1. Managing Research and Development

2. Overview Two Processes in Corporate Innovation Corporate Research –Why, what, history Functions of Corporate Research Location of R&D Managing R&D at Different Levels

3. Corporate Innovation Strategic Processes Induced Processes –From Strategy and External Environment –Incremental Innovation –Develop Strong Product and Process Development Capabilities –Commitment to R&D Investments

4. Corporate Innovation Strategic Processes Autonomous Processes –Outside Scope of Current Strategy –Changes Firm’s Strategic Concept –Radical, Unexpected, Serendipitous –Explore Potential Growth Areas –Internal Entrepeneurship

5. CORPORATE RESEARCH Key Questions and Issues What Is It? Why Do It? How Do You Control It ? Lessons Learned

6. Corporate Research What is it? “Plant the trees so others can some day sit in the shade” Long-term Top Management Driven Independent of Business Units

7. Corporate Research What is it? Small, yet important –10-15% of total R&D Budget Basic or Applied Research –Never Developmental –High Risk or Exploratory

8. Corporate Research History Relatively New Rapid Growth after WWII Significant Growth in 50s - mid 60s Reduced Investment (late 60s - 70s) –Emphasis on Financial Control Back in Favor Today

9. Corporate Research Why? Build Knowledge Base High Uncertainty Long Lead Times Lack of Near-Term Returns Difficult Fit with Operating Units Difficult to Measure Its Success

10. Corporate Research - Functions Research Charter –Innovation Improve Current technologies Discover New Technologies –Threat/Opportunity Identification –Personnel Recruitment/Development –Technology Transfer

11. Corporate Research - Functions Technological Planning –Project Into the Future and New Strategic Direction –Consider Both Business Importance and Technical Opportunity –Link Research Management to Corporate Planning –Jointly Performed by Lab Staff and Operating Units

12. Corporate Research How to Control Corporate Supervision –Strategic, not Tactical –Top Mgmt Control/Operating Mgmt Input Measures of Merit –Return on Investment (ROI) –Value of Previous Research –Future Value of Current Research –“Cutting Edge”

13. Locating R&D - Characteristics Corporate –Long time horizon (10 yrs~) –Weak internal linkage –Strong external linkage –Projects are relatively cheap Divisional unit (5 yrs) Business unit –Short time horizon (2-3 yrs) –Fast learning feedback –Strong internal linkage –Projects are relatively expensive

14. Locating R&D - A Rule of Thumb R&D supporting existing business (products, processes, divisions) should be located in established divisions R&D supporting new businesses should be initially located in central lab, then transferred to divisions for exploitation

15. R&D Centralization or Decentralization? The firm’s major technological trajectory –Need basic advance or improvement in process and product? The degree of maturity of the technology –During incubation stage better to isolate from commercial pressure Corporate strategic style –Market or technology-driven strategy

16. Corporate Research Managing Key Interfaces Corporate Research - Divisional R&D –Differing Orientations (Long-term Vs. Short-term) –Geographical Proximity Needs To Be Considered for Better Communication Corporate Research - Business Research –Scientific Method, Time Frames –Serendipity vs. Planning –Background, Interests

17. Technical Personnel vs. Business Personnel Work Environment –Structure –Methods –Work and Time Pressures Professional Orientation –Operating Assumptions –Goals –Performance Criteria

18. Technical Personnel vs. Business Personnel Educational Background Experience Career Objectives “Identification”

19. Corporate Research Lessons Learned Commitment of Resources Over the Long Haul Take No Product Life Cycle Projection at Face Value Beware of “Not Invented Here” (NIH) Maintain Balance in Research Portfolio Flexibility is Key

20. Corporate Entrepreneurship New Venture Divisions NVD - Operating Division Interface Problems NVD - Corporate Management Interface Problems

21. Corporate Entrepreneurship Design Factors Degree of autonomy Nature of task Life length of venture Expected return Basically, NVD should be folded into the existing structure of organization

22. Corporate Entrepreneurship Other Design Alternatives Direct Integration New Product Department Special Business Units Micro NV Department Independent Business Units Contracting / Nurturing Spin-Off