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Management of research and development
Structure of lecture
Amity Business School
1. Introduction 2. Background: The management of R&D within organisations 3. R&D and the link with corporate strategy 4. R&D strategic planning 5. R&D operational activities 6. Allocating funds to R&D 7. Summary and recap
Amity Business School
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.
Amity Business School
R&D in organisations: Expenditure in 2005
Ford Pfizer Siemens Johnson & Johnson Microsoft GlaxoSmithKline Samsung Nokia $bn 8.0 7.4 6.5 6.3 6.1 5.7 5.4 4.7 % sales 5 15 7 12 16 14 7 11
Amity Business School
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)
Introduction Development: demonstration of application and product engineering ROI Growth Revenue Maturity Decline Investment Accumulated investment Time -12 -10 -8 -6 -4 -2 0 2 4 6 .Amity Business School Extended product life cycle Applied research: Basic laboratory research: verification scientific suggestion. recognition. new concept. discovery.
DTI (2002).5 6 12 R&D as % of sales = (R&D expenditure/total sales income × 100%) Source: UK R&D scoreboard 2001. Crown copyright material is reproduced with the permission of the Controller of Her Majesty’s Stationery Office and the Queen’s Printer for Scotland .Amity Business School R&D expenditure (mean) across industries Industry Pharmaceuticals Aerospace Automotive Chemicals Electrical and electronics Food General manufacturing Computers % 15 5 5 8 7 1.
Amity Business School Classification of new product development activities across different industries Industrial products Technological activities Balance of activities Pharmaceutical industry Electronics industry White goods and domestic appliance industries Marketing activities FMCG Food and drinks industries .
Amity Business School Strategic management of research and technology What are we trying to do in this business? What will we support in R&D? How can R&D contribute? What can we afford? What are the costs. benefits and risks? .
R&D for existing businesses. 3.Amity Business School Strategic role of R&D R&D and its link with businesses N. Drive new businesses. Business opportunities will continually arise. 2. . This helps to develop understanding of technology that the business is using or may use. R&D will ensure that these can be exploited. Exploratory research. This will ensure the businesses are able to compete and to exploit all opportunities available to it.B It’s the businesses that pay for it 1.
Amity Business School 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 .
Amity Business School Classification of research knowledge and concepts Basic research Applied research Close to market Development Technical service Product tangibility Physical products high R&D continuum low .
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.Amity Business School 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. processes or systems. . Technical service Cost and performance improvements to existing products.
Amity Business School 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 .
Amity Business School 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 .
(1991) Third Generation R&D.A.. Lithedin FT: Pitman publishing. UK R&D scoreboard 2001. MA. London. DTI (2002). Trott P (2005) Innovation Management & NPD 3rd ed. . Boston. Twiss.. P. Prentice Hall. B. et al. (1992) Managing Technological Innovation.Amity Business School References Roussel. Harvard Business School Press.
Amity Business School Managing intellectual property .
Amity Business School Learning objectives • Understand the role of intellectual property in appropriating gains from innovation • Understand different forms of protection available for intellectual assets • Appreciate the limitations of the patent system .
buyers. 2000) . suppliers. (Winter. etc.Amity Business School Profiting from innovation • For an innovation to be profitable: – – – The technology underlying the product must work The product must create value for the customer/consumer The innovator must be able to appropriate (capture) enough of the value to make a profit • Value can be lost to competitors.
Amity Business School Mechanisms of appropriability • Secrecy – Trade secrets • Legally protected intellectual assets are termed intellectual property (IP) • Control of complementary assets – Other assets such as distribution. customer/supplier relationships. complementary products (Winter. 2000) • Lead time – First-mover advantage . service capability.
price costings or business strategies • Also applied to products (e.Amity Business School Trade secrets • Often applied to ways of working. Coca Cola) • Legal definition unclear • Maintain secrecy during product development – – – Risk of information leakage? Inhibits internal knowledge transfer? Limits inter-company collaboration? Reverse-engineering by competitors? • Difficult to maintain once marketed – • No protection against independent invention by others .g.
co. and must approve a successor should one of them die.Amity Business School Trade secrets No sign of the recipe on the can! “The secret to one of the world's most famous brands lies deep in a bank vault somewhere in Georgia. Outlets which make the drink are simply supplied with syrups and other ingredients from Coca-Cola – but not the original recipe.uk/1/hi/business 2nd June 2005 . People have revealed what they claim to be the official recipe after analysing the drink.” Source: Tom Geoghegan. Its exact location is reportedly known only to between two and four Coca-Cola executives. but Coca-Cola remains tight-lipped. US. It is rumoured that measures are employed to protect the chosen few – the executives never travel together. bbc. ‘What we still don’t know’.
