Innovation Strategy Management Lecture 13

Programme Part 1 – The basis of Innovation Part 1 – The basis of Innovation Part 2 – Innovation and New Product Development Part 2 – Innovation and New Product Development Part 3 – Innovation and Technology development Part 3 – Innovation and Technology development Part 4 – Innovation and Intellectual Property Part 4 – Innovation and Intellectual Property Part 5 – EU Green paper of Innovation Part 5 – EU Green paper of Innovation Part 6 – Innovation policies in different countries Part 6 – Innovation policies in different countries

Part 3 Innovation and Technology development

Lecture 13: Effective research and development management The changing nature of R&D management The changing nature of R&D management The acquisition of external technology The acquisition of external technology Effective R&D management Effective R&D management The link with the product innovation process The link with the product innovation process Funding R&D projects Funding R&D projects

Effective R&D management Successful technology management Successful technology management no formula for success! no formula for success!

Necessary ingredients for successful technology management: Necessary ingredients for successful technology management: the capacity to integrate functional and specialist groups for implementation of innovations the capacity to integrate functional and specialist groups for implementation of innovations continuous questioning of markets, missions and skills for the exploitation of technological opportunities continuous questioning of markets, missions and skills for the exploitation of technological opportunities a willingness to take a long-term view of technological accumulation within the firm. a willingness to take a long-term view of technological accumulation within the firm.

The changing nature of R&D management Technology explosion Technology explosion Shortening of the technology cycle Shortening of the technology cycle Globalization of technology Globalization of technology

The following areas now explicitly require involvement from the R&D department: The following areas now explicitly require involvement from the R&D department: Industry has expanded its support of university research and established numerous collaborations with university departments (Abelson, 1995). Industry has expanded its support of university research and established numerous collaborations with university departments (Abelson, 1995). Industry has increased the number of technological collaborations. R&D personnel are increasingly being involved in technology audits of potential collaborators. Industry has increased the number of technological collaborations. R&D personnel are increasingly being involved in technology audits of potential collaborators. R&D personnel are increasingly accompanying sales staff on visits to customers and component suppliers to discuss technical problems and possible product developments (Trott, 1993) R&D personnel are increasingly accompanying sales staff on visits to customers and component suppliers to discuss technical problems and possible product developments (Trott, 1993)

The acquisition and divestment of technology- based businesses have led to a further expansion of the role of R&D. Input is increasingly required in the form of an assessment of the value of the technology to the business. The acquisition and divestment of technology- based businesses have led to a further expansion of the role of R&D. Input is increasingly required in the form of an assessment of the value of the technology to the business. The expansion of industrial agreements, usually in the form of licensing, contract work and consultancy, has resulted in a new area of work for R&D. The rapid growth in knowledge- intensive service firms is clear evidence of this (Kastrions and Miles, 1995) The expansion of industrial agreements, usually in the form of licensing, contract work and consultancy, has resulted in a new area of work for R&D. The rapid growth in knowledge- intensive service firms is clear evidence of this (Kastrions and Miles, 1995)

Organizing industrial R&D Centralized laboratories Centralized laboratories Decentralized laboratories Decentralized laboratories Internal R&D market Internal R&D market

Organizing industrial R&D

The acquisition of external technology Technology/knowledge matrix Technology/knowledge matrix Level of control of technology required Level of control of technology required

Purchase know-how embodied within people and processes Explore external R&D contract possibilities Conduct internal R&D Seek possible R&D strategic alliances Purchase/licence a patent Acquisition of external technology/knowledge matrix

Technology acquisition: How much control of the technology is required?

Forms of external R&D Contract R&D Contract R&D R&D strategic alliances and joint ventures R&D strategic alliances and joint ventures R&D consortia R&D consortia

Olivetti product Olivetti product Software IMAGE Software IMAGE can manipulate: can manipulate: graphicsgraphics animationanimation photographsphotographs soundsound

Organizational characteristics that facilitate the innovation process and the managements of R&D R&D requirement Characterized by 1 Growth orientation A commitment to long-term growth rather than short- term profit 2Vigilance The ability of the organization to be aware development of opportunities 3 Commitment to technology The willingness to invest un the long-term development of technology 4 Acceptance of risks The willingness to include risky opportunities in a balanced portfolio 5 Cross-functional cooperation Mutual respect among individuals and willingness to work together across functions

R&D requirement Characterized by 6Receptivity The ability to be aware of, to identify and to take effective advantage of externally developed technology 7Slack An ability to manage the innovation dilemma and provide room for creativity 8 Awareness of business strategy High degree of awareness of corporate objectives 9 Project management Good project management skills and systems 10 Market orientation An awareness of the needs and changing nature of the market 11 Diverse range of skills A combination of specialization and diversity of knowledge and skills

Managing scientific freedom within an R&D function

Research project outcomes

The link with the product innovation process The R&D function will be continually consulted on virtually all aspects of the product, including: The R&D function will be continually consulted on virtually all aspects of the product, including: design design manufacturing manufacturing choice of materials to be used choice of materials to be used required shelf life required shelf life effects of transportation effects of transportation intellectual property rights intellectual property rights product safety, etc. product safety, etc.

The effect of R&D investment on products Development of existing products Development of existing products Early introduction of a new product Early introduction of a new product Late introduction of a new product Late introduction of a new product Long-term projects Long-term projects

Funding R&D projects Setting the R&D budget Setting the R&D budget Inter-firm comparisons Inter-firm comparisons A fixed relationship to turnover A fixed relationship to turnover A fixed relationships to profits A fixed relationships to profits Reference to previous levels of expenditure Reference to previous levels of expenditure Costing of an agreed programme Costing of an agreed programme Internal customer-contractor relationship Internal customer-contractor relationship

Comparison of R&D expenditure within the European chemical industry Company R&D expenditure as % of sales Novartis (Switzerland) 10 Hoechst (Germany) 18 Bayer (Germany) 19 Rhone-Poulenc (France) 14 BASF (Germany) 25

Evaluating R&D hard to do hard to do lot of mistakes lot of mistakes

The product development process in the pharmaceutical industry

Pharmaceutical R&D expenditure by type