Objectives of R&D R&D in an Individual Enterprise

Course Topics Why do firms undertake R&D? What are strategic objectives of R&D in business? Why is it necessary to manage R&D? 2

Why Do Firms Undertake R&D 1 Supporting existing business activities Developing new businesses 3

Why Do Firms Undertake R&D 2 Selling R&D services to other companies Providing the skills to ‘reverse engineering’ Helping to predict future trends in technology development Complying with social and political expectations 4

Why Do Firms Undertake R&D 3 Participating in research networks Portraying a positive corporate image Creating future options through new knowledge and technology 5

Broadening and deepening technological capabilities The strategic objectives of R&D Driving new business Defending, supporting, and expanding existing business 6

Strategic Objectives of R&D 1 Defending, supporting, and expanding existing business Modifying products to improve customer acceptance or adapting them to different market standards or regulations Using different or new materials or improvements in processes Dealing with safety considerations and environ- mental compliance Developing new products and processes to improve the competitive position 7

Strategic Objectives of R&D 2 Driving new business Providing opportunities for new businesses, using existing or new technologies The new business may be new for the company or new to the world The new technology may be new to the company or new to the world 8

Strategic Objectives of R&D 3 Broadening and deepening the company’s technological capabilities Concerns both the existing business and new businesses Taking into consideration the perceived opportunity and the company’s competitive position 9

Mission of R&D and the Stages of the Industry Cycle 10

Mission of R&D and the Stages of the Industry Cycle 11 Industry Maturity EmbryonicGrowth MatureAging Mission of R&D?

Mission of R&D and the Stages of the Industry Cycle 12 Industry Maturity EmbryonicGrowth MatureAging Launching a new business Establishing a competitive position Growing the new business Improving the competitive position Sustaining the competitive position Abandon ? Renew?

Mission of R&D 1 Embryonic stage – Demonstrating the validity of the product concept – Establishing the viability of the manufacturing process – Establishing and defending the company’s intellectual property 13

Mission of R&D 2 Growth stage – Extending the range of products and applications – Enlarging the application potential of the existing products 14

Mission of R&D 3 Mature stage – Extending the differentiation potential of products – Focusing on cost reduction – Rejuvenating the business 15

Mission of R&D 4A Aging stage – Classical approach: safeguarding profitability cost reduction providing customer support 16

Mission of R&D 4B Aging stage – Renewing the products – Renewing the manufacturing technology – Driving competitors out of business rather than be driven out 17

Wants of General Management Concerning R&D? 1 Benefits at the same time in many fronts – Supporting existing businesses – Launching new businesses – Deepening and broadening technological capabilities High rewards with minimum risks, and as fast as possible Resource allocations to R&D always limited 18

Wants of General Management Concerning R&D? 2 Higher risks and longer waiting times accepted only under tight conditions, which include – expected results are radical – rewards are in proportion to the risks – danger of competitors getting the results first is low enough 19

Tensions Concerning R&D 1 Wants of General Management Favorable risk-reward situation Timely results Results that serve business purposes Resource Constraints Limited finances Limited time Limited talent Basic uncertainty of outcomes 20

Tensions Concerning R&D 2 Managementspeak ”R&D does not understand business” ”Researchers are uncontrollable” ”According to R&D, results are always round the corner” Researchspeak ”Targeting kills motivation” ”Administration hinders creativity” ”Breakthroughs can not be forecasted” 21

Additional Constraints in Managing R&D Resources In the short term, the quality and quantity of resources within the company Lack of mobility of people and funds across organizational boundaries Policies concerning ”making” instead of ”buying” 22

Background Orientation of General Managers Business managers have limited familiarity with technology and R&D CEOs more often have their back-ground in marketing or finance than in engineering or science Difficult to balance between creativity and directive management 23

If emphasis is on directive management “You may kill the goose that laid the golden egg.” 24

”How can we reduce tensions between the wants of general management and the resource constraints?” 25

“How can we bridge the gap between the world of R&D and the world of business?” 26

Thank you! Acknowledgements Main source: Roussel, P.A. & Saad, K. N. & Erickson, T. J. (1991) Third Generation R&D: Managing the Link to Corporate Strategy, Boston, Massachusetts, USA, Harvard Business School Press, 192 pages. 27