Future R&D Environments A Report for the National Institute of Standards and Technology (2002) / Chapter Skim
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Appendix I: Trends in Industrial R&D Management and Organization
Appendix I: Trends in Industrial R&D Management and Organization
Pages 199-218
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From page 199... ...
It builds on a report published by the Industrial Research Institute (IRI) that summarized its members' expectations of how industrial R&D laboratories would operate in 2008.i After reviewing findings and projections of that iCharles F
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While total industrial R&D in the United States grew almost constantly after the mid-1970s (except for a flat period from 1990 to 1993) , manufacturing firms' support for R&D did not grow, in constant dollar terms, from 1986 to 1994.6 The contribution to total R&D growth between 1986 and 1993 was due to the rise of R&D in the service/nonmanufacturing sector, which is underrepresented in the IRI membership and is made up of much smaller firms.7 2Ibid.
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From page 201... ...
First, the report called attention to six forcing functions, identified by IRI members as drivers that would shape the conduct of industrial R&D and innovation in the decade from 1998 to 2008: . Information technology, · Globalization of technology, · Growing workforce diversity, · Integration of technology planning and business strategy, Herbert I
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From page 202... ...
This scenario assumes that the innovation (new products, processes, services) value proposition will overwhelm the perceived need for a separate R&D function, thus resulting in complete decentralization of R&D into customer-focused business units.
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economy over the next several years, concludes that "there are many reasons to side with the optimists, especially those who claim that widening use of the Internet creates a significant potential for increasing productivity and increasing the standard of living over time."~7 The paper cites four major findings regarding pathways for these effects: . Reducing transaction costs in financial services, health care, government, education, and manufacturing; · Increasing the efficiency of management in automobile manufacturing, trucking operations, and supply chain management; i3Larson, 1998, op.
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From page 204... ...
The Litan and Rivlin paper concludes that the potential of the Internet to contribute to productivity growth is real (although noting that a 2 percent annual growth rate is more likely than the 3 percent experienced between 1995 and 2000~; that the gains due to e-commerce are likely to be less important than the reductions in transaction costs in financial and health services, government, and old economy firms in general; that enhanced management efficiencies will increase productivity in product development, supply chain management, and many other aspects of business; and that we should not overestimate the productivity-enhancing effects of the expected improvements in market competitiveness, because much of the cost improvement will be passed along to consumers as price reductions. How important might IT be to the future of R&D?
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From page 205... ...
styles; and Flattening organizations and defeating command and control management · Enabling virtual research teams to transcend geographic, linguistic, and temporal barriers. Globalization of it&D/Technology The Commerce Department reported that R&D by foreign firms in the United States grew throughout the l990s as much as R&D by U.S.
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, together with the strategic management perspective (discussed below) , is driving industry to place a high value on recruiting and retaining people with strong credentials in scientific and engineering fields where explicit knowledge represents a core technical competency; on retaining people whose tacit knowledge is critical to successful innovation based on core technical competitiveness; and on outsourcing its noncore needs.
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From page 207... ...
Demers writes as follows: The type of talent organizations most fear losing are typically people in: · Technology who are implementing e-commerce strategies, · Information technology who are developing and/or implementing major new systems, · Junior positions where people are slated for major leadership roles, · Sales to customers considered vital to the preservation of revenues, · Positions with unique knowledge of products and services, and . Positions needed to support a major consolidation or acquisition.26 Other papers deal with defining the specialized roles required to make innovation happen for example, Markham and Smith on the role of champions in the new product development process27 and Roberts on the critical executive roles required for strategic leadership in technology.28 As innovation continued to absorb more and more of the attention and resources of industrial firms, as compared with traditional R&D laboratory work, large industrial firms have had to deal with "entrepreneurship" in more creative ways, as Perry points out.29 In many cases this has resulted in changes in organizational structure, including the 24Phillip M Perry, 2001, "Holding Your Top Talent," Research.Technology.Management 44 (3)
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From page 208... ...
, shifts in the structure of industrial R&D/innovation work could have important implications for S&E education programs. Integration of Technology Planning and Business Strategy In retrospect, the recession of 1990 and 1991 seems to have catalyzed serious corporate efforts to rationalize the relationship among business strategies, organizational structures, and operating systems.
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From page 209... ...
Roberts reports on 209 responses received from 400 very large firms surveyed in the United States, Japan, and Europe, and presents a preliminary interpretation of the results.34 Here are some of the observations: · The integration of corporate technology strategy and overall business strategy depends heavily on the involvement of senior management in formulating and implementing strategy. Trends are as follows: CEOs, R&D VPs, and CTOs are the primary integrators, with marketing VPs and CFOs lagging behind.
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In his conclusions, Roberts emphasized that Strong business/technology strategy linkages are correlated with superior business performance. · "The most important continuing business change in strategic technology management is the increasing worldwide reliance on external-to-each-company sources of technology."
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Partnerships and Alliances Industrial R&D partnerships and alliances appear to be motivated by a variety of corporate concerns and circumstances. The NSB broadly characterizes R&D partnerships as collaborations that allow "individual partners to reduce costs and risks and enabling research ventures that might not have been undertaken otherwise."36 Moreover, "the underlying theme is that more can be accomplished at lower costs when resources are pooled, especially if organizations can compliment each other in terms of expertise and/or research facilities." The report goes on to detail special conditions surrounding alliances involving different types of partners industry to industry, industry-academic, industry-federal laboratories, 35Lewis S
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Moving to research collaborations within industry, the pharmaceutical industry is noted for its use of combinations of in-house R&D, research contracts to small external research labs, and merger and acquisition activity to sustain innovation across successive waves of technological change.42 Campbell writes: The explosion in new technologies and genome sciences has created a unique situation for the pharmaceutical industry in that no single company has the resources or expertise to pursue all of these innovative techniques in-house. Thus outsourcing is becoming much more common, with some companies investing up to 20 percent of their research budgets in external collaborations.43 In addition to small research firms, universities are important R&D collaborators for industrial firms.
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notes that patenting activity in IT and health technologies is growing rapidly in the United States and that university patenting is particularly active.44 It further notes that company patents frequently cite publications from "in-state public sector institutions," perhaps indicating a diffusion of expertise beyond the elite universities. In the chemical industry, Brenner and Tao report that Air Products and Chemicals has been involved in 42 external R&D partnerships since the mid1990s.
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Thus, to the extent that external R&D collaborations evolve into joint business ventures and eventually into merger and acquisition activities, industry restructuring is facilitated. An article by Germeraad calls attention to other practices in external R&D/ technology development that may be important emerging trends.47 His basic point is that firms have done such a good job of integrating their technology strategies and business strategies that they are finding new ways of appropriating returns from their R&D investments.
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To the extent that these forces continue in place over the next 10 years, R&D partnerships and collaborations can be expected to continue, as part of the dynamic that restructures and expands industry. Customer Power Chatterji and Davidson credit the total quality management (TQM)
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Meyer and Paul C Mugge, 2001, "Making Platform Innovation Drive Enterprise Innovation," Research Technology Management 44 (1)
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, corporate funding of corporate labs has dried up. As a result, industrial R&D is more short-term-oriented and under great pressure to meet the time to market and other immediate needs of the business units that now provide most of their funds.
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· The external sourcing of R&D noted by Roberts, as well as the emerging trends in creating/capturing value from R&D results noted by Germeraad, deserves tracking.62 63 The interaction of these activities with existing tax policies and financial accounting standards seem worth watching, as firms continue to find ways to include intellectual capital on the balance sheet. · Globalization will interact with the Internet and the World Wide Web to create hybrid corporate structures and relationships that we are just beginning to understand.
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