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BM050-3.5.

3 Innovation Management and New


Product Development (IMNPD)

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 firm’s ability to
acquire externally developed technology

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Successful Technology Management
Essential Ingredients for Successful Technology
Management
 Technology can only be successful if it is fully
integrated into the company’s business.
 Capacity to orchestrate and integrate functional and
specialist groups for the implementation of
innovation
 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 Seek possible
existing R&D Strategic
products or Alliances
manufacturing Purchase / license
process a patent By
Level of
Granstrand et al.
understanding of the
technology by
external third Purchase
parties know-how Conduct internal
embodied R&D
within people
and process

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, idea that more can be achieved when
scientist work together
Decentralized Laboratories- reinforce the link with the
business products and market; large centralised R&D too
removed from where the technology is applied. Foster
improved communication and product development
Internal R&D Market- involves establishing functional cost
centre where each business pays for any R&D services
required; 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 Characterized by
1 Growth Orientation A commitment to a long term growth
rather than short-term profit
2 Organizational heritage and Widespread recognition of the value of
innovation experience innovation
3 Vigilance and external links The ability of the organization to be aware
of its threats and opportunities
4 Commitment to technology The willingness to invest in the long term
and R&D intensity development of technology
5 Acceptance of risks The willingness to include risky
opportunities in a balanced portfolio
6 Cross functional cooperation Mutual respect among individuals and a
and coordination within willingness to work together across
organizational structure functions

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Effective R&D Management
R&D Requirement Characterized by
7 Receptivity The ability to be aware of, to identify and to
take effective advantage of externally
developed technology
8 Space for creativity An ability to manage the innovation dilemma
and provide room for creativity
9 Strategy towards Strategic planning and selection of
innovation technologies and markets
10 Coordination of a Developing a marketable product requires
diverse range of combining a wide range of specialized
skills knowledge
11 Project Good project management skills and systems
Management
12 Market Orientation An awareness of the needs and changing
nature of the market
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The Effect of R&D Investment
on Products
Profitability and Growth Perspective
 Development of existing products, product improvements -
capturing market share and improving profitability,
Cadbury, Duracell
 Early introduction of a new product to gain advantage -
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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