or improvements to an existing product or process. provides exclusive rights for up to 25 years A distinctive name. for new products or manufacturing processes.Amity Business School Types of intellectual property Intellectual property Patent Key features Offers a 20-year monopoly. which was not previously known Provides exclusive rights to creative individuals for the protection of their literary or artistic productions Registration of the outward appearance of an article. mark or symbol identified with a company’s products Copyright Registered design Registered trademark .
d.) Sound recordings. musical and artistic works (70 years a. dramatic.g. written) Copyright applies to the presentation of the idea. broadcasts and cable programmes (50 years post publication) Typographical arrangements or layout of a published edition (50 years post publication) • Automatic protection • Cannot copyright ideas – – Must be in tangible form (e. films.Amity Business School Copyright © • Applies to: – – – Original literary. .
" Source: Lawyers for Baigent & Leigh.Amity Business School Copyright "Dan Brown copied from The Holy Blood and the Holy Grail and therefore the publication of the result by the defendant is in infringement of the copyright of my client in the United Kingdom. February 2006 . But none has lifted the central theme of the book." "The authors' historical conjecture has spawned many other books that developed aspects of this conjecture in a variety of directions.
renewable for up to five five-year periods • Similar in operation to the patent system .Amity Business School Registered design • Intended for designs with aesthetic appeal – Toys. • Maximum of 25 years – Exclusive rights for initial five years. • New designs: – Not published in the UK – Materially different appeal to the eye. packaging. electrical appliances. configuration. pattern. etc. etc. • Outward appearance of an article – Actual shape.
Amity Business School Registered design .
marks and symbols identifying a company’s products • Must be: – Distinctive in itself – Non-deceptive – Not confusing. • International registration • Many brands are registered trademarks • Licensing .Amity Business School Registered trademark ® • Distinctive names.
co.uk 20th February 2005 . Easymobile uses Easygroup's orange branding. Orange said it was starting proceedings against the Easymobile service for trademark infringement. Founder Stelios HajiIoannou has pledged to contest the action. Orange claims the new low-cost mobile service has infringed its rights regarding the use of the colour orange and could confuse customers – known as "passing off". The move comes after the two sides failed to come to an agreement after six months of talks. Source: bbc.Amity Business School Trademarks Orange colour clash set for court A row over the colour orange could hit the courts after mobile phone giant Orange launched action against a new mobile venture from Easyjet's founder.
publications. use or sell Legal right to prevent others using the invention Public disclosure of details of the invention Novelty – Must not be part of ‘state of the art’ – Words. anticipation • Inventive step – Not obvious to a person skilled in the art • Industrial application – Machine.Amity Business School Patents • • • • 20-year monopoly to make. process . product.
Amity Business School Limitations of patents • Annual fees required • National patent protection • Patent harmonisation – – – European Patent Convention (EPC) Paris Convention – 114 countries First-to-file (EU) vs first-to-invent (US) • Legal costs of defence • Limited effectiveness in some industries – Patent life vs ‘imitation lag’ • Inventing around patents .
Creative said Apple had filed for a patent for a user interface in a multimedia player in late 2002.uk 30th August 2005 . "The first portable media player based upon the user interface covered in our Zen Patent was our Nomad Jukebox MP3 player.Amity Business School Limitations of patents Creative wins MP3 player patent One of Apple's main rivals. has been awarded a patent in the US for the interface used on many digital music players." In its press release. "The Apple iPod was only announced in October 2001. 13 months after we had been shipping the Nomad Jukebox based upon the user interface covered by our Zen Patent." said Creative CEO Sim Wong Hoo.co. Creative Technology. but its application had been recently rejected. Source: bbc.
Amity Business School Strategic alliances and networks .
6. 3.Amity Business School Strategic alliances 1. 4. 9. 5. 8. 2. 7. Introduction The fall of the go-it-alone strategy The rise of the octopus strategy Forms of strategic alliances Reasons for entering alliances Risks and limitations with strategic alliances Licensing Critical success factors Case study: The film industry .
Amity Business School Learning objectives • Understand the reasons for increasing use of strategic alliances • Recognise different forms of strategic alliance • Identify factors critical to the success of strategic alliances • Appreciate the risks and limitations of strategic alliances .
Amity Business School Introduction • Collaborating with suppliers and customers is not new • The intensity of competition is increasing • The nature of collaboration is different • Nowhere is this more evident than in new product development .
Amity Business School The fall of the go-it-alone strategy • Increased levels of competition • Increased complexity of products and production • Widening technology base • Dramatically shortened product life-cycles • Pressure to reduce NPD time .
