ASSIGNMENT

Course Code : MS - 58
Course Title : Management of R & D and Innovation
Assignment Code : MS-58/TMA/SEM - II /2012
Coverage : All Blocks

1.Define innovation. How it is related to creativity? Discuss the role of creativity in innovativeness.

SOLUTION: - The term innovation means a new way of doing something. It may refer to incremental, radical,
and revolutionary changes in thinking, products, processes, or organizations. A distinction is typically made
between Invention, an idea made manifest, and innovation, ideas applied successfully. In many fields,
something new must be substantially different to be innovative, not an insignificant change, e.g., in the arts,
economics, business and government policy. In economics the change must increase value, customer value, or
producer value. The goal of innovation is positive change, to make someone or something better. Innovation
leading to increased productivity is the fundamental source of increasing wealth in an economy.
A convenient definition of innovation from an organizational perspective is
"Innovation . . . is generally understood as the successful introduction of a new thing or method . . .
Innovation is the embodiment, combination, or synthesis of knowledge in original, relevant, valued new
products, processes, or services.
Innovation typically involves CREATIVITY, but is not identical to it: innovation involves acting on the creative
ideas to make some specific and tangible difference in the domain in which the innovation occurs.
"All innovation begins with creative ideas . . . We define innovation as the successful implementation of
creative ideas within an organization. In this view, creativity by individuals and teams is a starting point for
innovation; the first is necessary but not sufficient condition for the second".
For innovation to occur, something more than the generation of a creative idea or insight is required: the
insight must be put into action to make a genuine difference, resulting for example in new or altered business
processes within the organization, or changes in the products and services provided.
Innovation = Creativity * Risk Taking
Creativity

The globalization effects of technological and economic development experienced in recent decades are
significant. The intensity of innovation has not decreased, even in times of world economic recession. On the
contrary: in this area immense growth has been seen.
The growth of competition has lead to the revaluation of the human factor. The creative human has come into
central focus.
The notion of creative human is interpreted in a wider sense today. Not only artists, or researchers with
significant innovations belong to this category, but also professionals who execute and develop every–day
activities.
Many notions exist about the most important traits and characteristics of creative personnel. According to
some, creativity is defined above all by talent, or abilities that we are born with. Another approach highlights
the role of personality traits, while the stress on adequate motivation is also recognized.
Them contribute creativity to many factors, and admit that different combinations of these elements lead to
the creation of similar creative abilities.
Through creative ability it is possible to find new and novel ideas to solve problems. The creative person is
characterized by a healthy combination of three factors:
The development of abilities is principally executed within the educational system in the framework of
educational programs.
Motivation originates from the environment, and awakens ambitions.
Creativity is perhaps the most valuable personal trait, although it is difficult to measure it can be developed by
the development of certain cognitive factors (for example: association, abstraction, combination or intuitive
abilities etc.).
Creative thinking
The solution for various tasks require different thinking processes, or mentalities. In the view of Rawlinson,
only two basic thinking processes exist: analytical and creative.
The two types of thinking processes and their characteristics
Analytical Creative

Logic Imagination

One (few) answer(s) Numerous possible answers or ideas

Convergent (one main line of thought) Divergent (branching lines of thought)

Vertical Horizontal

There are significant differences between the creative and analytical types of thinking. In practice, however,
the two are employed in a combination and complement each other.
Analytical thinking results in one or only a few solutions, whereas creative thinking provides numerous ideas
which are rich in variations.
During the analytical method, the problem is recognized, examined in detail and solutions are developed in a
limited area, by thorough and precise means. In contrast creative thinking involves the search for solution, on
the widest scale possible. This requires the collection of ideas, even the most surprising possibilities which
could aid the solution of the task.
Examination of the traits of creative thinking shows that there is a clear need for logical thinking, some analysis
mechanisms, and some systematic method for narrowing down the possible answers.
In contrast the few solutions born out of analytical thinking may only be expanded by a creative process. The
advantages of a different thinking method can be seen in the recognition of solution variants and the
exponential growth in the number of solutions.

Analytical and creative thinking

The result of focused analytical thinking may provide the starting point for the creative thinking processes. The
solutions produced in this manner can be worked out further, but this requires a change back to the analytical
approach again.
Creativity and innovation
The natural environment of personal creative work and creativity is the innovational process. Hence creativity
and innovation are inseparable. Their relationship and effects on each other are mutual. According to
Nyström:
“In the relationship between innovation and creativity, no one way definitiveness can take effect: creativity
does not directly generate innovation, nor does innovation automatically establish creativity, but the unity,
degree of mutuality incorporates the possibilities for further development and higher quality level.”
Creative techniques employed in innovational planning steps
Process element Most adequate creative method
1. Creation of innovational For needs analysis: the professional knowledge of
information base specialists in the field, innovation–research, specialist
involvement, team–work. Developing information
technology: professional field knowledge

2. Position analysis Professional methods of diagnostics in the framework

of personal and team–work, and involvement of
specialists

3. Creation of forecasts Solution and creative methods suited for forecasting

(for example: Delphi method)

4. Definition of requirements To set valid innovational standard: decision preparation

and objectives related to through personal and collective methods
task identification

5. Preliminary qualitative Appraisal of condition system through indirect methods

appraisal of project potential (research of intellectual products, employment of
needs professional experience, involvement of specialists),
using team work

6, Preliminary qualitative Professional methods of given (market, technical,

appraisal of expected results economic) areas

7. Selection, ranking and Employing professional methods of efficiency appraisal

appraisal of efficiency of
project suggestions
and comparison. For preliminary selection and ranking:
adequate execution of personal and group ranking
methods. Application and qualification of solutions
according to ranking and lock–out criteria in specialist
work.

8. Preparation of plan Application of professional methods in given specialist

concept fields and collective establishment of concept through
direct and group creation

9. Working out development

and investment action plans

– Consideration of projects After personal preparation, identification of related

eligible for the action plans innovation projects by team–work

– Planning development and Personal and collective consideration of condition–

investment sources for plan– system satisfying professional aspects
period

– Planning execution form Appraisal of executive forms through personal and

collective creative processes. Specification of given
project terms by professional and collective aspects
mainly through personal work
 – Selecting optimal Team–work according to optimum search solution
investment variant for each
project

– Detailed appraisal of The use of strictly professional (direct) methods

project potential needs

– Further examination of Expression of realization in numeric values requires

expected results cooperation between professional areas, while it is
based on mainly personal work

– Numeric appraisal of Known methods of economic calculations are generally

expected results indirect creative methods

– Complex project appraisal, Qualification according to innovational strategy is

project ranking undertaken by few professionals taking into
consideration the characteristics of developed projects

– Selection of a project, Decision of top executives based on a prepared study

executable in plan–period

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2. Explain the role of Technology Portfolio Analysis in business strategy of the organization.

Growth through innovation requires not only good technical ideas but alignment of priorities between all the
functions responsible for successfully developing and commercializing the idea. The ability to create, modify,
and maintain this alignment as business conditions change, new opportunities arise, and new capabilities are
Developed can mean the difference between capturing the benefits of being a market leader versus a market
follower. Road mapping has emerged as a best practice, particularly for large, global organizations (i.e.
Honeywell Intl., Boeing Corp, Motorola), in providing the framework for technology strategy creation and
management where cross-functional alignment and integration is a key requirement.

By employing road mapping from an enterprise perspective, where key functions in the business “own”
Their individual strategies which are fully integrated as needed to meet business priorities, an organization can
fully exploit its entire spectrum of capabilities to drive growth.

