Showing papers in "Research-technology Management in 2002"

Optimizing the Stage-Gate Process: What Best-Practice Companies Do—I

Abstract: OVERVIEW:Now that most companies have implemented a systematic new product process to drive projects from idea to launch, the best-practice companies are improving their processes to make them both faster and more effective. With breakthrough ideas and home-run projects in short supply, some companies are adding a Discovery stage to the front end of the process in order to generate better ideas. Activities in this new stage include: building in an idea capture and handling system; doing voice of customer research work, including “camping out” with customers and working with innovative users; generating scenarios; and holding major revenue-generating events. Best-practice companies are also harnessing fundamental research more effectively by implementing a novel stage-gate approach.

Moving Technologies from Lab To Market

Abstract: OVERVIEW:Product champions need more than enthusiasm and foresight if they are to accomplish their self-appointed mission—they must be able to steer their product idea across the “Valley of Death” that separates discovery from commercialization. This requires the champion to successfully accomplish a series of discrete activities: recognize that his/her idea or research actually has commercial value, manifest the discovery as a product, communicate its potential through a compelling business case, acquire the resources necessary to realize that potential, use those resources to reduce risk, seek approval for formal development, and translate the project into the approval criteria. Following this, the champion must make his influence felt during the formal project approval stage and in the (hopefully) final development and launch. Carrying out these activities requires special skills, from influence tactics to business case writing.

Connect & develop complements research & develop at P&G

Abstract: Procter & Gamble has undertaken a variety of activities designed to create connections that will enhance technological innovation. OVERVIEW: Connections-both internal and external-are of increasing importance to innovation and business growth at Procter & Gamble. But the challenge of maintaining effective connections is a formidable one for a global corporation with over 8,000 researchers, 40 percent of whom work outside of North America. Consequently, PG a logical linking or coherence." At Procter & Gamble, we actually look for those "illogical," "unpredictable" or "unobvious" connections-combinations of technologies in applications that go well beyond their original intended use. Linking technologies in unexpected ways lies at the heart of breakthrough innovation in our products, packages and processes-plus, it significantly reduces product costs, improves quality and speeds product delivery. Connections are in our blood; they are part of our heritage; they are how we have successfully grown and evolved our business. Figure 1 illustrates this point. In the beginning, PG it is only one moment in time. It will grow rapidly, encompassing new productive ways to leverage capabilities into existing and new P&G products. Hopefully, it will stimulate readers to identify at least one new way they can make a connection in their own businesses. As I noted earlier, our internal connections are at the heart of everything we achieve. John Seely Brown, former head of Xerox's famous Palo Alto Research Center, made the comment, "if we only knew what we know ... we'd be more effective." This makes the point about how difficult it is to fully utilize competencies in a large, globally-dispersed organization. Gordon Brunner, in accepting IRI's 2000 Medalist award, said, "if we only put to full use what's known, we'd be three times more innovative. …

Using Patent Citation Analysis to Target/Value M&A Candidates

Abstract: OVERVIEW:Patent analysis can be used for several aspects of Merger & Acquisition activities, including targeting, due-diligence, compatibility, and valuation. In the due-diligence stage, it can also be used to ensure that the target company's technology infrastructure is sound and that its key inventors still work at the company. In assessing technology compatibility, patent analysis can provide insights into the fit between the patent portfolios of the acquiring company and its acquisition target. Having established the technological quality and compatibility of a target company, patent analysis can be used to assess whether the stock market appears to be valuing it fairly. In addition, these methods can be used to identify undervalued companies in which to invest, and for competitive intelligence applications. Although not applicable to every industry, patent analysis is particularly effective in industries with substantial patented technologies, including telecommunications, information technology, pha...

Optimizing the State-Gate Process: What Best-Practice Companies Do-II: Leading Companies Are Creating More Rigorous Go/kill Decision Points and Implementing More Effective Portfolio Management

Abstract: Now that most businesses have implemented a systematic new product process, what are the leading firms doing to make the process even more effective? Part I of this two-part series focused on adding a new stage, namely Discovery, to enhance the flow of solid new-product ideas and opportunities into the process (RTM, Sept.-Oct. 2002, pp. 21-27). Harnessing fundamental research by applying a unique form of the Stage-Gate[TM] method to these projects was also outlined (1). This second article moves to a critical and difficult topic, namely better project selection and becoming much more discriminating in terms of the projects one undertakes. This translates into building in more effective Go/Kill decision points--tough gates--and moving toward portfolio management. Better Go/Kill Decision Points Most companies have too many projects and not enough resources to do them well, our benchmarking study revealed (2). As a result, resources are spread too thin over too many projects, and there is simply not the time or ability to do many of the key project activities proficiently. Consistently, we hear from senior people that, in spite of the fact that they indeed have a world-class new-product process on paper, there is a lack of discipline to adhere to it--that key activities are not executed when or as well as they should be. Often the problem boils down to simply trying to do too many projects too quickly. Why do firms consistently say yes to too many projects? And why are the gates so weak--why do so many companies have trouble killing projects or pruning the new-product portfolio? Here are five reasons we observe: 1. There are too many "must do" projects; companies seem to respond to customer and sales force requests, often a little too quickly and willingly. "We must have this product ... otherwise we'll lose this customer," is the frequent refrain from the sales force. 2. There is no mechanism to kill projects; after projects are born, they get a life of their own. Other than project status meetings and review points, there are no serious Go/Kill decision points built into the project or process. 3. No criteria have been established for making Go/Kill and prioritization decisions. This is an extremely weak area, with almost 50 percent of the firms in our study confessing to deficiencies here (3). Missing is a scorecard with criteria or metrics for rating the "goodness" of projects and helping managers to make objective prioritizing decisions. 4. Senior people are not engaged in the decision process properly. They are very busy; thus, scheduling these critical Go/Kill decision point meetings is difficult. Moreover, many senior managers do not understand their pivotal role in product innovation; they confess to not being close enough to the action, they do not understand the key projects fully, and they are unprepared or unable to make vital Go/Kill and prioritization decisions. 5. Finally, it is simply very difficult to "drown puppies." All the approved projects look good and it is hard to say no to any of them. Besides, given the way senior people are measured, there is often a huge pressure on senior management to get any project at all to market. A Customer Request Process The projects customers request are often small ones, and can be initiated with little formality, sometimes with little more than a chat between the salesperson and a technical manager. The problem is that, while individually these projects consume few resources, collectively they can account for the majority of your resources. At AlliedSignal-Honeywell, for example, the "Other" category of projects--tweaks, modifications and customer requests--was taking an ever-increasing piece of the resource pie. There are several solutions. The first is to use a Strategic Buckets approach to portfolio management; that is, make conscious decisions on what proportion of your resources will be devoted to different types of projects: platform developments, new-product projects, and smaller projects, such as customer requests (Figure 1). …

