CH 8 Strategic Alliances

✽ In strategic alliances firms cooperate out of mutual need and share the risks to reach a
common objective.
✽ Strategic alliances provide access to resources that are greater than any single firm could
buy.
✽ This can greatly improve its ability to create new products, bring in new technologies,
penetrate other markets and reach the scale necessary to survive in world markets.
✽ Collaboration with other firms, however, can take many forms.
✽ Virtually all firms have networks of suppliers and, in some cases, this can form part of a
firm’s competitive advantage.
✽ One of the major factors that prevents many firms from achieving their technical
objectives and, therefore, their strategic objectives, is the lack of resources.
✽ For technology research and development (R&D), the insufficient resources are usually
capital and technical‘critical mass.

Forms of strategic alliance

♧ Strategic alliances can occur intra-industry or inter-industry.

1. Licensing
♧ a relatively common and well-established method of acquiring technology.
♧ Aside from collaborative management, the success of a business alliance depends on the
*existence of mutual need* and the *ability to work together*, despite differences in
organisational culture.

♧ Alliances often are pursued as ways to explore new applications, new technologies or
both.

CH 9 how R&D is managed

♧ Large organisations with more resources can clearly afford to invest more in
R&D than their smaller counterparts. Therefore, in order to present a more
realistic comparison than that derived from raw sums invested, R&D
expenditure frequently is expressed as

R&D as % of sales = (R&D expenditure ÷ total sales income = 100%)

✽ A more realistic picture of R&D intensity within the organization.

✽ R&D is a major investment contributing to company success along with other
factors like excellent operations and good strategic choices. There are well-
established links between R&D growth and intensity and sales growth, wealth
creation efficiency and market value.
✽ This raises an important point.
✽ R&D expenditure should be viewed as a long-term investment.
✽ It may even reduce short-term profitability.

CH 10 Managing R&D Projects

Ways of acquiring external technology
♧ The ability to network in order to acquire and exploit external knowledge
enables the firm to enter new areas of technological development.

Forms of external R&D

♧ Contract R&D
- In those situations where the business has a low level of understanding of the
technology (bottom left-hand corner of technology acquisition matrix),
contracting the R&D out to a third party often is suitable.
- University research departments have a long history of operating in this area.
♧ R&D strategic alliances and joint ventures
- With a joint venture, the costs and possible benefits from an R&D research project
would be shared. They are usually established for a specific project and will cease on its
completion.
♧ R&D consortia
- Such types of business groups are based on common membership and collaborate over a
long period of time.
- The main advantages of this approach are the ability to reduce costs and risks, the ability to
access technologies and to influence industry standards on new technology (the experience
of the VCR industry and the computer-operating system industry have shown the potential
dangers in having competing industry standards).
- The main disadvantages are similar to those for joint ventures, in that one party may not be
able to gain any technological benefit from the consortia.

CH 11
♧ Technology that has already been produced, and hence paid for by someone else, could be
used and exploited by other companies to generate revenue and, thereby, economic
growth for the economy

OPEN innovation

- The need for external linkages and connectivity is a major factor influencing the
management of innovation.
- the process of innovation has shifted even further from one of closed systems, internal to the
firm, to a new mode of open systems involving a range of players distributed up and down
the supply chain.

- This chapter illustrates the strong link within the innovation process between the
external environment of the firm and the internal environment of the firm.
- It examines and explores knowledge flows within the innovation process.

Absorptive Capacity

♧ R&D expenditure as an investment in an organisation’s absorptive capacity and argue that

an organisation’s ability to evaluate and utilise external knowledge is related to its prior
knowledge and expertise and that this prior knowledge is, in turn, driven by prior R&D
investment.
♧ Absorptive capacity often is touted as being important for the success of open innovation.
♧ Firms needed to develop both supplier- and customer-types of absorptive capacity.
♧ Inbound open innovation involved customer absorptive capacity and
♧ Outbound innovation required supplier absorptive capacity.
♧ In each case, absorptive capacity needed to be leveraged differently.
♧ Inward technology transfer will be successful only if an organisation has not only the
ability to acquire but also the ability effectively to assimilate and apply ideas, knowledge,
devices and artefacts.
♧ Organisations will respond to technological opportunity only in terms of their own
perceptions of its benefits and costs and in relation to their own needs and technical,
organisational and human resources.
♧ inward technology transfer, therefore, is concerned with creating or raising the capability
for innovation.

This four-stage conceptual framework (4A) is used to explore the processes involved in
inward technology transfer.
♧ That it is not how much companies spend on research and development that determines
success – what really matters is how those R&D funds are invested in capabilities,
talent, process and tools.
♧ R&D expenditure now consumes a significant proportion of a firm’s funds
across all industry sectors.
♧ This is, principally, because companies realise that new products can provide a
huge competitive advantage.
♧ Competition can appear from virtually anywhere in the world.
♧ Globalisation provides opportunities for companies but it also brings increased
competition.
♧ The introduction of new products provides a clear basis on which to compete,
with those companies that are able to develop and introduce new and
improved products having a distinct advantage.

Why You Shouldn't Cut R&D Investments In Times Of Crisis And Recession

https://www.forbes.com/sites/forbestechcouncil/2020/05/29/why-you-
shouldnt-cut-rd-investments-in-times-of-crisis-and-recession/?
sh=5c0a8eeb257f

Other studies conducted during the 2008-2009 crisis, including multiple

surveys by McKinsey & Co., showed related findings, with leaders of
innovation-focused companies indicating they are maintaining or even
increasing their R&D investments to avoid product delays and maintain their
competitive edge in the market.

Many top companies save money by a renewed focus on optimized R&D

processes that boost strategically promising efforts and increase focus on
efficient project execution, raising productivity, increasing time to market and
improving their bottom line to the benefit of all stakeholders.

Long periods of economic expansion can make companies a little complacent.

When markets slow down, business owners need to focus with laser intensity,
taking out the magnifying glass and looking at where they can cut costs and
increase efficiency through innovation.

Unfortunately, this can mean layoffs. The good news is that intentional
spending in R&D could reveal the best ways to save on energy, trim material
usage and tighten the supply chain to reduce waste. This will lighten your
footprint on the planet independent of the necessary belt-tightening.

- See this as an opportunity to deep dive into goals.

- Businesses that can adapt quickly will have a better chance of succeeding.

- Plan ahead for potential slowdowns.

- Make sure to provide above-and-beyond service to your current customers.

- Their loyalty will ensure consistent and reliable revenue, especially during
times of crisis.
- As time goes on, reassess what works and what doesn't, and increase
conversations through trial and error.

- Although the urge to reduce costs is understandable in trying times, the

data shows that the optimal crisis response should entail maintained or
increased investments in the area of R&D as the best path to survival and
growth in today's world.

- Such investments should be made all the more wisely by leveraging the
best available specialized engineering talent and maintaining a culture of
innovation in order to ensure success in the middle and long-term.