Technology Road mapping,

Strategic Planning,
Technology Alignment

Effective enterprise strategy and technology management for the purpose of driving growth through
innovation has two basic challenges:
1- Elements of business strategy will need to be continuously modified to respond to changing market
conditions - strategic business and technology planning processes mustbecome integrated and “real-time” as
opposed to annual or serial events in order to maintain competitiveness

2 – Maintaining strategy alignment between business functions (i.e. marketing, product ownership,
technology…) and across the extended enterprise (corporate, divisions,business units, product lines, partners,
suppliers…) while strengthening the ability to continuously innovate and address new business opportunities is
key.
Strategic Planning has been defined as “a disciplined effort to produce fundamental decisions and actions that
shape and guide what an organization is, what it does, and why it does it.”
Road mapping has emerged as an extremely effective process for creating andvisualizing these relationships. If
applied as an enterprise framework, road mapping has the potential to provide a bridge between all the
tactical decision processes, differentbusiness functions, and organizations through the common element of
time.
Enterprise Planning Boundary Conditions and Framework
The term “Enterprise planning” is defined here as being the process by which each function (i.e. marketing,
product ownership, technology, etc) in an enterprise creates,
modifies, and maintains their own strategy in support of ongoing business decision processes. An enterprise
plan is the integrated combination of all the functional plans
representing that organization’s strategy. Functions within the business own responsibility for gathering,
evaluating, and prioritizing certain elements of strategy
(business decisions) on an ongoing basis.
The second key tenet of the enterprise planning approach is that the individual functional strategies/plans and
their associated linkages to other plans are created and maintained insupport of ongoing business processes
and not as a separate initiative.
Model Enterprise Planning Framework
To better illustrate the features of the proposed enterprise planning approach, a model road mapping
framework will be described based on the enterprise planning architecture
the author developed for Honeywell, Inc. in 2001. It is important to re-iterate at this point that any enterprise
planning framework will only be successful if it is derived fromthe key planning and decision processes of the
organization in question. The large variation from company to company in culture, management styles, and
process specificsprecludes the use of this exact framework across the board.

Prioritizing the key objectives of the planning process improvement and identifying the
major processes which will be used to define the basic architecture of the enterprise plan, is the first step in
creating the framework. At Honeywell, the need for an improved road mapping discipline grew out of a desire
to improve the link between technology innovation, product development and customer needs
Creating relationships and alignment between specific Goals, Drivers, Customer Need, or Priority, with the
organization’s ability to produce revenue (products, services, systems, etc) and the ability to develop the
requiredcapability to support that revenue (innovation, technology, partners, suppliers…) is the
basis of the framework. The two-way arrows in the flow diagram indicate the iterative nature of the process
which should be anchored in meeting customer needs from either an“outside-in” (market pull) or “inside-out”
approach (innovation and technology push).
Summary
The increased complexity and rapid pace of change of doing business in today’s economy puts a premium on
real time information access and exchange within and between organizations to support business growth
through innovation. The productivity and efficiency of current strategic planning and decision processes suffer
from an inability to maintain and manage strategy alignment and a robust innovation pipeline in this rapidly
changing environment. Using a road mapping framework based on distributed functional
ownership of strategy elements, a strategy management architecture and process has been
proposed which significantly increases the productivity of strategy creation and
management. The framework is two dimensional with functional strategies and
roadmaps sharing perspectives with Strategic Initiative strategies like Key Growth Programs and Key Account
Management. Key success factors for realizing the full
benefit of the approach include the full integration of the framework in existing business
processes across all functions. Implementation can be staged and planned to coincide
with current planning schedules and processes to minimize disruption of the current
business process calendar. The process and road mapping architecture, when combined
with a web-based, relational database for storing, accessing and communicating strategy
elements, provides the ability to develop, optimize, and maintain the strategy alignment
necessary to grow businesses through innovation.

Strategic and Technology Planning on a Road mapping Foundation

INPUTS
Stage one
Ext. Market, Customer, Competitive Drivers
• Ideation, Scenario Analysis
• Business Portfolio Analysis
• New Technologies
Stage two
Prioritized Goals and Drivers
Product Portfolio Analysis
Customer Needs/Key Accounts
Existing Product Plans
Stage three
Product Evolution Plans with target attributes
Competitor & Trend Analysis
Benchmarking
Existing Core Competencies

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3.Explain the impact of long or short technology life cycle has on measuring the economic value of an
invention.

Foundations of Technology Lifecycle Management (TLM)

New policies and initiatives continue to drive agencies to deliver measurably better results in providing the
services and performing the functions for which they are accountable. To meet government-mandated
performance metrics, each agency should adopt a long-term strategic methodology that aligns technology,
services, and the management of the IT infrastructure to business objectives.
Technology Lifecycle Management (TLM) is a multi-phased approach that encompasses the planning, design,
acquisition, implementation, and management of all the elements comprising the IT infrastructure. The
convergence of in-depth technical knowledge, astute business processes, and expert engineering and financial
services into a solid business model enables agencies to proactively address systematic budgeting and long-
term management of their IT infrastructures. With an accurate picture of how the IT infrastructure may evolve
over the next one, three, or five years, organizations can correlate their technology acquisition strategy with a
financial model that will help them realize the full benefit of their technology assets. Consequently, it is vital
for organizations to understand the processes involved in each of the following TLM phases:
•Assessment and identification of business objectives and appropriate application of technology
• Technology acquisition specific to IT infrastructure requirements
• Integration and implementation by certified engineers
• Support services such as custom warranty and maintenance packages, help desk services, and systems
monitoring
• Technology refresh to ensure upgrades are timely and relevant
• Asset disposition under pre-negotiated terms
Organizations that employ TLM can realize significant gains in performance, productivity, and service-delivery
metrics without negatively impacting budgets.
TLM: A Closer Look Assess and Identify
The first step in TLM is to assess the business and technology objectives and identify end-user needs. A key
element of this process is to address every phase of the technology lifecycle so that future business needs,
technology requirements, financial considerations, and expansion plans are anticipated and addressed from
the start. This involves developing logistics, deployment timelines, technology health check schedules, refresh
cycles, and asset disposal plans. The results of the business requirements analysis and technical environment
evaluation by certified specialists are evaluated and documented in both short-and long-term
recommendations. This report also should include:
• An acquisition strategy
• Financial plans aligned with budget availability
• A plan for ongoing support
• A project implementation plan
• An asset tracking and retirement strategy
Completing this phase requires several high level initiatives. Business Initiatives and Objectives and Needs
Analysis The assessment of an organization’s objectives and the identification of the business processes form
the framework for the recommended IT architecture. This serves as a working model for the development of
an IT infrastructure that continually supports each agency’s underlying business processes and objectives.
Technical Environment Evaluation It is vital that the procuring organization understand the business processes
supported by the IT infrastructure. A technical evaluation by certified specialists identifies the best technology
architecture for each environment. Through close examination of existing customer resources and the legacy
systems comprising the current infrastructure, a team of experienced technologists can then evaluate the
technology that will meet forecasted capacity and enhancement requirements over a span of years. Analyzing
the lifecycle of the technology, correlating quantifiable costs and benefits to each lifecycle stage, and providing
financing options can accelerate deployment of the IT infrastructure.
Technology Validation and Refresh Cycles Regularly scheduled reviews and assessments of the IT
infrastructure systems enable organizations to ensure that the technology integrated into their IT
infrastructures continues to perform to expectations. When it becomes evident that the currently installed
technology no longer has the capacity or capability to support the organization’s business need, components
can be swapped for new or updated technology. Effective financial planning and management make
appropriate technology refreshes easier by proactively developing a replacement strategy for assets prior to
initial deployment. This approach enables consistent budgeting, offers the flexibility to respond to change, and
promotes continuous performance improvements. Spreading acquisition costs over the life of the asset
protects agencies from experiencing both spikes and shortfalls in their capital budgets.

