KNOWLEDGE, INNOVATION & NEW PRODUCT DEVELOPMENT 2UZB614 Lecture-1 KNOWLEDGE, INNOVATION & NEW PRODUCT DEVELOPMENT 2UZB614 Mamurjon Rahimov and Farhod Karimov Academic year 2015-2016

Research and Development

3M’s ergonomic mouse

Outline 1. Introduction 2. Background: The management of R&D within organizations 3. R&D and the link with corporate strategy 4. R&D strategic planning 5. R&D operational activities 6. Allocating funds to R&D

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

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)

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

Definition 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.

Government incentives & priority areas Allows companies certain deductions on R&D expenditure Aim is to make firms more internationally competitive ICT Biotechnology Food sector Nanotechnology

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.

Why is R&D important? Crucial to survival Fast changing environment Continuous technology change Competition Changing consumer preferences Fundamental to “marketing” Advantage in markets come from: Understanding what markets need (MR) In case of technology – selling what is possible to make Efficient production processes

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 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

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: product development new technologies understanding of technologies in existing products technologies in manufacturing application of knowledge for commercial purpose

Classification of research

R&D operational activities Basic research - Work of a general nature intended to apply to a broad range of uses or to new knowledge about an area. Applied research - Work involving basic knowledge for the solution of a problem. Development -The application of known facts and theory to solve a particular problem through exploratory study. Technical service - Cost and performance improvements to existing products, processes or systems.

Components of R&D (1) 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 (ergonomic mouse) Moving basic research towards new products.

Components of R&D (2) Development: Focuses on products and commercializing these Several prototypes may be developed Design improvements occur Trials, modifications and improvements occur Technical service: Service support systems around existing products and processes Cost and performance improvements Modifications to specifications to improve costs Marketing considerations

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 e.g. climate change Risk analysis Capability analysis

Integrating R&D to overall business strategy 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 e.g. 3M’s discovery of temporary adhesive led to creation of Post-it notes. Broaden and deepen technological capability for long-term benefits

Extended product life cycle

Classification of new product development activities across different industries

Strategic management of research and technology

Strategic role of R&D

Evaluating research projects

What to spend on R&D? 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

For extracurricular reading… “And who would deny that the consumer demand for ever more stuff at ever cheaper prices is one of the great deterministic forces in history?”  “People like Justin Frankel and Daniel Sheldon linger on the fringe until they dream up something that has great commercial potential. Then some big company swoops in and buys them, or they give birth to the big company themselves.”  “The only thing capitalism cannot survive is stability. Stability—true stability—is an absence of progress, and a dearth of new wealth.”  “Inside every alienated hacker who thinks he stands for the “good things that ultimately don’t matter to most businesses” there is a tycoon struggling to get out.” ― Michael Lewis, Next: The Future Just Happened

Conclusion R&D is important for business R&D is supported by governments worldwide R&D should be integrated to overall business strategy Collaboration at all levels speeds up R&D.

mamurjon@gmail.com

Recommended Reading Essential Reading Recommended Reading Trott, P. (2012) Innovation Management & New Product Development. FT Prentice Hall. Recommended Reading Davis, S.M. & Moe, K. (1997). Bringing innovation to life. Journal of Consumer Marketing, 14 (5), 338-361. Kao, S-C., Wu, S-H. & Su, P-H. (2011). Which mode is better for knowledge creation? Management Decision, 49 (7), 1037-1060. Mitchell, R. & Boyle, B. (2010). Knowledge creation measurement methods. Journal of Knowledge Management, 14 (1), 62-87. Witell, L., Kristensson, P., Gustafsson, A. & Löfgren, M. (2011). Idea generation: customer co-creation versus traditional market research techniques. Journal of Service Management, 22 (2), 140-159. Yelkur, R. & Herbig, P. (1996). Global markets and the new product development process. Journal of Product and Brand Management, 5 (6), 38-47. KNOWLEDGE, INNOVATION & NEW PRODUCT DEVELOPMENT