenue

Subcommittee Name Presenter; Location, Slide 8 MINE Study Games R&D Structure Real Cost of Innovation

Subcommittee Name Presenter; Location, Slide 9 R&D Structure Survey Multiyear, Multiindustry study, lead researchers from Montreal Polytechnique 143 surveys completed to date Plan to survey 1200 firms  20 sectors  4 continents Web-based version of the instrument:  Initial personnel contact with CTOs, VP R&D level  Self-paced responses  Instant feedback / comparison to best performers and average

Subcommittee Name Presenter; Location, Slide 10 Major Learnings "Game" (Business Design or Strategy) is the largest determinant of organizational structure  Pioneer Entry  Battle for Architecture  Mass Customization  Engineering IP  Battlefield of Systems  Startup with IP  "Safe Journey"  Optimizing But…There exists an overlay of other factors -- Roger Miller, Montreal Polytechnic

Subcommittee Name Presenter; Location, Slide 11 Other Factors Ubiquitous IT Globalization Division of Labor (What is core and what's not) Customer Intimacy Cyclical Patterns of Centralization and Decentralization Cost Savings

Subcommittee Name Presenter; Location, Slide 12 R&D Structure Influencers

Subcommittee Name Presenter; Location, Slide 13 MINE Real Cost of Innovation  ~30% of Innovation is performed outside of the functional R&D structure in other functions (Marketing, Manufacturing, Sales, HSE, etc.

Subcommittee Name Presenter; Location, Slide 14 RTM Paper Hypothesis 1: Selection of R&D Structure is heavily influenced by “Games of Value Creation” Hypothesis 2: There are “passing trends” that affect all structures  Ubiquitous IT  Globalization  Division of Labor (What’s core and what is not)  Customer Intimacy  Cyclical Patterns of Centralization and Decentralization (e.g. Du Pont every 12 years, Raychem every 3 years). Hypothesis 3: Beyond the structure of the R&D Organization, there are capabilities and processes that contribute substantially to innovation and the cost thereof.

Subcommittee Name Presenter; Location, Slide 15 Next Steps June to November  Continue MINE survey * IRI Participation requested and essential  Present SIS at November IRI Meeting  Complete draft of RTM Article