Asset Disposal Strategy

A complete assessment of the costs and resources required to manage assets through the entire technology
lifecycle enables an organization to plan for the disposal of the devices when they reach the end of their useful
life. Asset disposal factors to consider include potential resale value, disposal costs, and services required t
securely uninstall data and remove equipment. Although predicting resale values and asset disposal costs is
not typically a core skill of an organization’s internal IT resources, it is a critical element in managing the costs
of the IT infrastructure. Costs for contracting with environmental specialists must be factored in if outside
services are needed to comply with environmental and security regulations. Regardless of the method of
disposal (donation, resale, or destruction)
Financial Planning
Technology acquisitions historically involve large appropriation requests and capital expenditures. Because the
benefits of investing in technology are often derived over time, it is difficult to capture ROI incrementally. At
the same time, the long budget cycles inherent in capital appropriations create an understandable bias toward
owning technology assets, as users fear future budget cuts could prevent them from procuring needed
equipment. Under this scenario, the entire budget justification, appropriation, and procurement must be
repeated for each technology refresh, upgrade, and addition to the infrastructure.
Technology Acquisition
Acquiring technology assets and services involves executing the recommendations developed during the
assess and identify phase of the TLM process and includes:
• Procurement of assets
• Logistics planning
• Finalization of financing
To simplify this phase, many organizations outsource some, if not all, acquisition-related tasks. A common
practice is to have a technology solution provider project manage the acquisition, deployment, and
implementation of the technology. The financial planning model is also finalized during this phase. The
scenario that significantly minimizes an organization’s risk is to have a contractor purchase the infrastructure
and recover the costs over the life of the contract using agreed-upon pay-for-use billing metrics.
Integration and Implementation
Integration and implementation of the infrastructure solution will follow a detailed services methodology,
mitigate risks, and maximize efficiencies by providing:
• System configuration and image loading
• Asset management, such as radio frequency identification (RFID) tagging
• Design verification and quality assurance
• Onsite or remote engineering by certified experts
• Certified project management standardized processes
Support Services
TLM vendors must be able to provide post-implementation support services that enable high infrastructure
productivity. These services, such as on-going proactive maintenance, are critical to keeping the I
infrastructure operating in its optimal state at all times
Outsourcing Considerations
The effective administration of TLM requires that organizations work with a responsive partner with multiple
skills, competencies, and a successful track record to support this model. Although many organizations have
considered adding internal staff to perform TLM functions, it is very difficult to find and retain engineers with
all the certifications required to implement and maintain the IT infrastructure

After conducting a thorough analysis, many organizations recognize that TLM is not a strategic function. This
leads them to determine that outsourcing the long-term financial responsibility, risks, operations, and
management of the IT infrastructure to an experienced contractor offers the best outcome. TLM eliminates
the many restrictions, distractions, and inefficiencies that occur when technology is acquired using a
component-based, incremental approach. Because the IT infrastructure must evolve to keep pace with
changing organizational missions and next-generation technology, TLM provides advantages that include:
• Financial pay-for-use agreements to preserve capital budgets
• Engineering services, support and warranty services
• Asset management
• Image loads and integration services
• Management/deployment of complex systems
• Project management
• Management of technology refresh schedules
• Secure disposal of retired systems and data degaussing Technology Lifecycle Management
Vendor Selection
The contracting approach and content of a solicitation for proposals may vary with the services required from
the chosen vendor. Acquiring IT as a service, complete with a statement of objectives and measurable service
level agreements (SLAs), is the optimal procurement method. A key selection criterion is based on a vendor’s
internal processes that enable it to perform timely and accurate integration, imaging, asset tagging, and
shipping of technology as well as the levels of expertise of its engineering resources. In addition, there is
significant value when a vendor has ISO certification and follows Earned Value Management standards to
ensure quality processes are employed at every phase. This focused attention on services and quality will help
lower program risk and decrease the likelihood of overall indirect and unexpected costs. The result should be a
lower and more predictable total cost of ownership (TCO). Summary and Recommendations Effective
organizations proactively develop strategies that leverage resources, anticipate future requirements, and focus
on business goals and performance objectives. As technology and other computing platforms become central
to supporting the mission of the organization, effective planning for the management of these platforms has
become vital. Ensuring the viability, relevancy, and long-term value of the IT infrastructure also requires
proper financial management. The benefits of proactively addressing capital requirements can help minimize
risks, lower TCO, and leverage existing and out-year operations budgets. Using longer-term funding programs,
where an organization spreads out the acquisition and support costs over the technology lifecycle, aligns the
timing of costs to the anticipated benefits. TLM enables the effective management of IT resources to ensure
they are appropriately focused on the organization’s mission. By comprehensively evaluating business,
technology, and financial drivers, an organization can deliver realistic lifecycle scenarios that set user
expectations and enable its IT infrastructure to be managed as a service. Organizations that make the decision
to outsource TLM should have a realistic assessment of their business priorities and available resources.

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4.Discuss the salient features of technology policy of India. What have been the achievement and failure of
the technology policy?

The mission of the department is “To strengthen the R&D base of the country through funding, development
and utilization of technologies, building entrepreneurship and innovation, fostering international S & T
cooperation, popularization and demonstration, generating S&T database, mounting mission mode initiatives,
attracting talent to science and rejuvenating research in university
and promotion of public-private partnerships”.
Policy and Structural Support to Research and Development: Consistent with the
stated vision and mission of the Department, programmes have been cast and recast suitably during the last
two years. Evidence-based approaches for sizing the research support systems have been prioritized.
New mechanisms and structures for supporting basic research have been developed. Support for Extra
Mural Research and Development has been fortified during the last financial year. Science and Engineering
Research Board has been notified and roles for supporting research through competitive grants are being
segregated from the developmental and promotional roles of the Department in a structured manner. The
Department has drafted a Science, Technology and Innovation policy for wider consultation and adoption.
Data sharing and access policy has now been approved by the cabinet and is being formulated into a
framework document.

Human Capacity Building for Research and Development: Large scale national
programmes for attraction of talent to study of science and careers with research have been promoted.
Reach of the INSPIRE programme to the school and educational systems has been widened. As many as
18 lakh posters describing the various elements of the scheme have been reached to the educational
enterprises of the country. During the current year (2010-11) 1,76,243 students from 27 States/UTs have
already been selected for awards under Scheme for Early Attraction of Talents for Science (SEATS).
Capacity and expertise building for research and development has been focused.

Strengthening Institutional Capacity for Research and Development:

Rejuvenation of research in university sector has been accorded high priority. The Department has more than
doubled investments into strengthening of institutional capacities during the last three years. Schemes like
Fund forInfrastructure Strengthening of Science and Technology (FIST) has been expanded to include colleges
and expand the R&D base of India. Parameters have been raised to extend critical level of support. During
the last 10 years 1343 Departments spread over to 337 academic institutions have been supported under
this scheme with a total support of about Rs 971 crores. For wider dissemination of the programmes, a
new website has been launched. The Program scope would now be extended for supporting departments
in the Colleges even at the Under-graduate level. After a review of the scheme over a period of ten years,
the need to augment the scheme with special packages for regions not covered under the existing provisions
have been developed. Special packages have been implemented for North Eastern Region, Jammu and
Kashmir Region and Bihar state during the last three years. Major facilities Supported are Guwahati
University (High Performance Computational facility with 64 nodes cluster and software), Tezpur University
(Powder XRD Facility with High and Low Temperature systems), Tripura University (400 MHz NMR
facility), Mizoram University (High Resolution TEM facility) and Coordinated Research Projects specific
to NER region. I A special scheme named CURIE Consolidation of University Research for Innovation
and Excellence has been designed and implemented for women only universities. Six Women Universities
have already been supported, namely, Banasthali University, Avinashlingam University, PadmavathiMahila
Viswavidyalaya, SNDT Women University, Karnataka State Women University, Mother Teresa Women
University with a grant of Rs. 23.3 crore each for 3 years. This new initiative is expected to make an impact
on the quality of research output from these universities.

