Indrajeet kumar 02Gaurav kumar 04Karanveer singh 08Nitish kumar 30Deepak saraf 44

RESEARCH & DEVELOPMENT

Introduction Background: The management of R&D within organisations R&D and the link with corporate strategy R&D strategic planning R&D operational activities Allocating funds to R&D Summary and recap

STRUCTURE

“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)

WHAT IS R&D?

Critical for marketing Competition has made R&D importantConsumers 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

R&D IN BUSINESS

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.

CONT…

Research = basic experimental research

Eg identification of possible chemical compounds

Theoretical mechanisms Universities

Development = exploitation of discoveries Mainly private sector Proof of concept Safety testing (eg drugs) Delivery mechanism (eg how to administer a drug)

R & D IN PHARMACEUTICALS

Crucial to survival Fast changing environmentContinuous technology change Competition Changing consumer preferences Fundamental to “marketing” Advantage is markets come from:

Understanding what markets need (MR) In case of technology - selling what is possible to make Efficient production processes

WHY IS R&D IMPORTANT?

CLASSIFICATION OF RESEARCH

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 Moving basic research towards new products eg Dyson vacuum

cleaner

COMPONENTS OF R&D

Development: Focuses on products and commercialising 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

COMPONENTS OF R&D

Companies Governments eg CSIRO Universities Future oriented Long-term activities

WHO ARE THE KEY PLAYERS?

More about application of old science and new science to produce new products

R&D is continuous process, difficult to define start and end times

Measure outcomes in terms of new products Large proportion of R&D in industry is technology based The diversity of technology means no one firm can gain

expertise in all areas. So there is greater reliance on alliances

R&D IN INDUSTRY

About gaining competitive advantage Technical developments in industries such as chemical,

electronics, auto, pharmaceuticals, was responsible for economic growth of nations

R&D was seems as 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

TRADITIONAL R&D

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

UNIVERSITY VS. INDUSTRY RESEARCH

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 eg climate change Risk analysis Capability analysis

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 eg 3M’s discovery of temporary adhesive led to creation of Post-it notes.

Broaden and deepen technological capability for long-term benefits

INTEGRATING R&D TO OVERALL BUSINESS STRATEGY

EXTENDED PRODUCT LIFE CYCLE

R&D EXPENDITURE (MEAN) ACROSS INDUSTRIES

R & D I N O R G A N I Z A T I O N S : E X P E N D I T U R E( I N 2 0 0 5 )

CLASSIFICATION OF NEW PRODUCT DEVELOPMENT (DIFFERENT INDUSTRIES)

STRATEGIC MANAGEMENT OF RESEARCH & TECHNOLOGY

STRATEGIC ROLE OF R&D

• Core technologies Central to all or most of the company’s products

Complementary technologies Additional technologies

Peripheral technologies Whose application contributes to the business

Emerging technologies Long-term significance

R & D S T R AT E G I C P L A N N I N G M E A N S D E V E L O P I N G A T E C H N O L O G Y P O R T F O L I O

Core: central to most if not all products of company. Eg photographic technologies are core to the photocopying industry

Complementary: eg microprocessor technology and paper-handling technology in photocopying (lifting, turning, stapling etc)

Peripheral: eg computer software. The photocopying industry is using software to add features and benefits to its products, eg security, emailing etc

Emerging: In photocopying more use of telecommunications as standard features, pdf

TYPES OF TECHNOLOGY

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

WHAT TO SPEND ON R&D?

R&D can be managed and is managed Technology for today, tomorrow and the future R&D operational activities R&D Project evaluation

KEY POINTS

What It Is: Research and development (R&D)  aims to create new

technology or information that can improve the eff ectiveness of products or make the production of products more effi cient.

How It Works/Example: Let's say company XYZ is a pharmaceutical company that

produces pain relieving medication. XYZ has several competitors, so the effi cient production of medication is essential for it to maintain or expand its share in the market. In order to continue to produce eff ective medication, XYZ needs to allocate much of its resources, both fi nancial and human, to the development of more eff ective pain relieving medication. Use of these resources is called research and development.

R & D: AN EXAMPLE

Research and development is more important to some companies than to others.  For example, a computer software company would spend much more on R&D than a retail sales company would. Technology companies survive by developing more eff ective technology than their competitors. A company like Apple (Nasdaq: AAPL) has many employees that work in R&D because Apple competes in its market by fi rst developing and then releasing devices that are better and more appealing than ones created by competitors.

WHY R & D MATTERS

Research and development especially aff ects investors in technology or pharmaceutical companies. Since Revenue is generated by selling products that depend on being more useful and more advanced than similar products sold by competitors, development of revolutionary technology can drastically increase the value of invetments in that particular company. Therefore, investors need to pay attention to research and development news, because the discovery and development of better technology begins with having a successful R&D department.

CONTD…

• The case outlines the research and development behind the Ford Figo- small car. The case unfolds the steps taken by Ford to identify the target customer, decide the features of Ford Figo to meet the needs of target customer. 

• Ford conducted marketing research to understand Indian customer for its new product Figo. However, the challenge before Ford was how to launch and market Figo in the highly competitive Indian small car market.

F O R D F I G O : E X A M P L E

Understand issues and challenges in launching a new product. 

Study the multi-pronged introduction strategy of Figo.

Understand various issues and challenges in target marketing.

Analyze Figo's marketing strategies and explore ways in which the marketing should be evolved to keep the brand relevant to the target audience.