Crafting R&D Project Portfolios

Abstract: OVERVIEW:Uncertain, but promising, R&D projects should be treated as one of three types of real options, depending on their degree of technical and market uncertainty. Positioning options are designed to preserve a company's future right to compete in a highly uncertain technological arena. Scouting options are used to create information about customer needs and market conditions. Stepping-stone options provide a technological path forward for an organization's long-run technology strategy, while containing cost and risk as new knowledge is created. Corporations rarely distinguish between such options and product launches or line extensions, with the result that they are managed and valued inappropriately. The guidelines provided here can not only help determine the right category for individual R&D projects, but also enable designing a portfolio of projects that is consistent with a firm's technology strategy.

Making Industry-University Partnerships Work

Abstract: University research centers have proven to be beneficial partners for industrial firms seeking new ideas and new technologies. The centers, especially those with flexible and creative policies for ...

Leading your scientists and engineers 2002

Abstract: OVERVIEW:Review of the recent literature on the management of scientists and engineers updates the four categories of study identified by M K Badawy in his 1988 survey (1), and identifies six new areas Badawy's review covered human resources planning, rewarding scientists and engineers, appraising the performance of scientists and engineers, and career management The new developments impacting the way scientists and engineers are managed comprise cross-functional teams, leading scientists and engineers, knowledge management, demographic diversity, electronic technology, and outsourcing Based on this updated review of the literature, actions are recommended in each of these ten areas for leading scientists and engineers in today's business environment

Model of Co-Development Emerges

Abstract: OVERVIEW:While collaboration has become almost routine for developing product or service solutions that span multiple technologies, only a handful of companies have made co-development an integral element of their business models, building a strategy for continuous cross-enterprise development. These companies have grasped that RD process and governance structures that define how the partners will work together, and information technology that effectively supports collaborative development.

Lessons Learned about Integrating Acquisitions

Abstract: Despite the evidence that most acquisitions fail to add value to the acquirer, an acquisition can be successful by following a disciplined integration program based upon best practices. A solid str...

Best HR practices for today's innovation management

Abstract: THE HUMAN SIDE In the past decade, we have witnessed a dramatic shift in the focus of industrial R&D strategies. The 1980s and early '90s were characterized by an almost obsessive focus on quality programs and continuous improvement, the direct result of the successful Japanese quality and product proliferation movement. The Asian industrial juggernaut turned out incrementally improved products at reduced cycle times that gave pause to every industrial firm in the United States that viewed itself as an innovation leader. This trend gave way to the reengineering trend in the U.S., the product of the early 1990s economic downturn. Reengineering became synonymous with downsizing, and with it came a real decline in the nation's R&D effort. This transition phase evolved into the "irrational exuberance" of the late 1990s in which R&D expenditures grew at a double-digit pace, and the focus shifted to radical or breakthrough innovation. The effect of these trends has been a dramatic transition from bottom-line financial improvements to top-line growth, and with it the need to think more boldly about managing more significant innovative advances. The "dot-com" revolution rose and fell dramatically during the late '90s and with it came a rebirth of the technology "rainmaker" or, in the new vernacular, the "knowledge athletes." These technical specialists became revered as the backbone and spirit of new technology enterprises whose goal was to replace older, less innovative companies or create entirely new businesses. The maturing of commercializable technologies in biotechnology, information technology and e-commerce has made heroes of these new technologists. Continuous improvement, followed by downsizing, then radical innovation and, finally, the dot-com boom-to-- bust: an almost schizophrenic series of changes in the brief period of a decade! Consequently, at the operating level, research managers should be asking if their human resource policies and practices are robust enough to keep pace with these shifts in strategic emphasis. Or, are the old shibboleths regarding the motivation of knowledge workers (e.g., the importance of feedback) adequate for the challenge of the future? I propose that human resources (HR) practices firmly grounded in a few basic principles that have weathered a broad range of business environments continue to provide the foundation for good personnel practices. But clearly, a firm understanding of the demands of breakthrough innovation must be integrated into an organization's policies, since every organization will be faced with the challenge of utilizing a broader range of new technologies just to survive. Defining Innovation and its Cycle Simply getting agreement on a common definition of innovation demonstrates the challenge that underlies this work. Innovation activities are generally categorized as either radical or incremental. Frequently there has been debate over which type of innovating activity is the most important and effective. But more astute managers and leaders understand the necessity for both, and writers like Abernathy (1), Badawy (2), Tushman (3), and Kash (4) have identified the issues associated with managing these seemingly contradictory innovation approaches. The point is that organizations must have a split personality to simultaneously manage both approaches and do it well. In effect, timing the introduction of breakthrough innovations to stay ahead of competition while simultaneously utilizing incremental innovations to maximize profits is the challenge for contemporary business managers. What is not appreciated is that there are important organization and human resource needs that are also driven by the various stages of the innovation process. Even worse, most HR practices are developed with an operations mindset, not with the understanding or flexibility to take into consideration the differing needs of people and organizations depending upon where they operate in the domain of innovating activities. …