The scheme “Promotion of University Research and Scientific Excellence” (PURSE) has
been reviewed and data on publications emanating from the university sector have been collected. Thirty
(30) new universities have been identified for support under this Program based on the publication output
in Scopus International Database for a period 1998 to 2008. Inclusion of new universities under this
program is major anticipated achievement of the programme.

To provide facilities of sophisticated analytical instruments to research workers specially from the
institutions which do not have access to such instruments to enable them to pursue R&D activities the
Department has set up Sophisticated Analytical Instrument Facilities (SAIFs) in different parts of the
country About 14,000 research workers from all over the country utilized the facilities during the year.
These included research workers from almost all the universities in the country. About 84% of the users
were from academic sector. More than one lakh samples were analyzed at the facilities during the year and
about 1,000 research papers were published by the users of the SAIFs

Support to Autonomous Research Institutions Nurtured by the Department:

The Department has been providing Grant in Aid to total of 15 autonomous institutions developed in the form
of independent societies. Majority of these institutions were founded by eminent scientist like CV Raman,
JC Bose, DN Wadia, SP Agharkar and BirbalSahni. These institutions have been receiving Grants-in Aid
from DST. Funding systems for supporting research in autonomous institutions nurtured by DST have
now been rationalized based on faculty strength and performance indicators. Recently a performance
review of the institutions nurtured by DST directly was conducted. In terms of S&T output indicators per
scientist, the overall outputs from the DST institutions meet the national bench marks of publications,
doctoral researchers and patents per scientist.

National Innovation Foundation, Ahmedabad was being supported from the interests of a corpus
provided by DST until last year. This is a grassroot innovation support system receiving small resource. In
view of the expanding base of grass root innovation system and the opportunity that it offers for creation of
open source and affordable innovations, the Government has now accorded an approval for the conversion
of NIF into an autonomous body of DST.

Technology Development Programmes: DST has been engaged traditionally in promoting

demonstration of technologies developed by public funded institutions. In recent times a strategic approach
to focus on the implementation of sustainable and convergent technology solutions rather than to limit the
objectives of technology interventions to demonstrations has been made. Under the new approach, some
select sectors of technology have been identified for strategic interventions. They are a) Solar energy, b)
Water related technologies, c) security technologies, d) Drug and Pharmaceutical and e) Chemical fertilizers.

Solar Energy Research Initiative included the commissioning of a solar thermal and hybrid
technology plant to serve the entire needs of a village of population 4,000 establishing diesel energy parity
in cost as well as a PAN IIT programme to deliver R&D outputs to a public sector unit (NTPC) for driving
down the delivered costs of solar energy through technology innovations. This intervention has been designed
to help policy building based on scientific assessment of viability gaps and size of generation bade subsidy.
Under the initiative, total of 37 faculties from 6 Indian Institutes of Technology have been networked for a
coordinated project.

Water Technology Initiatives and the Mission on “Winning, Augmentation and Renovation
(WAR)” for water: These focus on both a) innovative deployment of available technologies and b)
demonstration of applicability of revenue model based approaches. Under thesesprogrammes, total of 89
clusters suffering from 26 different types of water challenges have been identified from various states in the
country. Technology solutions for total of 8 clusters have been finalized and work commenced. This
intervention aims to offer some sustainable solutions with revenue based models for Ministry of Water
Resources to adopt successful solutions in their programmes.
Under the mission 26 types of water related challenges have been identified and technology solutions
for 10 types of challenges located in 25 clusters of human population of approximately 10,000 prioritized
during the first phase of the project.

Drug and Pharmaceutical Research Programme: In this important ongoing initiative of the
Department, more than 100 Public-Private Partnerships have been promoted for R&D on drug development.
Some important technology leads have been reported during the year under the programme. Six new
collaborative projects between public funded institutions and industry. Loans for R&D in the private sector
enterprises have been supported under Drug and Pharmaceutical programme. Phase 3 clinical trials for an
Indian drug for malaria have commenced under this programme.

Test Bed for Potash Fertilizer from Sea: India imports substantial quantities of potash based
fertilizers annually. One of the public funded R&D laboratory had developed a technology for potash
fertilizers from sea on a bench scale. A R&D consortium of the research laboratory, the fertilizer industry
association and a leading company has now been promoted under a relationship model of technology
development jointly by the Department of Science and Technology and The Ministry of Fertilizers to
establish a test-bed for 3 ton per day plant using continuous technology. This intervention offers scope for
reduction of subsidy on fertilizers.

Scientific Services: The Department of Science and Technology has been promoting some entities
and sub-departments associated with R&D services in the areas of geospatial technologies, testing and
standardization for quality systems for manufacturing, Good Laboratory Practices and Technology
Forecasting and Assessment. The sub departments Survey of India and National Atlas and Thematic
Mapping Organization are two important centres of the country. Geo spatial technologies and map
products of SOI are known for their brand value. These organizations have rendered critical and important
services to the country during the year 2010-11. This includes resolving some zones of conflicts. SOI has
initiated a programme to update quickly the maps of India on 1:10,000 scale. Currently the map products
available for public use are at 1: 50,000 scale. Revision of the map policy is also under consideration.
Technolgoy, Information, Forecasting and Assessment Council (TIFAC) is engaged into look ahead
in technologies, assess the technology trajectories and support technology innovation by network actions
in select technology areas of national importance. National Accreditation Board for Laboratories
(NABL) has gained self sustainability with respect to revenue expenditure and the number of certificates
issued is growing annually at rate of ~14%. The major sectors in which NABL has granted accreditation
are Textiles, Automobiles, Power, Telecom, Petroleum, Food, Health and Environment. As on date, more
than 1300 laboratories have NABL accreditation, out of which 20% are Government laboratories.
DST has been entrusted with the responsibility for certifying Test Facilities with a Good Laboratory
Practices compliance certificate for preclinical testing of Pharmaceuticals, Industrial chemicals,
Agrochemicals, Cosmetics and Food and Feed additives. GLP certification is required by manufactures
while registering these substances for use in humans and in animals. India has completed all requirements as
stipulated by OECD for GLP compliance monitoring. The OECD recognition on Mutual Acceptance of
Data (MAD) has been received data from Indian laboratories would now be acceptable in all 34 OECD
member countries. Removing a new tarrif trade bariers for the country.

Mission mode Programmes: DST has also been implementing and coordinating S&T missions
on Nano science & technology, climate change and adaptation programme, National Mission on bamboo
applications and “Mission for Geospatial Applications” The Department has been implementing Nano
Mission for creating national capacity in frontier area of science and technology namely Nano Science
and Technology since May 2007. So far 253 PhDs and 750 other professionals have been trained under
nano mission in the country. Total of ~2700 publications and 82 patents have resulted from the mission. 11
units have been strengthened and some of them have gained global competitiveness in quality standards.
Under Nano mission, 33 new projects have been initiated during the year. Indian beam line in Synchrotron
at KEK, Japan has been built and made available to Indian scientists for 250 days a year on a dedicated
basis.