ISSUES TO BE UNDERSTOOD

Development of new products The primary function of the R&D department is to

develop new products, which are essential if the company is to generate profi ts in the medium and long term. All products have a finite commercial life and this is particularly true in the microelectronics sector, where new technological developments are occurring continuously.

R & D D E PA RT M E N T F U N C T I O N S

Maintenance of existing products Existing products must be maintained to ensure that

they can be produced to specification. For example, a component required for an existing product may become obsolete. When this happens R&D are expected to find an alternative quickly so that production of the product will not be delayed.

A serious example of a product maintenance problem is when a key component is discontinued, such as a microprocessor, which may result in a complete software rewrite and electronic hardware redesign.

Enhancement of existing products The commercial life of a product may be increased

by enhancing it in some way, giving it extra features, improving its performance, changing its appearance, or making it cheaper to produce, etc.

Many companies enhance their products- it can keep their product ahead of the competition and spreads the large capital outlay associated with developing products over a longer period.

Interfacing with production • While a new product is being developed,

development staff and production staff interact to ensure that the product is manufacturable. The intention is to ensure low cost production and short production times, while maintaining quality standards.

• The R&D - Production interface is vital- not only does it ensure low production costs, but by reducing production times it should be possible to increase output and therefore income, on a monthly basis.

Technical aspects of regulatory compliance It is a legal requirement that products used in the

Community must comply with the relevant Directives. The R&D department is primarily responsible for ensuring that this is the case, but senior management are liable to fines and/or prison sentences for serious cases of non-compliance.

Electromagnetic compatibility (EMC) is a major consideration when designing new, electronically based products.

Quality• A product quality plan is produced for new products

as they are developed, principally by R&D and the quality department. However, if the product is being developed for an external customer, the customer's quality department must also be heavily involved. The quality plan may allow the customer to return a whole batch of products as a result of a small number of samples failing the customer's quality tests.

Typical R&D functions that we have described are:- Development of New Products- usually the primary

function of R&D Product Maintenance- probably the most important

secondary function of R&D- short term income is important

Product Enhancement - helps keep the company products ahead of the competition and extends the life of products

Regulatory Compliance- a legal requirement- products sold in the European Community must carry the CE mark

The Quality R&D Interface- quality is a major issue and R&D are heavily involved in ensuring new products attain the required levels of quality

The R&D structure we have outlined is typical of an SME- job descriptions help to defi ne the structure of a department eff ectively.

SUMMARY

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

BEST PRACTICE IN INNOVATION

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.

INNOVATION IN CONSUMER GOODS FIRMS

requires special skillscovers issues ranging from technical matters to

management techniques and overall business environment

Management of R&D projects requires attention to the following

Performance Timing Cost Personnel

MANAGING & MONITORING OF R&D

Corporate research and development is the principal corporate asset for long term technological competitiveness.

Corporate research activities can be classified by the purpose of research:To support current businessesTo provide new business venturesTo explore possible new technologies

CORPORATE R&D

Extending product life cycle – through improvements in production processes,

lowering production costs, increasing market share, profi t margins, etc.

OBJECTIVES OF CORPORATE RESEARCH

R&D projects tend to go through the following stages:Basic Research & InventionApplied research and functional prototype Engineering prototype and testingProduction prototype and pilot productionProduct testing and modification Initial production and sales

Stages a, b and c are usually called ‘Research’ while stages d to f are called ‘development’

R & D PROCESS

Technology generation involvesMonitoring and evaluation of R&D projects, Funding of R&D, Training & Development of resource personnelInteractions at all levels, Management policies and support, Availability of support structures and incentives at

government level, Timely collection and interpretation of technical and other

information, etc.

TECHNOLOGY GENERATION

TECHNOLOGY DEVELOPMENT

managed and headed by a well-qualified and experienced chief/head directly reporting to the top management

this unit has to have very close contact/interaction with other departments within the company

strength and facilities in the inhouse R&D deptt. would depend upon the technology policy of the company

IN-HOUSE R&D

A group of companies in a particular industrial sector promotes an R&D center as a society or a non-profi t making company

expenses are met from the contributions of the participating companies (as a fixed percentage of their turnover) as well as grants from the govts

more suitable for projects, which are not of secretive nature

COOPERATIVE R&D

A company may collaborate with another company in areas of common interest

collaborative R&D eff orts are becoming common in developed countries mainly due to high costs and shorter technology life cycles

A fi rm may also collaborate with public or private funded R&D organization on a case-to-case basis where R&D results are shared mutually and so are the expenses

R&D COLLABORATION

Large corporations or industrial houses may set up independent research societies

Suitable for broad interests of the promoting companies in line with national interests

Govt. extends several concessions for such societies and provides several tax concessions and fiscal incentives

Cancer drugs, AIDS vaccines, Bird-flu vaccines, MAIT, NASSCOM, Centre for Science & Environment, etc

RESEARCH SOCIETIES

Large corporations of technoprenuers may promote research companies, specifically for conducting research and development

The development costs and reasonable profi ts are recovered from the sale and transfer of technologies

Very common is US and other developed countries but is yet to gain recognition in developing countries

Inputs in R&D organizationsTraditional Inputs - money, materials, manpower, facilities,

energy and managementIntelligence-Based Inputs - science, knowledge, skills,

information and existing technologies

RESEARCH COMPANIES

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