1. Management of research and development
Chapter 8
Management of research and development

2. Structure of lecture 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

3. Nov 2007 US leads way as global R&D spending rises 10%
China and India both recorded growth of more
than 30 per cent, albeit from low bases – £766m for China and £268m for India.

4. R&D in organisations: Expenditure in 2005
$bn % sales
Ford
Pfizer
Siemens
Johnson & Johnson
Microsoft   16
GlaxoSmithKline
Samsung
Nokia

5. What is R&D?
“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)

6. Extended product life cycle
Basic
research:
scientific
suggestion,
discovery,
recognition,
new concept.
Applied research:
laboratory
verification
Development:
demonstration of
application and
product engineering
ROI
Revenue
Introduction
Growth
Maturity
Decline
Investment
Accumulated investment
Time
-12
-10 -8 -6 -4 -2 2 4 6

7. R&D expenditure (mean) across industries
Industry %
Pharmaceuticals 15
Aerospace 5
Automotive 5
Chemicals 8
Electrical and electronics 7
Food
General manufacturing 6
Computers 12
R&D as % of sales = (R&D expenditure/total sales income × 100%)
Source: UK R&D scoreboard 2001, DTI (2002). Crown copyright material is reproduced with the permission of the Controller of Her Majesty’s Stationery Office and the Queen’s Printer for Scotland

8. Classification of new product development activities across different industries
Industrial products
Pharmaceutical industry
Technological
activities
Electronics industry
Balance of
activities
White goods and
domestic appliance industries
Marketing
activities
FMCG
Food and drinks industries

9. Strategic management of research and technology
What are we trying
to do in this business?
How can R&D
contribute?
What will we
support in R&D?
What are the costs,
benefits and risks?
What can we
afford?

10. Strategic role of R&D N.B It’s the businesses R&D and that pay for it
its link with
businesses
1. R&D for existing businesses.
This will ensure the businesses are able to compete and to exploit all opportunities available to it.
3. Exploratory research.
This helps to develop
understanding of technology
that the business is using or may use.
2. Drive new businesses.
Business opportunities will
continually arise. R&D will ensure that these can be exploited.

11. R&D strategic planning means developing a technology portfolio
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

12. Classification of research
knowledge and
concepts
R&D continuum
Basic research
Applied research
Close to market
Development
Technical service
Physical
products
Product tangibility
low
high

13. R&D operational activities
Basic research
Work of a general nature intended to apply to a broad range
of uses or to new knowledge about an area.
Applied research
Work involving basic knowledge for the solution of a problem.
Development
The application of known facts and theory to solve a particular
problem through exploratory study.
Technical service
Cost and performance improvements to existing products, processes or systems.

14. Resource allocation to R&D
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

15. Key points from the lecture
R&D can be managed and is managed
Technology for today, tomorrow and the future
R&D operational activities
R&D Project evaluation

16. References
Roussel, P.A., et al. (1991) Third Generation R&D, Harvard Business School Press, Boston, MA.
Trott P (2005) Innovation Management & NPD 3rd ed., Prentice Hall.
Twiss, B. (1992) Managing Technological Innovation, Lithedin FT: Pitman publishing, London.
UK R&D scoreboard 2001, DTI (2002).