Integrating Business Strategy and R&D Strategy Frameworks for R&D Strategy Formulation.

Integrating Business Strategy and R&D Strategy

Frameworks for R&D Strategy Formulation

Critical Decisions in R&D Management

• Why should the company carry out R&D?• How much should the company invest in R&D?• What is the role of R&D in the company?• What types of R&D should the company engage in?• What should the company’s R&D strategy be?• Which R&D projects should be selected? • What should be the criteria for R&D project selection? • How can investments in R&D be allocated optimally?• How can the company manage its R&D projects effectively

and efficiently?

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Strategic Planning Process

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Scanning the External Environment for R&D 1

• Practiced throughout the product life cycle• Building a comprehensive data base• Anticipating the responses of competitors • Not feature and function orientation, but

business solution and benefit orientation

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Scanning the External Environment for R&D 2

• Identifying information needs in detail– Specific topic – Specific focus – Specific time frame

• Collecting data from various sources available– Understanding the source of information– Understanding the methodology of data collection– Comparing the information from different sources

• Documenting for own files: sources, methodology, data, and assumptions made

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Essence of Strategic Management

• Translating – mission, objectives, strategy

• into policies and tactics– processes– resources– linkages

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Technology Adjustment

• Reassessment of internal and external environment– Periodic– Triggered by external events– Triggered by own benchmarking activities

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Designing the Technology Strategy

• Based on the company’s over-all strategy, identify important product-market technologies

• Use technologies broadly in the various activities within the company’s value chain

• Commit resources to the selected technologies• Align organization design and management

techniques to facilitate the technology function

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Maturity of Technology

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Natural limit of technology

Embryonic Growth Mature Aging

Level of technology

Time

Maturity of Technology

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Natural limit of technology

Embryonic Growth Mature Aging

Level of technology

Time

Maturity of Technology in Reality

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Natural limit of technology

Embryonic Growth Mature Aging

Level of technology

Time

Maturity of Technology and Competitive Impact of Technology 1

• Maturity of technology is intrinsic to a technology, regardless of the industry

• Competitive impact of a technology is extrinsic, the impact closely dependent on the industry that applies the technology

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Maturity of Technology and Competitive Impact of Technology 2

• Maturity of technology gives insight to the potential for future technological advances

• Competitive impact of a technology indicates the differences that advances in technologies have to specific industries and specific businesses

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Types of Technologies by Competitive Impact

• Pacing technologies• Key technologies• Base technologies

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Pacing Technologies

• Technologies that have the potential to change the entire basis of competition

• Have not yet been embodied in products or processes

• These often develop into key technologies

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Key Technologies

• Technologies that are most critical to competitive success because they offer the opportunity for meaningful product or process differentiation

• These yield competitive advantage

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Base Technologies

• Technologies that, although necessary and essential to practice well, offer little potential for competitive advantage

• These technologies are typically wide-spread and shared

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Competitive Impact of Technologies

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Pacing Key Base

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Strategic Mission of R&D 1

• To exploit the potential for improvements in the competitive position in technologies that are important to the business

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Strategic Mission of R&D 2

• Key technologies: main source of competitive advantage

• Pacing technologies: exploring the future opportunities

• Base Technologies: should always be mastered for sustaining competitiveness

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Strategic Management of Technology

• Recognizing important technologies for the business (maturity of technology and competitive impact)

• Mastering the important technologies to gain sustainable competitive advantage

• Using technologies effectively by integrating them with the other success factors of the business

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Technological Competitive Strength

• Measures the degree to which a particular company masters, compared to its competitors, technologies important for the business or critical to the successful conduct of R&D

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Measuring Technological Competitive Strength

• No rigorous measures• Size and competence of the resources that the

R&D organization has for achieving the desired results

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Levels of Technological Competitive Strength

• Dominant• Strong• Favorable• Tenable• Weak

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Dominant Technological Competitive Strength

• Powerful technological leader• Strong in commitment, funds, manpower,

creativity, …• Well recognized in its industry• Sets pace and direction for technological

development• Competitors consistently seek to catch up

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Strong Technological Competitive Strength

• Able to express independent technical action, set new directions

• Technological commitment and effectiveness consistently high

• Technological accomplishments distinguish its strategic business units (SBUs) from lesser competitors

• Competitors consistently seek to catch up

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Favorable Technological Competitive Strength

• Able to sustain the technological competitiveness of the strategic business units (SBUs) it serves

• Has strengths that can be exploited to improve the technological competitive position

• Not a technological leader except in developing niches

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Tenable Technological Competitive Strength

• In a catch-up mode • Unable to set independent course in

development• Can maintain the competitiveness of its

strategic business units (SBUs), but unable to differentiate them from competitors

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Weak Technological Competitive Strength

• Declining quality of technical output compared to competitors

• Short-term firefighting focus • Products’ and processes’ costs slipping

compared to competitors• Difficult but not impossible to turn around

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Technological Competitive Strength

• Dominant. Technological leader• Strong. Sets new directions• Favorable. Not leader, except in niches• Tenable. In a catch-up mode• Weak. Firefighting focus

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Example of a Strategic Situation: Own Company Tenable

Result of a technology analysis: own company has “tenable” technological competitive strength and one or more competitors have strong technological competitive strength then viable options are– making a sufficient investment in R&D to reach at

least parity with the competition– abandon the project

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Example of a Strategic Situation: Embryonic Stage

• Possible for a weak company to catch up by increasing resources devoted to the technology

• Protection of technology is a key to sustainable competitive advantage

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Example of a Strategic Situation: Mature Industry Stages

• Catch-up strategy can be costly and risky. Usually there are many players in the market, with substantial resources

• Mature technologies usually offer limited competitive advantage. Existing technologies are often well understood. Patents have expired or will expire soon

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Example of a Strategic Situation: An Unforgivable Situation

• Undertaking an R&D project with insufficient knowledge of competition and without analysis of the competitors’ technological strength

• Resources, which could have been saved, are probably wasted

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Example of a Strategic Situation: Strategies for Small Companies

• Establish sufficient strength to out-perform competitors

• Focus on a single technical area– may require mastering of more than one product

or process technology

• Focus on a single business opportunity

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Thank you!

AcknowledgementsMain source: Roussel, P.A. & Saad, K. N. & Erickson, T. J. (1991) Third Generation R&D: Managing the Link to Corporate Strategy, Boston, Massachusetts, USA, Harvard Business School Press, 192 pages.

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