National Bamboo Applications Mission has delivered a number of technologies and products
for bamboo applications. Technologies for construction materials have been standardized. Cost effectiveness
of bamboo based construction materials against the conventional materials has been demonstrated. Housing
shelters for flood affected people in Leh covering about 60,000 sqft have been built in record time
providing relief to the affected people. Two missions assigned to DST by PMO for implementation under

National Action plan for Climate Change have commenced activities during 2010-11. The activities of
the Mission on Geospatial Applications include Agricultural Assessment, Flood Modeling and Forecast.

S&T Interventions for Socio-Economic Development:

Programmes relating Science
and Technology for socio-economic development by the Department are of many types to include S&T
Entrepreneurship Development, Science for Equity, Empowerment & Development, Natural Resources
Data Management System, Science & Technology Communication and Gender initiatives.

The National Science and Technology Entrepreneurship Development Board (NSTEDB)

aims to foster technology based and knowledge driven entrepreneurship among S&T persons through its
programmes and activities. Technology Business Incubator (TBI) is a flagship programme of NSTEDB
and focuses on tapping and incubating the potential ideas and innovations through a well defined venture /
enterprise creation process and by effectively utilizing the requisite expertise, facilities and other
infrastructure
available within the host institution and the adjoining region. During this year 5 TBI have been supported
the total number of TBI’s has grown to over 55 women entrepreneurship parks.

National Resource Data Management Systems (NRDMS) provide location specific data on
natural resources using geo-spatial and other data. Several activities have been completed during the year
2010-11. A set of broad parameters has been approved by the Union Cabinet to help evolve a National
Policy on Data Sharing and Accessibility. District geo portal prototypes have been developed and their
utility demonstrated using standards-based open source software packages to provide end users with
accessibility to information vital to local level planning. Sector-specific geo-information services have been
validated and made accessible to the end user community in the sectors of Health and Hydrology. Studies
have been completed in areas like Cartographic Generalisation, Disaster Management (floods and
landslides), Biodiversity, Lake Ecosystem, and Pollution Modelling. Fresh studies have been initiated in
areas like Spatio-temporal Data Analysis, Sensor Web Enablement, Marine GIS, Digital Heritage, and
Hyper Spectral Remote Sensing. Technical capacity has been built through a series of training and user
awareness workshops amongst the scientific and the end user communities towards operationalising National
and State level SDIs.
The National Council for Science & Technology Communication (NCSTC) is mandated to
communicate science & technology to masses. One of the flagships of science communication is the Science
Express, a unique 16 coach custom-built AC train. The train also houses the indigenously developed ‘Joyof-
Science’ in which schools students are encouraged to perform over 50 hands-on experiments & activities
in Physics, Chemistry, Biology, Mathematics & Electronics. This flagship programme of DST has also
been able to effectively engage & motivate students to pursue higher studies as well as careers in science
besides inculcating scientific temper among masses. This iconic mobile classroom has covered more than
160 destinations and enthralled a whopping 51 lakhs people including about 10 lakhs students and 50,000
teachers from 10000 schools. The 18th National Children’s Science Congress-2010 was held at Chennai
during 27-31 December 2010. The focal theme for 2010 & 2011 was Land Resources: Use for Prosperity
& Save for Posterity.

Interventional Programmes for Social Contract: Science for Equity Empowerment and
Development programmes have delivered long term core support to 17 field groups for development and
dissemination of location specific technologies. Programmes for training and capacity building of youth in
tribal & SC dominant areas have been continued. Several capacity building programmes involving selfhelp
groups have been organized. A council for Science and Technology for Rural India (CSTRI) has been
formed and two facilitation centres one at North East Institute for Science and Technology, Johrat and
other at Indian Institute of Technology, Madras at Chennai have been established in order to promote
convergent technology solutions for applications in rural India. Technology interventions for elderly and
S&T programmes for empowerment of weaker sections of the community through capacity and skill
building through S&T tools are flagships of the Department. The budget for Trial sub-plan & SCSP has
been increased. Eleven network programmes on need based themes are being implemented in different
parts of the country during the year. Eight thematic workshops and 55 training programmes have been
conducted at the field level. More than a thousand people were mentored into activities leading to
remunerative incomes. Two Rural Women technology parks are being facititated at Karnataka, A.P.
The Department undertook a study of per-capita income changes at district levels with 1993-94 as
the reference year. Data reveal that in many states, the rates of change of per-capita income of several
lowincome
base districts are higher than those of high-income base districts. The department is undertaking a
study of districts with high and low growth rates of per capita income and examine the possible roles of
technologies and planned socio-technological interventions in contributing to the inclusive growth agenda
of the country.

Gender Initiatives: The department has pioneered several steps for improving gender parity in the
science sector on the one hand and providing opportunities for re-entry of women into S&T related
socioeconomic
activities is receiving wide support and enrolment of women.
Based on the report of the Task force constituted for “Women in Science”, several follow up actions
have been taken. This includes the increase in the value of fellowship for under women re-entry scheme,
crèche facilities for autonomous institutions under the science ministry and revisions of parameters for the
ongoing programmes under women component schemes of DST. A standing committee has been constituted
under the chairmanship of the Minister of Science and Technology for overseeing the implementation of
various programmes leading to gender parity in science.
The Women fellowship schemes of the department provide enhanced opportunities to women scientists
in diverse areas to include fellowships for R&D in basic and applied science (WOS-A),S&T oriented
development and extension(WOS- B) and training in IPR (WOS-C).In the WOS-A scheme 191 projects
were sanctioned this year. Thirty two projects were sanctioned in the WOS-B scheme which aims to
motivate women scientists to contribute to the development of the country through research, development
and adaptation of technology for improving the quality of life and provide additional opportunities for
income generation in urban slums or rural Under the WOS-C scheme the selected candidates are trained
for one year in the area of IPR, mainly patents. Eighty four women scientists completed the one year
training in IPR in May 2010 while 73 are undergoing the one year hands on training with reputed IPR
Lawyers in different parts of the country

S&T co-operation / Partnerships and Alliances: The Department has strived to promote
and develop suitable and strategic partnerships and alliances in the S&T sector. International S&T
cooperation has been stepped up many-fold. State-Centre Technology partnerships have been nucleated
during the year 2010-11. Global Technology alliances and innovation partnerships have been fostered.
Institutional mechanisms for building office of alliance between MHRD and MoST have been built. New
models for PPPs for R&D and clean energy have been proposed. Efforts have been made to establish
more active linkages among academy, research and industry.

State- Centre Technology Partnership: The Government of India has prioritized the gainful
applications of technologies available with institutions under the GOI by states. DST prepared a concept
note for fostering the technology partnerships between states and centre. The concept note was widely
circulated among the various science departments and states. A technology compendium has been prepared
and converted into a technology portal. The first ever meeting of a state machinery and the central science
departments was organised on 6th November 2010 at Kerala. A state specific technology deployment plan
is being developed in consultation with the state. This exercise will be repeated with other states.

