STRATEGIC STRATEGIC PERSPECTIVES OF R&D PERSPECTIVES OF R&D

INVESTMENTINVESTMENT

A.S.Rao, asrao@alpha.nic.inA.S.Rao, asrao@alpha.nic.inScientist “G”Scientist “G”

Department of Scientific and Industrial Department of Scientific and Industrial ResearchResearch

overviewoverview• Technological environment• Exciting new options• Strategy theory• Re look at Strategic options• Illustrations• Conclusions

Technological environmentTechnological environment• Globalisation• Time compression• Technology life cycle• Technology integration

GlobalisationGlobalisation

• Spread of manufacturing/ service/ R&D facilities- China- manufacturing hub, India-ITES

• Implications : improvements can come from anywhere. Track technology developers and facilitators on a global scale.

• Competition: Telecom equipment-China, IT product/IP-Israel, Auto components-Thailand, Small aircraft-Brazil, Animation-Philippines, Ready made garments-???

Time compressionTime compression• Higher resource allocation to technology

development-more players, bigger budgets

• Shortening of development time• Shortening of product life cycle• Shorter payback period demanded by

capital market• Implications- larger amounts needed for

speedy development and even larger efforts needed to recover costs quickly.

Technology integrationTechnology integration• Combine technologies to develop

new product – strategic alliances

• Combine technologies to commercialize a product

- access to complementary assets

ALLIANCES BETWEEN ALLIANCES BETWEEN COMPETITORSCOMPETITORS

Alliances forged by rival firms can take on 3 different forms .

• Complementary -GM-Toyota NUMI, • Shared-supply-PRC V6 engine

Renault -VW • Quasi-concentration- Airbus

New optionsNew options• Living without collaborator• Reversing the dependency• Entering early stage of TLC• Forming Strategic Alliance

Strategy theoryStrategy theory-------------------------------------------------------------------SIGNALS ABOUTTHREATS ANDOPPORTUNITIES IN THE ENVIRONMENT

(What could we do?)

WINDOW OF STRATEGIC OPTIONS

SITUATIONAL ANALYSIS

WINDOW OF STRATEGIC OPTIONS (DESIRED)

STRATEGIC OPTIONS (AVAILBLE)

INVESTMENT IN DEVELOPING OPTIONS

STRATEGICCHOICE

ExamplesExamples

• TVS-Suzuki• Xerox-Fuji Xerox• Early stage TLC• Strategic Alliances

TVS-SuzukiTVS-Suzuki• Collaborator not supportive of Indian

firms’ desire to export in his name and introduce new models

• Option- go alone• Option was available because of prior

investment made in developing manufacturing and design capabilities

Fuji XeroxFuji Xerox• Collaborator not considering him as

equal• Option: prove he is equal if not better,

developed small size photocopiers, receives more royalty in reverse direction

• Option was available because of investment made in technology absorption

Early stage TLCEarly stage TLC• Advantages of entering TLC at

growth stage as against Maturity stage: more time to make money, use technology as differentiator.

• Prerequisites: Capability to bring out product innovations

• Option available only to those that invested in deign and development

Strategic alliancesStrategic alliances• Many firms collaborating with

competitors to manage technology integration : Sony-Erickson

• Prerequisite : ownership of complementary capabilities

• Option available only to those players that occupied critical patent spaces.

ConclusionConclusion• Strategic analysis, Environment

analysis sensitizes management of the opportunities and threats but awareness does not in itself bring a solution. It is not uncommon to find Indian companies having good grasp of the opportunities and threats to their business, but are unable to do anything to change the course, as they practically have no choice.

• Strategic choice is the fruition of prior investment made in R&D