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Research and development

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management of R&D within organizations, link with corporate strategy and strategic planning, operational activities.

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Research and development

  1. 1. RESEARCH & DEVELOPMENT Indrajeet kumar Gaurav kumar Karanveer singh Nitish kumar Deepak saraf 02 04 08 30 44
  2. 2. STRUCTURE         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. 3. 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)
  4. 4. R&D IN BUSINESS     Critical for marketing Competition has made R&D important Consumers 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
  5. 5. CONT…  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.
  6. 6. R & D IN PHARMACEUTICALS 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)
  7. 7. WHY IS R&D IMPORTANT?        Crucial to survival Fast changing environment Continuous 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
  8. 8. CLASSIFICATION OF RESEARCH
  9. 9. COMPONENTS OF R&D  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
  10. 10. 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
  11. 11. WHO ARE THE KEY PLAYERS?      Companies Governments eg CSIRO Universities Future oriented Long-term activities
  12. 12. R&D IN INDUSTRY  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
  13. 13. TRADITIONAL R&D  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
  14. 14. UNIVERSITY VS. INDUSTRY RESEARCH  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
  15. 15. BUSINESS STRATEGY  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
  16. 16. I N T E G RATING R& D TO OVE RA LL BUSI N E SS ST R AT EG Y  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
  17. 17. EXTENDED PRODUCT LIFE CYCLE
  18. 18. R&D EXPENDITURE (MEAN) ACROSS INDUSTRIES
  19. 19. R&D IN ORGANIZATIONS: EXPENDITURE ( IN 2 0 0 5 )
  20. 20. C L ASSIF IC AT ION O F N EW PR O D U C T D EVEL O PM EN T ( D IF F ER EN T IN D U ST R IES)
  21. 21. STR ATEG IC MAN AG EMEN T OF R ESEAR C H & TEC H N OL OGY
  22. 22. STRATEGIC ROLE OF R&D
  23. 23. 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
  24. 24. TYPES OF TECHNOLOGY  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
  25. 25. WHAT TO SPEND ON 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
  26. 26. KEY POINTS     R&D can be managed and is managed Technology for today, tomorrow and the future R&D operational activities R&D Project evaluation
  27. 27. R & D: AN EXAMPLE What It Is:  Research and development (R&D) aims to create new technology or information that can improve the effectiveness of products or make the production of products more efficient. How It Works/Example:  Let's say company XYZ is a pharmaceutical company that produces pain relieving medication. XYZ has several competitors, so the efficient production of medication is essential for it to maintain or expand its share in the market. In order to continue to produce effective medication, XYZ needs to allocate much of its resources, both financial and human, to the development of more effective pain relieving medication. Use of these resources is called research and development.
  28. 28. WHY R & D MATTERS  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 ef fective 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 first developing and then releasing devices that are better and more appealing than ones created by competitors.
  29. 29. CONTD…  Research and development especially af fects 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.
  30. 30. FORD FIGO :EXAMPLE • 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.
  31. 31. ISSUES TO BE UNDERSTOOD  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.
  32. 32. R&D DEPARTMENT FUNCTIONS  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 profits 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.
  33. 33.  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.
  34. 34.  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.
  35. 35.  Interfacing with production • While a new product is being developed, development staf f and production staf f 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.
  36. 36.  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.
  37. 37.  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.
  38. 38. SUMMARY 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 define the structure of a department effectively.
  39. 39. BEST PRACTICE IN INNOVATION  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
  40. 40. INNOVATION IN CONSUMER GOODS FIRMS  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.
  41. 41. MANAGING & MONITORING OF R&D  requires special skills  covers 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
  42. 42. CORPORATE 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 businesses To provide new business ventures To explore possible new technologies
  43. 43. OBJECTIVES OF CORPORATE RESEARCH  Extending product life cycle – through improvements in production processes,  lowering production costs,  increasing market share,  profit margins, etc.
  44. 44. R & D PROCESS R&D projects tend to go through the following stages:  Basic Research & Invention  Applied research and functional prototype  Engineering prototype and testing  Production prototype and pilot production  Product testing and modification  Initial production and sales Stages a, b and c are usually called ‘Research’ while stages d to f are called ‘development’
  45. 45. TECHNOLOGY GENERATION Technology generation involves Monitoring and evaluation of R&D projects, Funding of R&D, Training & Development of resource personnel Interactions 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.
  46. 46. TECHNOLOGY DEVELOPMENT
  47. 47. IN-HOUSE R&D  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
  48. 48. COOPERATIVE R&D  A group of companies in a particular industrial sector promotes an R&D center as a society or a non -profit 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
  49. 49. R&D COLLABORATION  A company may collaborate with another company in areas of common interest  collaborative R&D ef forts are becoming common in developed countries mainly due to high costs and shorter technology life cycles  A firm 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
  50. 50. RESEARCH SOCIETIES  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
  51. 51. RESEARCH COMPANIES  Large corporations of technoprenuers may promote research companies, specifically for conducting research and development  The development costs and reasonable profits 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 organizations Traditional Inputs - money, materials, manpower, facilities, energy and management Intelligence-Based Inputs - science, knowledge, skills, information and existing technologies

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