Managing RND

Definitions
RESEARCH?
…the systematic approach to the discovery of new
knowledge…
-academics-
DEVELOPMENT?
…a continuum activities with scientific knowledge
and concepts directed toward the production of
useful materials, devices, systems or methods,
including design and development of prototype and
process...
-industry-
Classification of R&D
The main activities in Industrial R&D:

Discovering & develop new technologies.
Improving understanding of technology in existing
products.
Improving and strengthening understanding of
technologies used in manufacturing.
Understanding research results from universities & other
institutions.
Classification of R&D
…R&D can be viewed as two sides of the same coin…
1st side – research activities (basic research)
2nd side – development of products (applied research)

R&D Management
…each company and every competitive environment is

unique and in its own state of change…
…R&D need to be managed according the specific

heritage and resources of the company in its competitive
industry…
Fundamental dilemma
…the need to provide an environment that fosters

creativity, at the same time providing a stable
environment of the business…
Why R&D becomes necessary?
Globalization R&D Competitiveness
…Introduction of new products provides a clear basis

on which to compete…
What make companies worry to invest in R&D ?
- Where precisely to invest?

- Which projects and technology to invest?
- When to stop pouring money into a project
that look likely to fail but could yet deliver
enormous profits?
R&D Investment and company success
…has increased by an average 23% from 1991 to

2002…
-global scale-
Reason
…new products can provide a huge competitive advantage…
Relationship with Business Strategy
…the R&D function has to make some assessment of the
future…
…conscious view of the future:

Environmental forecasts (competitor & technology)
Comparative technological cost-effectiveness (life cycle)
Risk (organization culture)
Capability analysis (strengths & weaknesses)
Two simple questions…
1- What are the aims of the business?
2- How can R&D contribute?

Example: UNILEVER CO.
Business aim:
To strengthen company position in the luxury perfume
business.
Business strategy:
R&D projects being placed by buying brands (e.g.
Calvin Klein)
Technology Leverage and R&D Strategies
Amount of research effort to be undertaken depends

on the state of business in terms of markets, products
and capabilities.
Survival
Competitiveness
Technology Mastery
Break the mould

Types of
R&D
R&D for R&D for

maintenance growth
Technology Break the

Survival Competitiveness
Mastery mould
1- Survival
- roles of problem solving
- research on process or product
2- Competitiveness
- research on product improvement and process
improvement
- Amount of R&D for high-technology is higher than
R&D for low-technology
- e.g. automotive industry
3- Technology Mastery
- research on technological developments
- higher R&D expenditure
4- Break the mould

- developing new patentable technology.
- involve a higher level of basic scientific research
Case study
FUJIFILM vs KODAK
Setting the R&D Budget
Basic concept of R&D
…enable profits from today’s successful businesses to

be invested into what the company hopes will
become the profitable businesses of tomorrow…
Setting the R&D Budget
…should consider spending between 10% ad 25% of

sales on R&D…
…R&D expenditure can be based on a constant

percentage. Turnover provides a stable figure that
grow in line with the size of the company.
Estimating R&D expenditure
…large organization with more resources can clearly

afford to invest more in R&D than their smaller
counterparts…
R&D as % of sales = (R&D expenditure/total sales income)x 100%

R&D expenditure
Industry sector R&D expenditure as % of sales
Pharmaceutical & biotechnology 14.9
Software & computer 10.4

Technical hardware 8.2
Leisure goods 7.0
Electrical & electronics 4.8
Aerospace & defence 4.6
Automotive & parts 4.2
Chemicals 3.2
Industrial engineering 2.7
Food producers 1.7

Managing RND

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Definitions

The main activities in Industrial R&D:

1st side – research activities (basic research)

2nd side – development of products (applied research)

…each company and every competitive environment is

…R&D need to be managed according the specific

…the need to provide an environment that fosters

Globalization R&D Competitiveness

…Introduction of new products provides a clear basis

- Where precisely to invest?

…has increased by an average 23% from 1991 to

…conscious view of the future:

Two simple questions…

1- What are the aims of the business?

2- How can R&D contribute?

Example: UNILEVER CO.

Amount of research effort to be undertaken depends

Break the mould

R&D for R&D for

Technology Break the

4- Break the mould

Basic concept of R&D

…enable profits from today’s successful businesses to

…should consider spending between 10% ad 25% of

…R&D expenditure can be based on a constant

…large organization with more resources can clearly

R&D as % of sales = (R&D expenditure/total sales income)x 100%

Industry sector R&D expenditure as % of sales

Pharmaceutical & biotechnology 14.9

Software & computer 10.4

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