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?

2

Strategic Planning Process

3

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

4

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

5

Essence of Strategic Management

• Translating – mission, objectives, strategy

• into policies and tactics– processes– resources– linkages

6

Technology Adjustment

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

7

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

8

Maturity of Technology

9

Natural limit of technology

Embryonic Growth Mature Aging

Level of technology

Time

Maturity of Technology

10

Natural limit of technology

Embryonic Growth Mature Aging

Level of technology

Time

Maturity of Technology in Reality

11

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

12

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

13

Types of Technologies by Competitive Impact

• Pacing technologies• Key technologies• Base technologies

14

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

15

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

16

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

17

Competitive Impact of Technologies

18

Pacing Key Base

Time

Strategic Mission of R&D 1

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

19

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

20

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

21

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

22

Measuring Technological Competitive Strength

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

R&D organization has for achieving the desired results

23

Levels of Technological Competitive Strength

• Dominant• Strong• Favorable• Tenable• Weak

24

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

25

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

26

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

27

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

28

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

29

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

30

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

31

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

32

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

33

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

34

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

35

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.

36