BM050-3.5.

3 Innovation Management and New

Product Development (IMNPD)

An introduction to New Product

Development (NPD)

New products Development:

Managing Research,
Technology and Intellectual
Property
 New Product Development-
Considerations when developing NPD
strategy
Learning Objectives
1. Recognize that R&D management is context dependent
2. Recognize that the R&D function incorporates
several very different activities
3. Explain that formal management techniques are an
essential part of good R&D management
4. Recognize that certain factors are necessary but
their presence alone is not sufficient to achieve
successful management of R&D projects

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 What is Research and
Development?
‘ R&D is the purposeful and systematic use of
scientific knowledge to improve man’s lot even
though some of its manifestations do not meet with
universal approval’
Knowledge and concepts

Basic Research
Applied Research

Development
Technical Service
Low Product Tangibility Physical
Product
High
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 R&D Management and the
Industrial Context
 There is no single best way to manage R&D.
no prescription, no computer model that will
ensure its success. Each company and
competitive environment is unique.
 R&D needs to be managed according to the
specific resources of the company.
 R&D expenditure is frequently expressed as:
R&D as % of sales = R&D expenditure x 100%
total sales income

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 R&D Management and the
Industrial Context
Industry Sector R&D expenditure as % of
sales
Pharmaceuticals and Biotechnology 14.9
Software and computer 10.4
Technical Hardware 8.2
Leisure goods 7.0
Electrical and electronics 4.8
Aerospace and defense 4.6
Automotive and parts 4.2
Chemicals 3.2
Industrial engineering 2.7

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 The Operations that Make Up
R&D
Basic Research
 General work nature intended to apply to broad
range of uses or new knowledge about an area
 Fundamental science and is usually only
conducted in laboratories of universities and
large organization
 Outputs will result in scientific papers for journals
 E.g. antibiotics in the 1940s

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 The Operations that Make Up
R&D
Applied Research
 Use of existing scientific principles for the solution of a
particular problem
 Application of science
 May lead to new technologies and development of
Patent.
 Research typically conducted by large companies and
university departments
 E.g. development of Dyson vacuum cleaner. Centrifugal
forces spin dirt out of the air stream in 2 stages at air
speed of 924 miles an hour.

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 The Operations that Make Up
R&D
Development
 Similar to applied research, involves the use of known
scientific principles, but differs in that activities centre on
products
 Usually involved in overcoming a technical problem
associated with a new product
 May involve exploratory studies to improve product
performance
 Eg. Dyson launched a a cylinder model to complement
its upright model.

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 The Operations that Make Up
R&D
Technical service
 Focuses on providing a service to existing products and
processes
 Involves cost and performance improvements to existing
products, processes or system
 Include design changes to products to lower the
manufacturing cost
 Dyson appliances reduce the cost of manufacturing its
vacuum cleaner, leading to increased profit margins for
the company

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 R&D Management and its Link
with Business Strategy
 Planning decisions are directed towards the
future
 Predicting the future is extremely difficult and
R&D managers have to build into planning
process a conscious view of the future:
1. Environmental forecasts
2. Comparative technological cost-effectiveness
3. Risk
4. Capability analysis

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 R&D Management and its Link
with Business Strategy
Environmental Forecasts
 Primarily concerned with changes in technology
that will occur in the future
 Cannot be considered in isolation to economic,
social and political factors
 Who will be our competitors in five or ten years time?
 What technologies do we need to understand to avoid
technological surprises?
 What will be the new competitive technologies and
businesses?

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 R&D Management and its Link
with Business Strategy
Comparative Technological Cost-
effectiveness
 Technologies have life cycles and after a period
further research produces negligible benefit
 New branch of technology is likely to offer far more
promising rewards
 Require significant shift in resources
 E.g. Car manufacturers are increasing their research
efforts in electrical power technology

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 R&D Management and its Link
with Business Strategy
Risk
 The culture of company and its attitude to risk will
influence decision-making.
 Spread of risk over a portfolio of projects into high risk and
low risk developmental ones
 Planning cannot eliminate risk but can ensure that
decision are reach using a process of rational analysis
Capability Analysis
 Consider strengths and weaknesses
 Help ensure company have necessary capabilities for the
future

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 Integration of R&D

 Management of R&D needs to be fully integrated

with strategic management process of the
business. This enhance and support products
that marketing and sales offer.
 Three strategic areas can be broken down into
operational activities
 Defend, support and expand existing business
 Drive new businesses
 Exploratory research, broaden and deepen
technological capability

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 Strategic Pressures on R&D
The Technology Portfolio
 Core technologies central to all products (e.g. Photocopying
industry photographic technologies are core)
 Complementary technologies- additional technology essential
in product devt (e.g. paper handling technology in
photocopying industry)
 Peripheral technologies – not incorporated into product but
application contributes to business (e.g. Using software to
add features & benefits)
 Emerging technologies – new to the company but have long
term significance (e.g. photocopying industry -
telecommunications technologies may soon be incorporated
as standard features of the product)
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 Technology Leverage and R&D
Strategies
Research by Scholefield (1993 suggests that there
are essentially two forms of activity for a R&D
department
1. Growth
2. Maintenance

These categories are subdivided into 4 different

categories 1) Survival 2) Technology Mastery 3)
Break the mould 4) Using the model

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 Technology Leverage and R&D
Strategies
Survival
 This type of activity is conducted if decision
has been made to exit the business
 Ensure interim survival against technological
mishaps to process or products
 Reactive problem-solving role and termed
‘survival research’

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 Technology Leverage and R&D
Strategies
Competitive
 Intention to sustain the business, role of research to
maintain competitiveness by improvements to
products and process.
 E.g. Automotive industry invested heavily in their
own processes and vehicle quality improved to the
extent that car buyers take it for granted
 Amount of research activity required to maintain a
high-technology leverage position is significantly
greater than that required to maintain a low
technology position

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 Technology Leverage and R&D
Strategies
Technology Mastery
 Incremental growth of a business in a strong position
involves improving the product and process relative to
competition
 High level of R&D expenditure will be required
Break the Mould
 Aim to create a technological advantage
 Higher order of novelty and creativity is required
 Involve developing new patentable technology and
higher level of basic scientific research

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 Technology Leverage and R&D
Strategies
Using the Model
 R&D expenditure on activities would normally be
reviewed annually or quarterly
 Model is used as a guide to establish the
appropriateness of its position
 Without guide, research will drift over time
 Essential for continual analysis, adjustment and
realignment
 E.g. Business executive to meet quarterly to discuss
quarterly result

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 Allocation of Funds to R&D

Setting the R&D Budget

 Expenditure by competitors
 Company’s long-term growth objectives
 The need for stability
 Distortions introduced by large projects

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 Allocation of Funds to R&D

Inter-firm Comparisons
 A fix relationship to turnover
 A fixed relationship to profits
 Reference to previous levels of
expenditure
 Costing of an agreed program
 Internal customer-contracture relationship

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 Tutorial

1. Discuss the variety of ways of funding

R&D.
2. Discuss some of the strategic pressures
on R&D.

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