Global Innovation and Technology Alliance: The culture of translating a laboratory research
finding into a commercializable Intellectual property and product requires experience sharing for both
Indian R&D system and the industry. DST has been striving to build such cultural changes by twinning the
R&D systems and the industrial enterprises through global alliances in technology and innovations. CII and
DST have been working on a project mode for building synergies with Canada, Israel and other similar
economies. Under GITA about 11 projects have been launched with partners from other economies.
One of the main goals of the department has been to enable the Indian S&T community to increase its
scientific outputs in the form of scientific publications and patents. Various enabling measures,
strengthening and improving funding systems for Extra Mural Research have been addressed. One of
the key roles played by the Department has been to strengthen the R&D funding systems in the
country.
India has registered an annual growth of rate of 12% in scientific publications in Science Citation
Indexed journals during the last three years. This is to be compared to about 4% of global average.
There is also a relative improvement in the global ranking from 15th position in 2000 to 10th in 2009
with respect to the number of publications. There is also an improvement in the relative ranking of
number of patents filed by Indian researchers in the USA and OECD countries. A significant increase
in the number of PhD outputs in the country has been reported during the last five years.
The current share of DST in the Extra Mural Research funding in the country is about 50%. On
account of several initiatives taken by the department, there has been an increase of more than 250%
in the number of proposals received by the department indicating an expansion of R&D and stake
holder bases. Service impact ratio of the department as the major R&D funding agency of the country
is assessed by the percentage share of researchers receiving Extra Mural Research grants from DST.
More than 50% of active researchers publishing papers in SCI journals are recipients of R&D grants
from the Department currently.
A concerted effort has been made to increase the size of the project grants and speed up the decision
making processes relating to release of R&D grants during the last three years. A Science and

Engineering Research Board has been notified with a desire to de-bureaucratize R&D funding systems.
###########################################

5.What is GATS? How can it facilitate access to technology and technical information for developing
countries?

What is GATS?
The General Agreement on Trade in Services (GATS) is the first set of multilateral rules covering international
trade in services. It came into effect in 1995 and is being negotiated under the auspices of World Trade
Organization (WTO).
GATS has three main parts: the main text with general principles and obligations; annexes with rules for
specific sectors; and Member countries' specific commitments to provide access to their markets. The WTO
provides links to the GATS text.
Services are covered by GATS
GATS considers education as a tradable service. GATS covers 12 service sectors (Business; Communication;
Construction and Engineering; Distribution; Education; Environment; Financial; Health; Tourism and Travel;
Recreation, Cultural, and Sporting; Transport; "Other".). Two exceptions are services in the exercise of
governmental authority and air traffic rights

laws are covered by GATS

GATS applies to all measures affecting trade in services. GATS defines measures as all laws, regulations and
practices from national, regional or local government or non-governmental bodies exercising powers
delegated to them by government that may affect trade.
services be traded
GATS defines 4 ways that all services can be traded based on modes of supply:
1. Consumption abroad of service by consumers travelling to supplier country (e.g. students studying abroad);
2. Cross border supply of a service to consumer country without the supplier (e.g. open and distance
education);
3. Commercial presence of a supplier in consumer country (e.g. offshore foreign universities); and
4. Presence of Natural Persons from supplying country in consuming country (e.g. professors, researcher
working outside their home country).
rules does GATS have
GATS has two broad categories of rules. The first category are general rules which apply, for the most part, to
trade in all services. The second category are rules applicable to national commitments in specific service
sectors.

General Rules - Most Favoured Nation Treatment (MFN)

The most significant general rule is that of 'Most Favoured Nation Treatment' (MFN). MFN means that
countries must give equal and consistent treatment to all foreign trading partners. WTO describes this as
'favour one, favour all'.
rules for national commitments - Market Access & National Treatment:
Market Access refers to the degree to which market access is granted to foreign providers in specific sectors.
GATS sets 6 ways of limiting free market access. These limitations may not be applied unless their use is clearly
provided for in the schedule of commitments. These limitations include : limitations on the number of service
suppliers, limitations on the value of transactions, service operations or employees in the sector.
National Treatment means equal treatment for foreign and domestic services or service suppliers.
Progressive Liberalization
GATS has rules for Members schedules of specific commitments ('agenda for trade'). Through these schedules
successive rounds of negotiations are foreseen to achieve progressively higher liberalization of trade in
services.
National Schedules
Each country must have a Schedule of Specific Commitments which identifies the service sectors that it is will
open to foreign markets. These commitments also spell out any limitations on market access and national
treatment.
Negotiating Proposals
Negotiating Proposals outline the role of government, rationale/purpose of trade liberalization; benefits of
trade liberalization; public private mix.

The GATS distinguishes between four modes of supplying services: cross-border trade, consumption abroad,
commercial presence, and presence of natural persons.
Cross-border supply is defined to cover services flows from the territory of one Member into the territory of
another Member (e.g. banking or architectural services transmitted via telecommunications or mail);
Consumption abroad refers to situations where a service consumer (e.g. tourist or patient) moves into
another Member's territory to obtain a service;
Commercial presence implies that a service supplier of one Member establishes a territorial presence,
including through ownership or lease of premises, in another Member's territory to provide a service (e.g.
domestic subsidiaries of foreign insurance companies or hotel chains); and
Presence of natural persons consists of persons of one Member entering the territory of another Member to
supply a service (e.g. accountants, doctors or teachers). The Annex on Movement of Natural Persons specifies,
however, that Members remain free to operate measures regarding citizenship, residence or access to the
employment market on a permanent basis.

(a) General obligations

MFN Treatment: Under Article II of the GATS, Members are held to extend immediately and unconditionally to
services or services suppliers of all other Members “treatment no less favourable than that accorded to like
services and services suppliers of any other country”. This amounts to a prohibition, in principle, of
preferential arrangements among groups of Members in individual sectors or of reciprocity provisions which
confine access benefits to trading partners granting similar treatment.
Derogations are possible in the form of so-called Article II-Exemptions. Members were allowed to seek such
exemptions before the Agreement entered into force. New exemptions can only be granted to new Members
at the time of accession or, in the case of current Members, by way of a waiver under Article IX:3 of the WTO
Agreement. All exemptions are subject to review; they should in principle not last longer than 10 years.
Further, the GATS allows groups of Members to enter into economic integration agreements or to mutually
recognize regulatory standards, certificates and the like if certain conditions are met.
Transparency: GATS Members are required, inter alia, to publish all measures of general application and
establish national enquiry points mandated to respond to other Member's information requests.
Other generally applicable obligations include the establishment of administrative review and appeals
procedures and disciplines on the operation of monopolies and exclusive suppliers.
(b) Specific Commitments
Market Access: Market access is a negotiated commitment in specified sectors. It may be made subject to
various types of limitations that are enumerated in Article XVI(2). For example, limitations may be imposed on
the number of services suppliers, service operations or employees in the sector; the value of transactions; the
legal form of the service supplier; or the participation of foreign capital.
National Treatment: A commitment to national treatment implies that the Member concerned does not
operate discriminatory measures benefiting domestic services or service suppliers. The key requirement is not
to modify, in law or in fact, the conditions of competition in favour of the Member's own service industry.
Again, the extension of national treatment in any particular sector may be made subject to conditions and
qualifications.
Members are free to tailor the sector coverage and substantive content of such commitments as they see fit.
The commitments thus tend to reflect national policy objectives and constraints, overall and in individual
sectors. While some Members have scheduled less than a handful of services, others have assumed market
access and national treatment disciplines in over 120 out of a total of 160-odd services.
The existence of specific commitments triggers further obligations concerning, inter alia, the notification of
new measures that have a significant impact on trade and the avoidance of restrictions on international
payments and transfers.

What information is contained in services “schedules”?

Each WTO Member is required to have a Schedule of Specific Commitments which identifies the services for
which the Member guarantees market access and national treatment and any limitations that may be
attached. The Schedule may also be used to assume additional commitments regarding, for example, the
implementation of specified standards or regulatory principles. Commitments are undertaken with respect to
each of the four different modes of service supply.
Most schedules consist of both sectorial and horizontal sections. The “Horizontal Section” contains entries that
apply across all sectors subsequently listed in the schedule. Horizontal limitations often refer to a particular
mode of supply, notably commercial presence and the presence of natural persons. The “Sector-Specific
Sections” contain entries that apply only to the particular service.