Assessing Transition Readiness for Radical Innovation

Abstract: Here's a tested tool for determining the readiness of a breakthrough project to move from R&D into a commercial operating group OVERVIEW: Radical innovation is fraught with risk due to the high levels of uncertainty, in creating new technologies and new markets Add to this the challenge of managing in the context of the large corporate enterprise, replete with its bureaucratic processes and necessary focus on continuous improvement, and it is obvious why successful commercialization of radical innovations through large established companies does not happen more regularly Having an assessment tool to help manage the transition from R&D project team to business-unit product development team can greatly enhance the probabilities of commercial success Since 1995, the Industrial Research Institute has engaged in a program of research, in conjunction with a group of academic scholars, to understand how to manage radical innovation better The underlying thesis is that this is not impossible, and that, indeed, if we can understand what companies do to manage it now (that is, first describe the process), then we can begin to put mechanisms in place to improve our management of radical innovation One of the outputs of that research program is a tool to help manage the transfer of a radical innovation project to its ultimate home in an operating unit In this article, we describe the context for this work, how the tool was developed, and the appropriate opportunities for its use Where We've Been The impetus for the radical innovation research program was the belief that, while US-based firms had been driven since the 1980s to focus on improving their performance in managing incremental innovation and continuous improvement, that focus had come at a price It diminished the capacity of America's largest companies to engage in truly discontinuous, breakthrough innovation Central R&D labs, traditionally the source of radical innovation ideas, were redirected to serve the immediate needs of corporate operating units Always under pressure to maximize short-term performance, operating units were reluctant to invest in high-risk, long-term projects The negative consequences of too much attention to incremental innovation have been recognized by many scholars, who have noted how firms that dominate one generation of technology often fail to maintain leadership in the next generation (1) We have been studying 12 projects in 10 large companies All projects were considered, at the outset, to have the potential to be radical innovations, defined by the IRI membership and the academic researchers as a project that had the potential to offer either 1) newto-the-world performance features, 2) a 5-lOx improvement in known performance features, or 3) a 30-50 percent reduction in cost Any project that came into our study must have been considered by the firm's senior technical management to have that kind of potential, and must have been granted its own budget and had an identified team associated with it We are entering our eighth year of tracking those projects Of the 12, four are clear market successes, one has been folded into a current product platform, four are still in development, confronting technical and/or market challenges, and three are clear failures in that the projects have been de-funded and the key people associated with them have left the organization Much of the accumulated learning associated with Phase I of the project has been published (2) One very surprising result is the subject of this article In initial discussions, our respondents indicated their belief that once the Radical Innovation project was sufficiently mature, the receiving operating unit would be able to employ tried and true project management techniques, such as the well-recognized Stage-Gate system (3), to bring the new products resulting from the radical innovation to market success …

Product development-faster, on-time

Abstract: Some popular tactics work well, but others-like co-location and team isolation-can actually slow down a project, this study shows. OVERVIEW: Researchers and consultants have promoted many tools and techniques for accelerating the execution phase of new product development. But which ones make the greatest impact? Data gathered from over 130 new product development projects separated the high-impact methods from the less significant ones. Interestingly, managers perceive that project organizational tactics and computer-based tools produce high impacts on project goal achievement. Yet the influence of these methods on time-based performance appears to be insignificant. Highly acclaimed methods such as co-location and team isolation are even associated with worse time-based performance. On the other hand, such infrequently used approaches as quality function deployment and computerized project scheduling promise accelerated product development with better on-time performance. Certain project leadership and product design analysis tactics are also associated with improved project timeliness. Speeding NPD and improving on-time project completion have for some time been top priorities at many firms (1-4). How can this be done? Strategic choices made in the idea generation stage certainly affect NPD time (5). The influences of end users, suppliers and various functional groups affect NPD time performance as well (6). Beyond these influences, however, project execution tactics greatly influence NPD time. Advances in product design and prototyping methods, communication technologies, and program management policies create many new ways to accomplish NPD (7-11). While some of the tactics have been linked to great success stories, others have questionable impact on NPD performance. This article examines the prevalence of a number of popular tactics for improving NPD speed and on-time performance. Survey data from over 130 NPD projects provide insights into the widespread use, the perceived impact, and the actual impact of these methods on timebased performance in accelerated and normal-speed projects. The results suggest that some tactics often do not deliver the expected results. At the same time, some of the other, more effective methods appear to be underutilized. NPD Tactics and Tools Specifically, this study addresses 18 tactics and tools that researchers and consultants have suggested are important contributors to product development success. Table 1 groups the tactics into four broad categories. 1. Leadership tactics include managerial policies regarding project goals, rewards and procedures. Such tactics include providing explicit project goals, preproject training, rewards for speed, and additional resources. These tactics are designed to enable faster execution of development activities. Omitting normal development steps, procedures, approvals, or inspections streamlines the development process by eliminating nonessential activities. 2. Organizational tactics affect the location and the constituency of NPD project personnel. Outsourcing development activities is a means of reducing internal resource requirements and increasing efficiency when parties outside the firm have more relevant expertise. Isolating and co-locating project personnel are thought to minimize interruptions and communication delays, thereby encouraging more concentrated team efforts and facilitating richer, more immediate communication among development team members. Organizing development personnel into cross-functional teams ensures that the concerns of multiple product and process design specialties are addressed simultaneously. Including only certified suppliers on the development team increases the likelihood that supplier inputs to the design process will be of high quality. 3. Design analysis tactics include methodologies that improve the translation of desired product attributes into product and process design specifications. …

