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Topic 10
MANAGING R&D PROJECTS
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Objectives
Definition of R&D
Importance of R&D
R&D features in the industry
Investment in R&D
R&D expenditure
R&D emphasis in industry and university
Forms of R&D activity
Setting R&D Budget
What is R&D? 3
Is the purposeful and systematic use of scientific
knowledge to improve man’s lot (Man’s quality of
life), even though some of its manifestations do not
meet with universal approval (e.g. cloning).
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Importance of R&D
Crucial to survival
Continuous technology change
Competition
Changing consumer preferences
Fundamental to marketing
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R&D Features in Industry
Application of old and new science to produce new products.
R&D is a continuous process.
Outcome is measured 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 in
preforming R&D projects.
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Investment in R&D
Research and development activity costs a large percentage of the
company's funds in all sectors because companies realize that new
products can provide a competitive advantage.
Itis not only how much companies spend on research and
development that determine success, what really matters is how
those research and development funds are invested in:
capabilities, talent, and process and tools. However, a budget is
needed.
R&D Expenditure across the World 7
(continued)
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R&D Expenditure across the World
R&D Expenditure across Industry 9
Sectors
R&D Expenditure within European 10
Pharmaceutical Industry
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List of Countries by R&D Spending
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untries_by_research_and_development_s
pending
Research Emphasis in Industry and 12
University
Research Emphasis in Industry and 13
University (continued)
Basic research :
This activity involves work intended to produce new
knowledge about an area.
Usually conducted in by universities and large organizations.
Output from this activity will result in scientific papers for
journals.
Some findings may be developed in further to produce new
products or technologies (e.g. Penicillin in 1928)
Research Emphasis in Industry and 14
University (continued)
Applied research:
This activity involves the use of existing scientific
principles for the solution of a particular problem.
Ex. Investigating if background music in a work
environment can contribute to greater productivity.
Research Emphasis in Industry and 15
University (continued)
Product Development:
This activity is similar to applied research in that it
involves the use of the known scientific principle, but
differs in that the activities focus on Products.
This activity involves overcoming technical problems
associated with the new product and may do studies
to try to improve product performance.
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Forms of R&D Strategy
There are two categories of activity for the R&D department:
Maintenance
Growth
Within these two categories, it is possible to conduct significantly different types of
activity. Each category is subdivided into two groups:
R & D for maintenance: Survival & Competitive
R & D for growth: Technology mastery & Break the mould
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Forms of R&D Activity
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Forms of R&D Activity (continued)
Survival:
The role of the R&D department is to ensure survival against technological
mishaps to processes or products.
This would be a reactive problem-solving role.
Competitive:
If the intention is to sustain the business, then the role of research is to maintain
the relative competitive technological position by making improvements to both
product and process.
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Forms of R&D Activity (continued)
Technology mastery:
It involves keeping abreast of all technological developments that may affect the
business’s products or processes.
The strategy is to grow incrementally-improving the product and process.
Hence, a much higher level of R&D expenditure will be required.
Break the mould:
If the aim is to create a technological advantage, then a much higher order of novelty
and creativity is required.
This type of research will involve developing new technology and involve a higher
level of scientific research.
Setting R&D Budget 20
1. A fixed a percent of sales or profits
A criticism of this method is that it uses past figures for future
investment.
2. Reference to previous levels of expenditure
Previous year’s expenditure + an allowance for inflation.
3. Costing of an agreed programme
The expected cost for all R&D projects.