What is the so-called “built-in agenda” of the GATS?

The GATS, including its Annexes and Related Instruments, sets out a work programme which is normally
referred to as the “built-in” agenda. The programme reflects both the fact that not all services-related
negotiations could be concluded within the time frame of the Uruguay Round, and that Members have already
committed themselves, in Article XIX, to successive rounds aimed at achieving a progressively higher level of
liberalization (see below). In addition, various GATS Articles provide for issue-specific negotiations intended to
define rules and disciplines for domestic regulation (Article VI), emergency safeguards (Article X), government
procurement (Article XIII), and subsidies (Article XV). These negotiations are currently under way.
At the sectorial level, negotiations on basic telecommunications were successfully concluded in February 1997
and negotiations in the area of financial services in mid-December 1997. In these negotiations, Members
achieved significantly improved commitments with a broader level of participation.

Matchmaking and provision of information on technologies

One of the main challenges faced by developing countries is to identify the most suitable technology from out
of several alternative technologies and multiple sources of technologies. This is important especially in those
areas where the technologies are changing rapidly. Matching those who possess the necessary technologies
with those that need them may be difficult and costly for developing countries with limited sources of
information. The importance of matchmaking in facilitating the transfer of technology is illustrated
by the activities of United States-Asia Environmental Partnership (US-AEP), a public- private interagency
partnership, supported by the United States Agency for International Development (USAID).

Promoting public-private partnerships

Public-private partnerships present a unique opportunity for combining the entrepreneurial, innovative and
efficiency of private firms and the flexibility of public institutions to deliver services especially in neglected
areas. These partnerships so far have been in limited areas. The Public Private Partnerships (PPP) programme
managed by the Deutsche Gesellschaftfür Technische Zusammenarbeit (GTZ) promotes technology transfer to
developing countries by providing support to firms in developed countries to take up projects to be
implemented in developing countries. GTZ offers its experience, local contacts and financial support, while the
private partner provides technical assistance to projects that are jointly planned, financed, and implemented
with the local institutions.
International alliances and transfer of technology
One of the significant features of the global business environment in recent decades
has been the formation of networks involving partners in different countries, each providing
complementary support services and technologies. These networks are designed to reduce the
risks and share the costs associated with the development of new products. Such arrangements
are particularly important in areas with limited access to financing and technology. Some of
these alliances may involve developed and developing country institutions that may share key
technologies. an international consortium (Brazil, China, France, India, Japan, Republic of Korea, Taiwan
Province of China, Thailand, United Kingdom and US) led by Japan. The EU-China collaboration has provided
unique training opportunities. In addition, there are dedicated centres that promote partnerships and
alliances. For instance, the Australian Centre for International Agricultural Research (ACIAR) promotes
partnerships between Australian and developing country institutions. ACIAR has supported more than 50 R&
agricultural projects in Viet Nam between 1993 and 2003.

UNCTAD Series on Technology Transfer and Development

project, the Institute of Agricultural Sciences of South Viet Nam worked with the Queensland
Department of Primary Industries to develop and introduce a pig variety suited to Viet Nam
that grows faster and produces leaner meat. The project also equipped five artificial
insemination centres to support the introduction of this superior breed. ACIAR participates in
projects in Southern Africa, Asia and the South Pacific, and supports international agricultural
research centres such as the Consultative Group on International Agricultural Research Centre
(CGIAR) (see annex 1 for details).
Measures to improve host-country absorptive and technological capacity
Many developed countries support human resource development in developing
countries by providing scholarships for higher education in their home countries. They also
provide research and equipment support to academic, research and professional institutions in
developing countries. Technical assistance is also provided to industrial associations and
government advisory bodies.

UNCTAD Series on Technology Transfer and Development

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6.Discuss the major issues related to allocation and management of R&D funds.

Research and development management involves overseeing and controlling the research and development
department of a given company. Research and development is the process of developing new ideas in order to
patent, market or sell those ideas. Research and development exists in many industries but is most common in
the technology industry and the drug industry where there is a consistent need for newer, better and more
innovative projects and where more extensive research and work must be done to make those products a
functional reality.
There are a number of different things that go into research and development management, depending on the
industry and the type of project being done. One of the main components of research and development
management involves overseeing, managing and allocating the budget assigned to given research projects.
Research and development, or R&D, when conducted by for-profit companies, is designed to produce a
product that will be profitable for the company when patented or sold.
R&D managers must ensure that funds are allocated only to products likely to produce a good return-on-
investment (ROI) and that any funds invested are reasonable in light of what the ROI will ultimately be if the
product is developed properly. For example, it would not be logical to allocate millions in funds to create a
drug used to treat a minor illness that only a small portion of the population has, since there would be both a
small market and little willingness to pay high prices for the given drug. On the other hand, allocating millions
to research cures for cancer is a more appropriate investment since there are many people with cancer who
would pay large sums of money to be made healthy.

LEVEL 1 PROBLEMS - R&D INFLUENCES

The portfolio problems that initiated the first stage of development were experienced during the period 1987 to
1989 and are still prevalent today.
 Stock market crashes severely affected investors’ financial security, yet crashes and bear markets are
natural risks.
 Traditional approaches to portfolio structure could not manage the longer term complex
relationships between assets and liabilities, while modern portfolio theory had noliability relationship.
 There was no disciplined, structured framework able to direct asset management expertise to the
management of the individual portfolio.
What was the optimum allocation between short and long term assets to meet short and long term financial
needs to protect short term financial security against significant short term stock market and economic risk and
to optimise long term total returns?

LEVEL 2 PROBLEMS – R&D INFLUENCES

The complexities of individual management have in the main pushed asset management expertise to institutional
and packaged retail mandates. The retail solution had been to use mean variance optimisers and model portfolio
options managed independently of the client’s individual needs.
These solutions separate asset management expertise from the construction, planning and management of
assets and liabilities and more importantly separated the relationship between valuation and allocation. These
portfolio problems are as follows.
 How to integrate, automate and personalise valuation driven asset management with asset and liability
management frameworks.
 Allocation theory regarding the structure and management of allocation was and still is limited. We
needed an allocation framework with both a risk/return and a liquidity relationship.
 Value investment and globally diversified allocation styles were subject to significant levels of
performance risk in the late 1990s.
 Investors and asset managers occupy different areas in the same risk/return universe. If you are to
personalise allocation this means a different allocation structure for each client.
 How did you relate the performance style risk aversion of an investor to your style and, provide the
necessary allocation permutations to meet all performance risk aversions. Towards the end of the 1990s
markets were moving to very high levels and valuations were exposing new cash investors’ financial
security to significant long term risk. We needed a rationale to assess significant risk to liabilities, a way of
automating and managing the resulting allocation and a way of assessing and relating risk profiling to the
allocation structure.
 The planning of current and future structure in the face of future portfolio inflows and outflows is a
dynamic and not a static problem. We need to be able to adjust the relationship between current and
future allocation and current and future liability profiles.
All these problems have characteristics in common; personalisation, dynamism, automation, centralisation of
asset management and decentralisation of investment planning.

LEVEL 3 PROBLEMS – R&D INFLUENCES

The objective of phase 3 was to develop a universally accessible asset and liability management system. The
problem, everybody has different risk assessment methodologies, different allocation and management
processes and, different portfolio construction methodologies.

