Managing Research and Development

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

Corporate InnovationStrategic Processes

• Induced Processes– From Strategy and External

Environment– Incremental Innovation– Develop Strong Product and Process

Development Capabilities– Commitment to R&D Investments

Corporate InnovationStrategic Processes

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

CORPORATE RESEARCHKey Questions and Issues• What Is It?

• Why Do It?

• How Do You Control It ?

• Lessons Learned

Corporate ResearchWhat is it?

“Plant the trees so others cansome day sit in the shade”

• Long-term

• Top Management Driven

• Independent of Business Units

Corporate ResearchWhat is it?

• Small, yet important– 10-15% of total R&D Budget

• Basic or Applied Research– Never Developmental– High Risk or Exploratory

Corporate ResearchHistory

• 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

Corporate ResearchWhy?

• Build Knowledge Base• High Uncertainty• Long Lead Times• Lack of Near-Term Returns

Difficult Fit with Operating UnitsDifficult to Measure Its Success

Corporate Research - Functions

• Research Charter– Innovation

• Improve Current technologies• Discover New Technologies

– Threat/Opportunity Identification– Personnel Recruitment/Development– Technology Transfer

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

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”

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

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

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

Corporate ResearchManaging 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

Technical Personnel vs.Business Personnel

• Work Environment– Structure– Methods– Work and Time Pressures

• Professional Orientation– Operating Assumptions– Goals– Performance Criteria

Technical Personnel vs.Business Personnel

• Educational Background• Experience• Career Objectives• “Identification”

Corporate ResearchLessons 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

Corporate Entrepreneurship

New Venture Divisions

• NVD - Operating Division Interface Problems

• NVD - Corporate Management Interface Problems

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

Corporate Entrepreneurship

Other Design Alternatives• Direct Integration

• New Product Department• Special Business Units• Micro NV Department• Independent Business Units• Contracting / Nurturing• Spin-Off