Involve Everyone in the Innovation Process

Abstract: Challenging and involving all employees in the innovation process will improve the "climate for innovation" and, ultimately, the contribution of RD people naturally think of ways to make their jobs easier, faster and more productive. Although these words are a truism, few R&D organizations have effective systems in place to solicit ideas and then implement the best ones. In short, there is no formal process for innovation. The informal process required an "idea champion," usually the idea's creator, whose persistence and personal energy were required to make things happen. An effective innovation process should include a system for encouraging employee suggestions that removes barriers and makes it easy to contribute ideas, and makes it equally easy to decide next steps for the best ideas. Any system that does this will increase the likelihood that good ideas will be submitted. Strong, visible support by leadership lets everyone know that individual thinking and ideas are valued, and allows everyone to be more involved with the business. This, in turn, establishes an improved climate for innovation. Perhaps you have been involved with "suggestion systems" in the past that didn't work well. Typically, these were instituted by leaders and kicked off with high visibility "hoopla" only to eventually fall into disuse and be quietly abandoned. One Fortune 100 company we know became so disenchanted with its system that it formally abolished it and replaced it with nothing! The Human Side Suggestion systems most often fail because the human side of the system is ignored, and because the added work of administering the system becomes so burdensome that it falls under its own weight. In another Fortune 100 company with a highly publicized employee suggestion system focused on cost reduction, participants were paid for their ideas. Program administrators and managers (who saw the ideas first) began stealing ideas, submitting them as their own to get the reward! Naturally, this diminished cooperation and gave employees an incentive to withhold their ideas from one another, which in turn squelched "debates on the issues," another important dimension of the climate for innovation. This is a classic example of the well-known "fix that backfires" archetype in systems thinking technology (3), which could have been avoided by considering the human issues. Such behavior is not surprising to those schooled in systems thinking technology or in knowledge management and human behavior (4), but came as a complete surprise to the leaders. …

Best HR Practices for Today's Innovation Management. (the Human Side)

Abstract: In the past decade, we have witnessed a dramatic shift in the focus of industrial R&D strategies. The 1980s and early '90s were characterized by an almost obsessive focus on quality programs and continuous improvement, the direct result of the successful Japanese quality and product proliferation movement. The Asian industrial juggernaut turned out incrementally improved products at reduced cycle times that gave pause to every industrial firm in the United States that viewed itself as an innovation leader. This trend gave way to the reengineering trend in the U.S., the product of the early 1990s economic downturn. Reengineering became synonymous with downsizing, and with it came a real decline in the nation's R&D effort. This transition phase evolved into the "irrational exuberance" of the late 1990s in which R&D expenditures grew at a double-digit pace, and the focus shifted to radical or breakthrough innovation. The effect of these trends has been a dramatic transition from bottom-line financial improvements to top-line growth, and with it the need to think more boldly about managing more significant innovative advances. The "dot-com" revolution rose and fell dramatically during the late '90s and with it came a rebirth of the technology "rainmaker" or, in the new vernacular, the "knowledge athletes." These technical specialists became revered as the backbone and spirit of new technology enterprises whose goal was to replace older, less innovative companies or create entirely new businesses. The maturing of commercializable technologies in biotechnology, information technology and e-commerce has made heroes of these new technologists. Continuous improvement, followed by downsizing, then radical innovation and, finally, the dot-com boom--to--bust: an almost schizophrenic series of changes in the brief period of a decade! Consequently, at the operating level, research managers should be asking if their human resource policies and practices are robust enough to keep pace with these shifts in strategic emphasis. Or, are the old shibboleths regarding the motivation of knowledge workers (e.g., the importance of feedback) adequate for the challenge of the future? I propose that human resources (HR) practices firmly grounded in a few basic principles that have weathered a broad range of business environments continue to provide the foundation for good personnel practices. But clearly, a firm understanding of the demands of breakthrough innovation must be integrated into an organization's policies, since every organization will be faced with the challenge of utilizing a broader range of new technologies just to survive. Defining Innovation and its Cycle Simply getting agreement on a common definition of innovation demonstrates the challenge that underlies this work. Innovation activities are generally categorized as either radical or incremental. Frequently there has been debate over which type of innovating activity is the most important and effective. But more astute managers and leaders understand the necessity for both, and writers like Abernathy (1), Badawy (2), Tushman (3), and Kash (4) have identified the issues associated with managing these seemingly contradictory innovation approaches. The point is that organizations must have a split personality to simultaneously manage both approaches and do it well. In effect, timing the introduction of breakthrough innovations to stay ahead of competition while simultaneously utilizing incremental innovations to maximize profits is the challenge for contemporary business managers. What is not appreciated is that there are important organization and human resource needs that are also driven by the various stages of the innovation process. Even worse, most HR practices are developed with an operations mindset, not with the understanding or flexibility to take into consideration the differing needs of people and organizations depending upon where they operate in the domain of innovating activities. …

After the Acquisition: Managing Paranoid People in Schizophrenic Organizations

Abstract: The integration of technology organizations is a key element in the success of mergers and acquisitions. Research managers benefit significantly by an awareness of the unique set of people and orga...

The Human Side: Best HR Practices for Today's Innovation Management

Abstract: (2002). The Human Side: Best HR Practices for Today's Innovation Management. Research-Technology Management: Vol. 45, No. 1, pp. 57-60.