RESEARCH & DEVELOPMENT

R&D LEVEL 1 PROBLEMS

 Research focussed on understanding the fundamental characteristics of different asset classes over
time and the relationship between the risk return profiles of asset classes and asset allocation relative to
liabilities over time.
o This led to the development of a portfolio foundation for the structure, planning & management of
assets relative to liabilities over time. The natural relationship between asset risk/return at a point in time and
over time in liability space provided a direct relationship between portfolio structure, portfolio planning and
portfolio management. This allowed you to automate the construction, planning and management of assets to
meet financial needs.
 When modelling the ability of assets to meet needs over time, you needed to assess the ability of
assets to meet needs in the event of significant risk. Research focussed on the risks to return and the
development of return assumptions that reflected these risks.
o Led to the development of economic and market cycle risk/return modelling. No client should ever
have to revise their plans because of natural stock market and economic risks.
 Conventional risk assessment had no relevance to portfolios structured in accordance with liabilities
and liability risks. A new risk assessment methodology and process was developed which directly related risk
aversion to portfolio structure, planning & management.

Level 1 results

The first phase of research and development under pinned the development of the basic models and processes
which were used to plan primary portfolio structure, allocate low risk assets and assess ability of assets to meet
financial needs over time. These were the short term asset liability model which optimised portfolio allocation
and structured the low risk portfolio and the long term asset liability model which both modelled and managed
the long term planning and structure of assets and liabilities.

R&D LEVEL 2 PROBLEMS

Level 2 was about saving time at the individual portfolio level, increasing quality and output and providing a more
effective focus of central investment resources. If you could not centralize asset management functionality,
there would be no way in which asset management could be integrated within the liability management process.
Research and development focused on the following.
Allocation management frameworks
 Relative valuation frameworks for the construction and management of allocation. Relative valuation
frameworks relate point in time valuation models to allocation structures. They set the price, risk and
relative price relationships and manage security, market component and portfolio allocation. Link these
to your valuation models and real times prices and, you have a dynamic allocation delivered to all
recommended portfolio options and existing client portfolios.
Centralized management of existing asset allocation.
A personalized benchmarking system that managed the deviation between the recommended allocation and the
client’s own personal allocation and allowed individual portfolio management to be sensitive to the client’s
liability profile, size and timing of inflows and outflows and risk and performance preferences. You could
manage thousands of different portfolios from one central allocation strategy, up to 10
liquidity/risk/return/relationships and 10 and 20 personal allocation benchmarks.

Level 2 results

Level 2 looked at the fundamental nature of valuation and allocation and developed a system, process and
methodology for the centralisation and personalisation of asset management expertise, saw important
developments in open system design, risk profiling and important developments regarding asset allocation and
return management structures within liability space.

LEVEL 3 PART 1 - INTERNET WEALTH MANAGEMENT RESEARCH & DEVELOPMENT 2000 TO 2001

Research and development in this phase looked at wider wealth management issues, with particular focus on the
following.
 Research into internet delivery of wealth management services and the application and integration of
investment planning & asset management systems onto the internet.
 Research into the mechanics and organisational structures of wealth management delivery and future
opportunities and competitive pressures in the market place.

SYSTEMS DEVELOPMENT AND APPLICATION

SIMPLE PROTOTYPE

The first phase of research and development under pinned the development of the basic models which were
used to plan primary portfolio structure, allocate low risk assets and assess ability of assets to meet financial
needs over time. These models were as follows.
 Prototype short term asset liability model.
 Long term asset liability model.
 Basic low risk security interaction.
The system did not integrate portfolio construction, which was organised centrally and managed individually via
segregated model portfolio options. The benefits were primarily towards planning of assets and structure of the
low risk portfolio. At this stage portfolio management was a more involved process. However, it did allow for
the integration of asset management with the financial planning process.

SOFTWARE DEVELOPMENT

Software development was carried out between 1992 and 1994. This development integrated the short and long
term asset liability models, and delivered recommended low risk and equity portfolios. The system process was
as follows.
 Input multi period income and capital inflows and outflows (earnings, pensions, expenditure etc).
 Input existing investments.
 System analysed ability of assets to meet liability profile over time and allowed adjustment of multi
period objectives.
 Provided recommended low risk portfolio to meet short term needs and recommended model
mutual fund portfolio to meet long term needs.
 System provided an area where changes to existing portfolios relative to the recommended could be
made.
By 1996 the software was used by up to 20 firms of financial advisorsand was distributing recommended
portfolios to advisors.
The system was limited in its ability to perform centralised portfolio construction, planning and management as
well as the necessary flexibility to optimize the asset management and liability management relationship. While
it was solving some important problems, it had also created a higher level of complexity, which, needed to be
managed. This was the reason for Phase 2 Research and Development.

DETAILED SYSTEM SPECIFICATION & ADVANCED PROTOTYPE DEVELOPMENT

A detailed system specification was developed for an advanced universal system capable of allowing universal
input and application.

The activities of the R&D group should be consistent with, and fully support, the overall\ business and
technology strategy of the company. As such, the decisions made by senior
management regarding the role that technology is expected to play in the company’s overall business strategy
will impact the type and scope of the projects to be undertaken
by the R&D group, the amount of resources that will be allocated to R&D activities and the manner in which the
performance of the R&D group will be measured.
I. Research and Development Portfolio Analysis
Just as companies speak of product portfolios, it is also possible to plot the array of different types of R&D
initiatives being undertaken by the company. One way that this
can be done is to classify R&D projects by reference to the level of risk involved with successful completion of
the work. Another method that can be used is to focus on the
relationship of the project to the strategic objectives of the company. For example, the company may invest in
the development of "pacing technologies," which are high-risk
undertakings that have the potential, if successful, to radically change the basis for competition within the
applicable markets.
A "key technology" is one that is used in current products. In this area, the focus may be on enhancements
that allow the company to maintain a proprietary position. Finally, "base technologies" are the building blocks
for work in the other areas, even though they are widely available and offer no specific competitive advantage.
The purpose of any type of portfolio analysis is to focus on the
entire array of R&D projects being undertaking by the company at any point time in order to evaluate whether

II. Budgeting
As with any other significant business activity, a budget should be established and monitored for the
company’s R&D activities. Obviously, the main issue in the budgeting
process is determining the level of funding to be allocated to R&D and the activities and projects within the
general area that warrant investment. In addition, however, senior
management must be sure the budget is organized in a manner that allows the company to track specific types
of activities and, as necessary, allocate direct and indirect expenses to
individual departments, business units and projects. While establishing priorities and proposing specific
activities and projects falls within the purview of the vice president or
other senior management of the R&D unit and/or the company’s chief technology officer,
the chief financial officer and the company’s internal accounting department will need to lend support in
designing the appropriate tracking procedures.
III. Measuring Productivity and Performance
One dilemma that is commonly faced in the area of technology management is identifying and applying an
appropriate measure of the “productivity” of the R&D group or the return on investment (“ROI”) for funds
allocated to R&D activities. This issue is usually not a large concern at the early stages of the company’s
existence since successful R&D for the first products and technologies is a “mission critical” exercise that must
be completed in order for the company to survive and move forward. As such, debate about ROI on R&D is
moot; however, investors may express their concerns about cost overruns in relation to the initial budget by
extracting concessions from the employee owners in negotiations for additional funding to complete the initia
R&D projects and expand the R&D infrastructure by hiring more staff and purchasing or leasing new
equipment and other assets. As the company grows and the universe of potential R&D opportunities expands,
senior management must begin to apply traditional financial analysis when determining the R&D agenda and
evaluating the past and current activities within the R&D group.