P Trott R&D Mgt slide 1

Managing R&D Projects

“In many areas it is not clear before the event who is in the innovation race, where the starting

and finishing lines are, and that the race is all about. Even when all these things are clear,

companies often start out wishing to be a leader and end up a follower!”

(Pavitt, 1990)

P Trott R&D Mgt slide 2

Managing R&D Projects

1. Introduction2. What issues are there in selecting and

evaluating projects?3. How to evaluate projects?

A. How Viagra almost slipped awayB. R&D as 2 businesses

4. What are the other options to R&D internally?

5. Summary & recap

P Trott R&D Mgt slide 3

What issues are there in selecting and evaluating projects?

P Trott R&D Mgt slide 4

Key decisions in R&D Management decision making

How many projects do we invest in?

Which projects do we choose to invest in?

When to evaluate? How much to invest in each?

P Trott R&D Mgt slide 5

How many projects do we invest in?

•Invest in many to avoid missed opportunities

•Investment spread thinly

•Invest heavily in fewer projects

•Potential for missed opportunities

P Trott R&D Mgt slide 6

Spreading Investment:Strategic Pressures on R&D

Building knowledge for entire business

Gaining greater depth of knowledge for a particular business

Funding per area

Num

ber o

f rese

arch

are

as

P Trott R&D Mgt slide 7

Evaluating Projects

Why evaluate, and which projects to invest in?

P Trott R&D Mgt slide 8

Why evaluate projects?

intr

oduc

tion

growthmaturity

decline

developmentdemonstration ofapplication andproduct engineering

applied researchlaboratory verification

new concept

time

0-2-4-6-8-10-12 2 4 6

accumulated investment

ROI

revenue

investment

NEW PRODUCT DEVELOPMENT PROCESS

Cumulative Expenditure & Investment

P Trott R&D Mgt slide 9

Which Projects to Invest In?R&D Project Selection Criteria

1. Technical2. Research direction & balance3. Competitive Rationale4. Patentability5. Stability of the market6. Integration & synergy7. Market8. Channel Fit9. Manufacturing10. Financial11. Strategic Fit

P Trott R&D Mgt slide 10

What does the process of evaluating projects look like?

60 ideas are evaluated for: Technical feasibility Financial feasibility Suitability

12 ideas worthy of evaluation through: Technical evaluation & market research analysis

6 potential products worthy of further development & analysis

3 prototypes for technical and market testing

2 products launched

1 successful product

Evaluation of research project ideas

Number of research ideas

The Process of Evaluating Projects

P Trott R&D Mgt slide 11

Criteria Typical questions

1 Technical Do we have experience of the technology?Do we have the skills and facilities?What is the probability of technical success?

2 Research direction & balance

Compatibility with research goals?Balance of risk in project portfolio?

3 Competitive rationale

How does this project compare relative to the competition?Is it necessary to defend an existing business?Is the product likely to be superior?

4 Patentability Can we get patent protection?What will be the implication for defensive research?

5 Stability of the market

How stable is the technology?Is the market developed?Is there an industry standard?

R&D Project Evaluation Criteria

P Trott R&D Mgt slide 12

Criteria Typical questions

6 Integration & synergy

What is the level of integration of this project relative to other products and raw materials?Will it stand alone?

7 Market What is the size of the market?Is it a growing market?Is there an existing customer base?Is the potential big enough to warrant the resource?

8 Channel fit Do we have existing customers who might be interested, or do we have to find new customers?

9 Manufacturing Can we use existing resources?Will we require new equipment, skills, etc?

10 Financial Expected investment required and rate of return.

11 Strategic fit Does it support our short term and long term plans for the business?

P Trott R&D Mgt slide 13

How Pfizer’s Viagra almost slipped away

•Viagra one of the world’s most recognised brands•A social icon with sales >$2bn•An unintended discovery•13yrs to market•How to attract consumers without

alienating them•But impotence market was small!•Why spend valuable R&D money on such a small market?

Issue: Is it easy to evaluate which projects to proceed?Risk?

P Trott R&D Mgt slide 14

The main businessactivity

Business 1Corporate objectives•objectives;•strategy;•plans.

Business 2Unplanned projects worth exploiting.

Licences & technologytransfer

technology baseddiversification

Provisionof funds to R&D

Projects selected to meet corporateneeds (1-10)

Projects warrantingmodification of existingcorporate plans (B&Y)

Research & DevelopmentAllocation of funds to projectsto satisfy corporate needs1 2 3 4 5 Y X6 7 8 9 10 Z

Loosely controlledfundsA B C D E

Unplanned value

no value

statedcorporateneeds

Strategic planning: R&D Supports 2 Business Activities

P Trott R&D Mgt slide 15

Is internal R&D the only option?

Types of R&D

P Trott R&D Mgt slide 16

internal R&D

external R&D

industrialR&D

centralised laboratories

decentralised laboratories

internal market

contract

collaborative

consortium

Organising Industrial R&D

P Trott R&D Mgt slide 17

& Disney

Sony-Ericsson

A joint venture dependent on

technology transfer

P Trott R&D Mgt slide 18

& Disney

Technological Collaboration

Internal R&D is now only one of many technology development options available to companies.

The technology base of a company is viewed as an asset that represents the technological capability of that company.  

The focus of these new activities is on external knowledge acquisition and assimilation.

P Trott R&D Mgt slide 19

Acquisition of External Technology Knowledge Matrix

Purchase existing products

or manufacturing

processes

Seek possible R&D Strategic

Alliances

Purchase/license a patent

Conduct Internal R&D

Purchase know-how embodied within

people & processes

Explore external R&D contract possibilities

Level o

f un

dersta

ndin

g o

f the

tech

nolo

gy b

y e

xte

rnal th

ird

partie

s

Level of understanding of the technology by the acquiring business

Low

Low

High

High

The shaded area represents those technology acquisitions normally embraced by technology transfer

P Trott R&D Mgt slide 20

Key Points

R&D project evaluation It also supports a technology

business Technology collaboration

P Trott R&D Mgt slide 21

Rate of Technologicalprogress

Amount of effort

Single-processorcomputer

MultiprocessorcomputerSpeed of light

Communication bottlenecks

Technology life cycles and S curves: e.g. Supercomputer

Source: Utterback & Abbernathy (1992)

How do we spread investment? (how much do we invest in each)