’ . • The element of trust can be highlighted through the use of the ‘prisoner’s dilemma.Amity Business School The rise of the octopus strategy • Sharing resources • Facilitate the achievement of strategic objectives • Provide opportunities to expand into new markets by sharing skills and resources. • A lack of trust often lies at the heart of an unwillingness to engage in any form of cooperation.
Faulkner (1995). Licensing Supplier relations Joint venture Collaboration (non-joint ventures) R&D consortia Industry clusters Innovation networks . 7. 3. Conway and Stewart (1998) identify seven generic types of strategic alliance: 1. 6.Amity Business School Forms of strategic alliances Strategic alliances can occur intra-industry or inter-industry. 5. 4. 2.
g. VW and Bosch.Amity Business School Reasons for entering a strategic alliance Reasons 1 Improved access to capital and new business Greater technical critical mass Examples European Airbus to enable companies to compete with Boeing and MacDonnell Douglas Industry alliance formed between US microchip manufacturers to compete with Japanese Sony-Ericsson European Airbus Customer-supplier alliances. e. GEC and Siemens 60/40 share of telecommunications joint venture: GPT Disney and Pixar 2 3 4 5 6 7 Shared risk and liability Better relationships with strategic partners Technology transfer benefits Reduce R&D costs Use of distribution skills .
NMB has access to Intel’s marketing IBM gained access to Apple’s user interface technology Attempt by Sony to get Beetamax technology as industry standard. Fuji Use of management & IT consultancies 9 10 Standardization 11 By-product utilisation 12 Management training .Amity Business School Reasons for entering a strategic alliance (Continued) 8 Access to marketing strengths Access to technology NMB. Japan and Intel. Cannon. Also Microsoft Windows GlaxoSmithkline and Matsushita.
• information asymmetry. • increased complexity. . • reduced management control.Amity Business School Risks and limitations with strategic alliances It can lead to: • competition rather than cooperation. • conflicts resulting from incompatible cultures and objectives. • loss of competitive knowledge. It may harm a firm’s ability to innovate. • loss of autonomy.
which is protected by patents. Level of involvement varies considerably. or a product or service.Amity Business School Licensing • • • • • • Licensing is granting another business permission to use your intellectual property. Very often the technology in question will be protected by patents. Product. Payment of a fee in return for access to the technology. . manufacturing process and brand. which is protected by a trademark or copyright. Mutual self-interest is key driver.
.g. Licences to competitors constitute a high percentage of all licences extended. etc. BTG. e.g.Amity Business School Licensing (Continued) • Licensing is the main income generator for many firms e. • N. • It helps businesses and universities generate income from their intellectual property through the licensing of technology to third parties. (MS-DOS).B. Microsoft.
domain names – www.g.Amity Business School Licensing (Continued) Licensing brand names • A growing area of business e.: • All England Club and use of Wimbledon Trademarks JCB Harley-Davidson Disney • Brands.3m.g.com . trademarks and the internet e.
Amity Business School Licensing (Continued) • Negotiate with care . • How advantageous is the technology? Many patents can be legally breached with sufficient R&D investment. . . The licensee must be careful to evaluate the need for and the benefits likely to accrue from the technology before making the commitment to pay. .
. 1976): • to avoid or settle patent infringement issues • to diversify and grow through the addition of new products • to improve the design and quality of existing products • to obtain improved production or processing technology • to ensure freedom of action in the company’s own R&D programme (patents held by other companies may inhibit R&D activities).Amity Business School Licensing (Continued) Other reasons for licensing are (Rothberg.
1976): • to save R&D expense and delay • to eliminate the uncertainty and risk involved in developing alternative processes and technology • to accommodate customer needs or wishes • to qualify for government and other desirable contracts.Amity Business School Licensing (Continued) Other reasons for licensing are (Rothberg. .
Amity Business School Critical success factors • Creating knowledge sharing routines – Codifiable knowledge. culture • Building and managing co-specialised assets – New assets created as a result of the alliance • Establishing effective governance processes – Formal (legal. informal (trust) . ‘know-what’ – Tacit knowledge. distinctive resources – Organisational complementarity • Decision processes. information/control systems. ‘know-how’ • Choosing complementary partners – Strategic complementarity • Assets. financial).
Amity Business School Case study: The film industry • The Hollywood film industry and the role of knowledge network organisations • Industry clusters and networks • Independent film making and the $60 billion porn industry in the San Fernando Valley • The nature of film making and the project-based enterprise • End of the film. end of the enterprise .
Amity Business School The end Thank you for listening .
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