R&D in an EVA World

Abstract: The valuation of R&D has been the subject of numerous publications (1) and recently, a comprehensive book by F. Peter Boer (2). Most of these publications use a variety of financial metrics such as net present value and return on investment. Some also treat the so-called "soft side," behavioral issues that are associated with applying such metrics to technology. Economic Value Added, or EVA[R] (registered trademark of Stern Stewart & Co.), is a financial tool (3-6) that has been gaining adherents among company managers and investors (7). Fortune magazine called it "today's hottest financial idea and getting hotter" (4). The investment house Goldman Sachs cited EVA models as being "reliable indicators in 1) assessing overall enterprise performance, 2) identifying the primary drivers that enhance shareholder value, 3) determining the capital efficiency of a company, and 4) aiding the equity valuation process" (7c). For the scientist, it is perhaps tempting to view EVA as simply one more in a long series of financial metrics. This is not the case, however. EVA fundamentally changes the accounting landscape by treating R&D as a strategic capital cost rather than an expense. In addition, it provides an accurate measure of value creation/ destruction. This enables the R&D manager to use EVA as a tool for strategic R&D portfolio management. Finally, EVA also has the potential to affect cultural issues surrounding R&D. In Boer's book, EVA and the pros and cons of capitalizing R&D receive passing treatment (2, pp. 102-103 and 76-77, respectively). This is, perhaps, justified since of the thousands of corporations, only a handful use EVA. However, this number appears to be growing (3-7) and a diverse set of companies including Monsanto, AT&T, Eli Lilly, Briggs & Stratton, Coca-Cola, and Millennium Chemicals have been using EVA, both as a barometer for financial performance and as a cultural mantra (see listing, next page). The purpose of this article is to introduce EVA to the scientist, engineer and R&D manager. Simple examples will illustrate the effect of R&D on EVA accounting and suggest ways in which R&D can be used to drive EVA growth. Finally, benchmarking across a series of EVA-driven companies is used in an effort to probe the cultural effects of EVA on R&D. Economic Value Added (EVA) The idea behind EVA is simply that a company is creating wealth (value) when it makes more money than its cost of doing business plus its cost of capital. From a more financial perspective, EVA is the company's net operating profit after taxes and after deducting a capital charge. EVA = NOPA T - CC, where NOPAT = net operating profit after taxes and CC = capital charge = cost of capital x economic capital. The merits of using EVA as a tool for decision making and financial evaluation have been presented elsewhere (3-7) and are only briefly summarized here. EVA is a measure of a company's true economic profit. Thus, it can be argued that EVA reflects "economic reality" more accurately than traditional measures such as net operating profit, earnings per share, return on equity, and free cash flow. These measures reflect an "accounting reality" that can be more easily distorted by accounting practices. Scientists and engineers are well aware of a simple example that illustrates the difference between "economic" and "accounting" reality. Consider the case of a short-sighted business manager whose bonus is driven by net operating profit. An easy way to increase net operating profit is to decrease costs. Since R&D is a relatively large cost center not directly associated with immediate sales, our business manager might be tempted to cut R&D and thereby quickly raise her net operating profit. This is the "accounting reality." However, by making such a move, she is likely to mortgage away part of the company's future. …

Financial Management of R&D 2002

Abstract: Financial thinking about R&D has evolved well beyond basic discounted cashflow models. Better tools have been developed to value intellectual capital, including the quantitative assessment of the v...

Project Management 2002: Powerful Forces Have Affected the Practice of R&D Project Management in the Past Decade. Here's a Review of the Most Fundamental Ones

Abstract: Since Paul Gaddis wrote his seminal article on the functions of the project manager for Harvard Business Review in 1959 (1), two simultaneous movements have rendered his words all the more meaningful. First, the field of project management has sparked enormous interest. A discipline that at one time seemed applicable almost exclusively to construction, RD rather, it is important to recognize that in the face of so much change and innovation, choosing the definitive set of preeminent advances in project management may be next to impossible. Nevertheless, some breakthroughs have made such a profound impact on current project management practice that it is necessary to concentrate our efforts along those lines. The Movement to Project-Based Work The increasing fascination with project management techniques for research and development stems from a number of recent events/states of modern business. Among the most important influences promoting a project orientation in recent years have been the following (3): 1. Shortened product life cycles.--Products become obsolete at an increasingly rapid rate, requiring companies to invest ever-higher amounts in R&D and new product development. 2. Narrow product launch windows.--When a delay of months or even weeks can cost a firm its competitive advantage, new products are often timed for launch within a narrow time band. 3. Huge influx of global markets.--New global opportunities raise new global challenges, like the increasing difficulty of being first to market with superior products. 4. Increasingly complex and technical products.--As technical advances are diffused into organizations, and technical complexity grows, the challenge of R&D becomes increasingly difficult. 5. Low inflation.--Corporate profitability must now come less from raising prices year after year and more from streamlining internal operations to become ever more efficient. The impact of these and other facets of the modern economic environment have created conditions under which companies using project management are flourishing. Their success has encouraged more and more firms to give the discipline a serious look as they contemplate how to become "project savvy. …

