An introduction to New Product Development (NPD)

New products Development: Managing R&D Projects

New Product Development- Managing Intellectual Property

Learning Objectives
1. Recognize the changing nature of R&D management 2. Recognize the factors that influence the decision whether to undertake internal or external R&D 3. Recognize the value of providing scientific freedom 4. Examine the link with the product innovation process 5. Recognize the significant of evaluating R&D projects 6. Explain how prior knowledge affects a firms ability to acquire externally developed technology

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Successful Technology Management

Essential Ingredients for Successful Technology Management
Capacity to orchestrate and integrate functional and specialist groups Questioning the appropriateness of the existing divisional markets; missions and skills for the exploitation of technological opportunities Willingness to take long term view of technological accumulation

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The Changing Nature of R&D Management

Factors of Changes
Technology explosion- 90% of present technical knowledge generated in last 55 years Shortening of technology cycle- market life of production cars decreased from 10 years in 1960 to 6 years in 1990 Globalization of technology- ability to acquire and assimilate technology into new products e.g. Technology transfer

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Acquisition of External Technology/Matrix

High
Purchase existing products or manufacturing process Seek possible R&D Strategic Alliances Purchase/license a patent

Level of understanding of the technology by external third parties

By Granstrand et al.

Purchase knowhow embodied within people and process

Conduct internal R&D

Low

High

Level of understanding of the technology by the acquiring business

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Organizing Industrial R&D

Form of R&D Organization Structure
Centralized Laboratories- critical mass; collaborative ideas; synergy results e.g. 3M

Decentralized Laboratories- reinforce the link with the business products and market; foster improved communication and product development Internal R&D Market- involves establishing functional cost centre; similar to decentralized R&D laboratories
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Forms of External R&D

Contract R&D- Business has low level of technology, contracting to third party is often suitable e.g. University Research department R&D Strategic Alliances and Joint Venture- generic terms for all cooperation through sharing of cost and benefits R&D Consortia- based on common membership and collaborate over a long period of time e.g. Keiretsus & Chaebols Open Source R&D- free to use e.g. web browser and Wikipedia

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Effective R&D Management

R&D Requirement 1 Growth Orientation 2 Organizational heritage and innovation experience 3 Vigilance and external links Characterized by A commitment to a long term growth rather than short-term profit Widespread recognition of the value of innovation The ability of the organization to be aware of its threats and opportunities

4 Commitment to technology and The willingness to invest in the long term R&D intensity development of technology 5 Acceptance of risks 6 Cross functional cooperation and coordination within organizational structure
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The willingness to include risky opportunities in a balanced portfolio Mutual respect among individuals and a willingness to work together across functions
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Effective R&D Management

R&D Requirement 7 Receptivity Characterized by The ability to be aware of, to identify and to take effective advantage of externally developed technology

8
9

Space for creativity

Strategy towards innovation

An ability to manage the innovation dilemma and provide room for creativity
Strategic planning and selection of technologies and markets Developing a marketable product requires combining a wide range of specialized knowledge Good project management skills and systems An awareness of the needs and changing nature of the market

10 Coordination of a diverse range of skills 11 Project Management 12 Market Orientation

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The Effect of R&D Investment on Products

Profitability and Growth Perspective
Development of existing products-capturing market share and improving profitability Early introduction of a new product- strive to be technology leaders in their industry Late introduction of a new product- deliberately postponing until shown by competitors to be valid reduces the risk and cost Long term projects- Looking into the future, developing products that public do not realize they require

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R&D Project Evaluation Criteria

1. Technical 6. Integration and 2. Research Direction Synergy and Balance 7. Market 3. Competitive 8. Channel Fit Rationale 9. Manufacturing 4. Patentability 10.Financial Strategic 5. Stability of the Fit Market
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Evaluation Criteria
Categories of Screening Methods 1. Benefit Measurement Models
Derived from a group of well informed and experienced managers Subjective assessment Quantitative and qualitative method Mathematical, scoring, decision trees
(Holger, 2002)

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Evaluation Criteria
Categories of Screening Methods 2. Financial/Economic Models
Most popular project selection tool Too much emphasis on financial formulas and inherent short term bias Limited accurate future financial data, leading to inaccurate estimates of future revenues

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Evaluation Criteria
Categories of Screening Methods 3. Portfolio Selection Models
Newness- How new is the product likely to be Time of introduction- is the new product portfolio going to deliver a constant stream or case of feast and then famine? Markets- are the different business markets and business areas of the company receiving resources proportionate to size and importance?

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Tutorial
1. Discuss the strengths and limitations of undertaking external R&D. 2. What is meant by scientific freedom and why is it important? 3. Discuss the benefits of open source R&D.

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