1. EVALUATING R&D PROJECTS

4. Table 9.3 R&D project evaluation criteria
Source: Adapted from Seiler, R.E. (1965) Improving the Effectiveness of Research and Development: Special Report to Management, McGraw-Hill Book Company, New York. © The McGraw-Hill Companies, Inc.

5. Evaluation methods
COOPER (2001) identifies three broad categories of screening methods:
Benefit measurement models
Economic models
Portfolio selection models

6. Benefit measurement models are usually derived from a group of well informed and experienced managers identifying variables and then making subjectyive assessment of projects.
Frequently these variables are brought together in the form of quantitative or qualitative model that will provide the organisation with a value with which to make comparisons of projects.

7. Financial / economic models are the most popular project selection tool.
How ever it is generally accepted as having considerable limitations.
This is partly because of the emphasis on financial formulas and their inherent short term bias.
Another limitation of financial models is limited accurate future financial data, which inevitably leads to inaccurate estimates of future revenues, etc.

8. Portfolio selection models attempt to find those ideas that ‘fit’ with the business strategy and attempt to balance the product portfolio. They consider a business’s entire set of projects rather than viewing new research projects in isolation.
The dimension of balance can be :
Newness – how new is the project likely to be ?
Time of Introduction – is the new product portfolio going to deliver a constant stream or will it be a case of feast and then famine?
Markets – are the different markets and business areas of the company receiving resources proportionate to their size and importance?