Better New Business Development at DuPont—II

Abstract: Implementation of a "business initiative process" has enabled the company's business management and project teams to significantly improve their NPD efforts. OVERVIEW: Growth-oriented companies frequently identify attractive business development opportunities that lie in markets new to them and require new product/ technology capabilities. Successfully capturing these 11 new/new " opportunities can be problematic, however, because companies often lack the appropriate experience base to guide them; i.e., "they don't know what they don't know." To improve the success rate of its business development initiatives, DuPont developed a comprehensive framework to help its business leadership and development teams successfully navigate through the new business development (NBD) minefield. This framework-called "Business Initiative Process" (BIP)-brings together an array of best practices for establishing high-performance development teams, creating/managing strategic alliances, structuring leadership decision-making, and organizing detailed project planning. By using this holistic framework, DuPont SBUs have improved the returns on their NBD investments. The ability to rapidly bring to the marketplace valuable new products and services-superior offerings that delight customers-is critical to business success today. Companies that are adept at identifying and exploiting high-payoff opportunities for new offerings are destined to be the long-term winners. As Hamel and Prahalad have pointed out, "competition for the future is competition to create and dominate emerging opportunities" (1). A number of companies-DuPont included-have found that many attractive growth opportunities lie outside both their current product/technology base and those markets/customers they currently serve. These opportunities commonly arise from the emergence of new markets, from the restructuring of power in the value chain, from the development of new business models, or from the discovery/emergence of new technologies. Firms often look at their organizational capabilities and core competencies and conclude they can profitably exploit these non-traditional opportunities. As a result, we see companies moving beyond product innovation to pursue what we term "new business development" (NBD) as a major route to corporate renewal and growth (see Figure 1). However, NBD is a notoriously risky proposition. The higher level of marketplace uncertainty (often due to a chaotically changing environment), the large number of new tasks and the lack of business familiarity that typically characterize NBD initiatives make it difficult to predict future outcomes. In addition, a variety of projectspecific failure modes-from incomplete assessment of competitive response to the inability to deliver key technologies on time to poor project execution-have led to costly NBD failures. Still, there are companies that have learned to grow profitably through new business development, Hewlett Packard's successful development of a multi-billiondollar ink jet printer and ink business being one major example. These companies learned how to put the right people in place-both at the home office and on the ground-to guide and execute their business growth. They continuously capitalized on new marketplace insights, committing big resources only when they truly understood what it took to win. In addition, they developed and implemented effective management processes that drove sound decision-making and project management. The challenge to DuPont, and the broader business community, is to learn from these high performers. DuPont's Response Like many large companies, DuPont has had mixed results with its NBD efforts; for instance, DuPont's joint venture with Philips to produce optical disks did not meet expectations, but the Corian bath and kitchen surfacing enterprise is one of DuPont's fastest growing and most profitable businesses. To help business management and project teams significantly improve NBD performance, DuPont has instituted a systematic effort to improve the overall return from its NBD investment by developing and implementing a set of disciplined processes, tools and organizational structures. …

Managers at Work: Involve Everyone In the Innovation Process

Abstract: (2002). Managers at Work: Involve Everyone In the Innovation Process. Research-Technology Management: Vol. 45, No. 5, pp. 13-16.

Six Sigma in R&D

Abstract: MANAGERS AT WORK As popularly used in industry, achieving a Six Sigma level of quality means limiting defective performance to 3.4 per million opportunities, which would be nearly defect-free. "Elimination of defects" has interesting implications for research and development, because RD however, their familiarity with Six Sigma varied widely-from novices to "Black Belt" experts. Therefore, the panelists took time to explain three important Six Sigma points, namely that Six Sigma and Design for Six Sigma: * Are philosophies-the core philosophies for defining problems in process-based performance. * Are not the same-Six Sigma (SS) involves finding and fixing problems in existing processes whereas design for Six Sigma (DFSS) involves designing errorfree processes after you realized that fixing the existing processes would not resolve your performance concerns. o Are not tools-they are core organizational competencies. Following this, the panelists explained that Six Sigma and Design for Six Sigma are implemented by applying tools and techniques within the bounds of the philosophy. The candidate tools and techniques, used in both, involve familiar things we saw in TQM, some new vocabulary, and critical process management and project selection activities. Techniques used in Six Sigma are listed on the next page. Customer-centric goals and customer-focused metrics strongly drive the core Six Sigma philosophy that will, in the long run, be part of the way surviving firms operate. Rather than providing distinct competitive advantage, they will be prerequisites for competition. Panelists emphasized that factors important to success in Six Sigma and Design for Six Sigma are no different from the important attributes of quality in other areas of business and manufacturing. From that perspective, they noted the most important factors of success in Six Sigma and Design for Six Sigma: 1. Commitment and leadership from the top of the organization. 2. Repeatable project selection and management processes involving rigorous project administration, commitment management, control of costs, schedules, changes, and production, as well as quality assurance and configuration management. 3. An understanding of the customer's value proposition, very early in the process. 4. Metrics to prove and track performance. 5. Learning and using a common language for improvement. 6. Providing and maintaining adequate funding for improvement efforts. Among the foregoing points, panelists held that topdown leadership and culture were most important, and that tracking metrics, common language and adequate funding had more impact than panelists had seen in comparable TQM efforts. Finally, the panelists pointed out that in building a Six Sigma culture within an organization, it is important not only to start at the top but to start big (in depth and scope), not small. …

