Topic 1 Lecture:Managing R&D •Manager:I think we should invest in innovation. •VP:What's the ROI? •Manager:Uh … I don't know but I'll see if I can find out. •Manager:I think we need to deepen our capability to innovate. We have very few new products in the pipeline and our revenue from new products and services has dropped dramatically in the past few years. •VP:What's the ROI on innovation? •Manager:I'm not sure that's the right question. Here's some different questions we might ask: •At our present rate of new product and service development, where will we be in five years? Is that good enough and where do we think our competition might be? •How much new business do we need to generate and how are we going to do that? What resources and capabilities do we need to develop to generate that new business? •What new business or technology might actually put us out of business? Where might that come from? •If we looked at ourselves from the eyes of our competitors, what would we do to put us out of business? •VP:So what should we do to address some of these questions? Asking the right question is half the battle in managing R&D.Faced with increasingly intense global competition, many high-technology and industrial companies consider Research and Development (R&D) essential to the survival and growth of the business. In fact, the development and revitalization of products and processes is of major importance to all enterprises that strive to reduce costs and add value in offering a product or service.Defining R&DWhat is normally thought of as R&D (that is, the development of a new technology) makes up only a minor fraction of the R&D in most companies. In general terms, research is the pursuit of knowledge and development is the application of knowledge. R&D can be defined as work that has technical uncertainty, is done through the scientific approach, and is conducted by qualified technical people. In the largest companies, what is usually called exploratory R&D (that is, fundamental research targeted toward specific business purposes) usually only makes up, at best, 10% of the R&D budget. Most smaller companies do not do any exploratory R&D.Technological innovation is defined as the "successful exploitation of new ideas." This exploitation of ideas can be interpreted as the design and/or development of new or improved products, processes, or services. Over the past fifty years, technological innovation has become a diffused phenomenon with wide differences between industry sectors, in the size of the organizations involved, and in the complexity of the R&D efforts related to the innovations. Although there is a distinction between R&D (which is essentially an objective process) and innovation which is relatively unstructured, the lines are blurring. The trend is to focus more on innovation especially the ability to put things that already exist together (Wehad suitcases for decades and wheels for centuries…why did it take so along to put them together?