Set the Fuzzy front end in concrete

Abstract: MANAGERS AT WORK "Fuzzy front end"-fatuous fallacy! The "Stage-Gate process" is typically depicted with a little light bulb in a circle captioned "Ideation" as the starting point for new product development. However, if you start there, the new product coming out at the end of the process (if indeed any concept makes it all the way through) may well not succeed in the marketplace; in any case, it will have cost a lot more (if you count all costs) than it should have. As we all know, Purgamentum init, exit purgamentum! ("Garbage in, garbage out" sounds much classier in Latin.) A "Stage-Gate" process is not actually a new-product development process at all; rather, it is a conventional project-management process incorporating milestones as it proceeds. It can be useful in managing and controlling the efforts and investment in any project (including new product development) where the starting point is vague and ill-defined, the activities altogether require significant time, inputs from various sources are contributed along the way, and the outcome is in doubt. The cost of developing a new product tends to increase exponentially-by an order of magnitude-as a function of elapsed time (see Table 1). The dollars and duration for your own company, or for any given new product development project, may be off by plus-or-minus 50 percent or more, but in my experience the broad relationships are always roughly the same. The measure of the value of a Stage-Gate process is how early it can kill a new product candidate. The worst case occurs when the new product gets all the way through and is introduced but then flops, for one reason or other. The biggest savings result from killing the product prior to the latest stages. It would be nice to avoid wasting the investment in the mid-stages (that's real money); best of all, abort the new product concept in the beginning and save all that money! The Stage-Gate cross-functional review committee is typically well-staffed to do the job of killing any proposed new product, from the standpoint of: Production: A new manufacturing process would need to be developed, with lots of problems in the beginning and costly short runs. Marketing: New prospective customers would have to be visited to obtain small trial orders, if any. Finance: The investment will hurt our performance this quarter, on a gamble for gains in some future period. Technology: That certainly is not the most technically elegant concept in our lab now. How about the cold fusion project? Rather work on that! The Place to Start Any fuzzy new product concept is a lamb led to slaughter by the Stage-Gate review committee. The little light bulb-Ideation-is not the place to start. Fuzzy is at the front end, but not the front end. The very first thing to do is to step back a pace and establish a set of specific success criteria which define, in advance, all of the essential attributes and desired characteristics of the ideal, next-generation new product line. That can be accomplished by the company's top executive team (those who know most about the organization's capabilities and have the authority to set objectives and make go/no-go decisions) in two sittings facilitated by a leader-first to draft, then to refine and confirm. They will cover the financial goals that any new product lines must meet (minimum, specific dollars and dates), the company's unique technologies which the product should leverage, production processes it should utilize, the kind of market the company is comfortable serving, any deep-seated predilections and prejudices, and finally, the acceptable means of implementation (produce, out-source, partner, or some combination). The success criteria should be ranked in order of importance, in the practical recognition that an acceptable new product line may not fill the entire wish list, but some demands are mandatory (see Table 2). …

Why do we still not apply what we know about managing R&D personnel ?

Abstract: ONE POINT OF VIEW Recently, I was asked to present a paper at a conference of the Analytical Laboratory Managers Association (ALMA) on the "Management and Leadership of Scientists" (1). I initially decided to focus on three themes: what is unique about being a manager in a science-based organization, what are the prime motivators of R&D staff, and what are the characteristics and actions of an effective leader of scientists? Midway through my preparation, I realized that most of the information contained in these themes was not new, leading me to add a fourth theme, "Why are we still not applying what we know?" Some of the unique features of an R&D environment that affect the ability of a manager to manage researchers properly that I decided to include were (2): * The uncertainty associated with R&D activities. * The difficulty of assessing the contribution or impact of research results on the firm or on the advancement of science/technology in general. * The rapid changes in science and technology that result in an ongoing battle to stave off technological obsolescence in both people and equipment. * The values, expectations and attitudes of research scientists and engineers are in many aspects different from those of other professionals. I went on to provide an overview of the more popular theories of motivation and their application to the R&D environment. These included Maslow's Needs Hierarchy (3), Herzberg's Motivation-Maintenance Theory (4), McClelland's Socially Developed Needs (5), the Goal Setting Theory of Motivation (6), and Vroom's Expectancy Theory of Motivation (7). These theories can be summed up as follows: Scientific staff are highly motivated and experience high levels of job satisfaction when they are allowed to satisfy their psychological needs for: Experiencing achievement. * Receiving respect and recognition from peers and colleagues both inside and outside their organization. * Being self-fulfilled. * Having opportunities for professional growth or organizational advancement through working on R&D projects of a challenging, important and/or interesting nature, for which they are held responsible for the conduct of the work, and that have clearly defined goals and objectives. I then outlined how an effective R&D leader could put these theories into practice, keeping in mind that everyone is different and that the key to effective management is to treat people as individuals. This included a description of some of the key attributes of a good R&D leader, such as the ability to operate in a participatory/ consultative style when making decisions, to inspire enthusiasm for the goals and objectives of the organization, to listen carefully in order to understand accurately what people are trying to say, and to be honest and forthright in their dealings with colleagues and subordinates. Among the specific motivating actions I described were: * Allowing scientists the freedom and autonomy to make operational decisions about their work. * Providing challenging, interesting research projects. * Reinforcing the importance of the work the researchers are doing. * Providing adequate resources in terms of money, equipment, people, and time. * Encouraging researchers to take risks and try something new (i.e., reducing the "terror quotient" in the organization). * Ensuring a fair, equitable and responsive reward and recognition system that emphasizes intrinsic over extrinsic rewards. * Encouraging interaction between the organization's researchers and those in other research organizations. Nothing New As noted earlier, I realized that none of this information was new. The fact is, we have known how to lead/ manage R&D personnel for about 50 years. This knowledge has been available ever since the IEEE Transactions on Engineering Management started publication in 1953 and Research Management in 1958. …

Technology Outsourcing in the U.S. and Japan

Abstract: Why look to external sources for technology? What are the tactics and strategies employed to take advantage of such technology? Are there opportunities for competitive advantage in the way a company manages the process of acquiring external technology? These are among the questions we sought to answer by undertaking the research reported on in this article. Our sample consisted of 32 leading companies in the United States and Japan (17 U.S., 15 Japanese). The data were collected from personal interviews with 134 senior research staff, including chief technology officers, and two questionnaires--one examining externally-sourced technology from a corporate policy perspective and the other from the viewpoint of the project engineer responsible for the introduction of selected new products. This research project is the source of data for all figures except Figure 1. [FIGURE 1 OMITTED] The average sales of the companies participating in the study was $16.3 billion, with average employment nearly 45,000 (sales of U.S. companies averaged $12.4 billion, Japanese companies averaged $18.3 billion). The entire sample averaged nearly 150 new product introductions per year from 1991-1996. The companies were selected on the basis of their prowess in developing technically sophisticated products. Why Outsource Technology? Why outsource technology? "To make the bottom line look better," one CTO answered. Another said, "Because no one can do everything." A third answered, only partly in jest, "It is the only way to break up an inefficient bureaucracy." One senior manager called technology outsourcing the "great equalizer" enabling the firm to leverage new-product development resources. Another reported an example of this leverage where suppliers provided 50 percent of the funds for an experimental development. The chief engineer of a large capital goods company put it this way: "We want to be the technology leader but not the technology driver." They did not want to develop the technology--their job was to drive the application of technology developed by others. Reduced R&D budgets were cited as another reason to outsource technology. The CEO of one firm directed that the company virtually shut down its internal R&D program and forced external sourcing. It is now well accepted that reliance on internal sources for technology will not ensure success in the next generation of competitive struggle. Some believe that acquiring knowledge from external sources will become even more critical to producing ever more complex products well into the foreseeable future. Edward Roberts tracked changes in technology management practices in Europe, Asia and the U.S. during the 1990s (1). He concludes that the most important change by companies around the globe is the "relentless intensification" of dependence on external sources for technology. His research cites a doubling of dependency on external sources of technology between 1995 and 2001 (Figure 1). But Is It Really Important? Roberts' research provides insight at the aggregate level for reliance on external technology. But are companies going to the outside for the less important aspects of product development? The results of this research suggest they are not. Rather, for U.S. firms, outsourcing the less important technology is only slightly more probable than the more important technology. On the other hand, as can be seen in Figure 2, the Japanese are more likely to outsource the more important technology than they are the less important. [FIGURE 2 OMITTED] A common perception is that the strategic differentiators of a new product (i.e., those product components that will provide the most substantial competitive advantage) will be developed under wraps within the firm, while commodity technologies will be obtained primarily from suppliers. Arguably, the most important strategic differentiator of a new product is the product design. …

Modeling Resource Requirements for Pharmaceutical R&D

Abstract: OVERVIEW:The task of bringing novel pharmaceutical products to market quickly at reasonable cost is daunting. While both pharmaceutical sales and R&D expenses are on the rise, the latter is outpacing the former. In order to increase top-line revenues, pharmaceutical firms have been employing a range of strategies to supplement the vitality of their R&D portfolios. While these strategies have the potential to increase revenues, they typically increase the demand for development resources that are already in short supply. Two models—steady-state and dynamic—allow R&D managers to estimate these resource requirements accurately and allocate them intelligently.

Globalization within the Auto Industry

Abstract: A major benefit of globalization for GM has been access to technology being developed around the world. OVERVIEW: General Motors' alliance strategy and its initiatives to develop new markets are key elements in the company's approach to globalization. Alliances afford the opportunity for component and architecture sharing as well as the reduction in R&D costs that will be critical for manufacturers looking ahead to hybrid vehicle technology and, ultimately, hydrogen-based fuel-cell vehicles. By pulling together the talents and resources from its global R&D network, GM has been able to reduce redundancy, accelerate ongoing development and jump-start new development. Nevertheless, globalization entails risks from many quarters: economics, political forces, energy, and national differences in social and cultural norms. Consequently, the recruitment and empowerment of an international executive team may be the best way to help accelerate the globalization process. Competitive pressures have forced most companies (and countries) to increase their focus on innovation. This pressure to innovate has increased the need for talented engineers and scientists-not only in the rapidly evolving computer and communications industries, but in virtually every other industry as well. The automobile industry, for example, has significantly expanded the electronics and computer content on the vehicle, with applications today ranging from powertrain controls for improved fuel economy and reduced emissions, to enhanced safety systems and chassis controls, to on-board communications systems like OnStar. During the last decade, to meet the ever-growing need for advanced technology, General Motors has recruited a rich blend of international talent, with engineers and scientists from North and South America, Europe, the Middle East, China, Taiwan, India, and Korea. This melting pot of technologists has created a bubbling cauldron of exciting ideas that General Motors is applying to the development of a vast array of product, technology and business innovations. In fact, one of the biggest benefits of globalization for GM has been access to technology being developed around the world. Today, our most advanced research programs, such as our fuel cell technology development, are being conducted across several continents. World Markets for Cars and Trucks Contrary to what some might think in the midst of the computer and communications technology upheaval, the automobile industry today is a growth industry. Only about 12 percent of the earth's 6 billion people enjoy the benefits of vehicle ownership (1), and industry growth remains positive at about 20 percent per decade, with the potential for global annual sales of 65 to 70 million vehicles by 2010. Most of this expansion will occur in emerging markets such as China, India, Russia, and Brazil. Today, the developing countries account for only a small percentage of the total number of vehicles sold each year. In 10 years, this percentage is expected to increase substantially. China alone could account for as much as onefifth of the expected growth in the emerging markets. This data point alone explains why GM has taken such an aggressive business position in China. Even as the automobile business grows, it is also becoming more competitive. Currently, there is worldwide overcapacity in the industry-and this has forced manufacturers to contain and even reduce costs. In the United States, for instance, the average monthly vehicle payment as a percentage of household income has dropped from 12.5 percent in 1980 to only 7.5 percent today-a 40 percent decrease. As a colleague once pointed out, at about $6 per pound a car costs almost the same as a Big Mac. This cost pressure has forced all manufacturers to reduce structural costs, seek new markets, reduce cycle time for new product development, form alliances with other manufacturers and business partners, and develop products with more innovative styling and content (2). …