Need to Improve R&D Quality and Performance - Case Study Example

R&D Alignment Institution Date Introduction Contemporary marketing organizations have to deal with a fiercely competitive environment. It has become increasingly difficult to attain revenue targets and companies are constantly on the lookout for new ways to bring in revenue. R&D is one of the most common solutions and allows companies to build competitive advantage. R&D is the backbone of innovative business models and products that enable companies stay ahead of competitors. R&D enables organizations attain superior products and develop demand for their products; this makes R&D critical for growth and survival (Lyne, 2003). Competitive organizations need R&D to offer quality beyond that of competitors, cost below competitors and innovative technologies before competitors. R&D may also contribute to increases in productivity and operational improvements. Thus, the need to improve R&D quality and performance is greater in contemporary organizations. However, many businesses focus on R&D but do not align their R&D with the overall strategy of the company. This non-alignment means R&D is viewed as an isolated agenda that is left to R&D managers with no link or idea of how it can contribute to overall corporate or business strategy. Why align R&D to Strategy? According to Herfert and Arbige (2008), one of the issues that is highest on the agenda of senior management is the improvement of innovation performance. Any business needs to be innovative regardless of whether it is in the electronics, pharmaceuticals or the more traditional industries like automobile manufacturing. In a fiercely competitive landscape, good performance is directly linked to superior R&D performance. However, attempts to innovate through R&D are a frustrating endeavor for corporate managers. Efforts to improve R&D performance have subjected companies to repeated restructuring, endless process re-engineering, a barrage of team concepts, oscillations between decentralized and centralized models and many other management interventions but still little R&D results to show for all this effort. R&D efforts are often met with a lot of skepticism after one too many failures. The failure by many organizations to run successful R&D ventures is not due to lack of commitment. R&D failure can be linked by the failure of the management teams to link R&D strategy with the overall strategy of the organization. Superior R&D performance is a product of interactions between many different choices and decisions. Decisions that touch on R&D performance include location and size of R&D facilities, choice of technologies for use in facilities, selection of personnel, and division of labour among various groups involved in the R&D initiative (Herfert and Arbige, 2008). Like other organizations, all the components of a company’s strategy must be coherent and thus they is need for R&D strategy to be well aligned to overall corporate strategy. What is strategy? What is the corporate strategy that R&D has to be aligned to? According to Herfert and Arbige (2008), strategy is “a commitment to a pattern” of behavior or a way of doing things with a focus on winning a competition. However, strategy does not mean that every activity in the business operations has to work out the same way. For example, Apple’s strategy can be summarized as the development of aesthetically appealing electronic devices that are easy to use and connect seamlessly with other devices found in the consumer’s digital world. Strategy guides and orients many of the operations and activities of the organization (Lyne, 2003). For example, decisions on who to include in R&D projects, choice of suppliers, focus of marketing campaigns, layout of organization’s stores, hiring or people among other decisions are dependent on the organization’s overall strategy. The requirements of a good corporate strategy indicate the critical need to align R&D and overall corporate strategy. The most essential requirements of a good corporate strategy are coherence, consistency and alignment. The elements of a good corporate strategy are (Skinner, 2003): Consistency: Competitive advantage arises from strategy from an accumulation of actions, decisions and behaviors aligned to the strategy. For all these aspects to be consistent all the activities of functional units have to be aligned to the overall strategy. Coherence: Tactical decisions have to be coherent and should be guided by the overall corporate strategy of the organization. Decisions that could impact the competitive advantage of the company are made on a daily basis. Such decisions include what assets are acquired by the company, which projects get funded, who gets hired and promoted, which partners to engage or collaborate with. Many contemporary organizations have operations in far-flung corners of the world and all their decisions have to be coherent. Strategy provides the guidance that ensures these tactical decisions are coherent and contribute to the overall performance of the organization. In the absence of good strategy, organizations will struggle to create communicating mechanism to ensure coherent and integrated decision making. However, the creation of such devices cannot provide the coherence that result from good strategy. Alignment: Organizations need to align all components and units of their operation with overall corporate strategy of the organization. In this regard, the R&D activities of the organization need to be aligned to the corporate strategy to be beneficial to the performance and ultimately the survival of the organization. How to align R&D to strategy? According to Gindy et al (2008), an organization can align its R&D strategy with its business strategy by constructing a Technology Management Architecture. The first step in developing a Technology Management Architecture involves defining the strategic intent of the R&D in the company. This step establishes and a common and clear view of R&D and scope of its activities within the organization. Question like what markets are the focus of R&D, whether process or product R&D should be prioritized are key consideration in this step. When these questions are addressed they define the dimension of R&D activities. In many cases, the answers to these questions are often contrasting and conflicting (Gindy et al, 2008). The contrast and conflict starts within the R&D function but even more conflicting answers are to be expected from other functional areas. After defining the objectives and scope of the R&D function, the means of execution of the strategy is defined. This involves identifying the particular resources and skills needed for the execution of the strategy. Once the strategic intent is established, the technology management architecture has a direction and guidelines are available for its design. The next step in the process is a process termed as Technology Planning Practice. One of the best methodologies to use in this process is the Technology Roadmapping (TRM) (Narayanan and O'Connor, 2010). With these tools, the organization can translate market drivers and trends into product requirements. The product requirements are further translated into technology needs which become the focus of the R&D function. TRM is critical in developing an agenda for the R&D function that is aligned with the overall corporate strategy of the organization. The second element is developing an R&D portfolio Management Practice which establishes a portfolio of projects that are aligned to the overall strategy. Using a stage-gate decision process can help to develop the Portfolio management practice. The stage-gate process involves a number of go/ no-go decision moments (gates) and phases with criteria for selection and analysis of the projects (Narayanan and O'Connor, 2010). A company should have a small number of balancing dimensions which reflect the choice of the company’s R&D activities. Successful R&D alignment with strategy is dependent on the existence of a proper governance structure. Organizations need to have well-defined organizational structures, a coherent definition of roles and responsibilities and decision making forums. With such a proper governance structure, superior R&D performance can be achieved. Approaches to R&D Organizations that seek success through R&D can take a number of approaches to the R&D process. Approaches to R&D include science and design (Wiethaus, 2005). The science approach involves a systematic investigation with the aim of gaining a better understanding of an existing phenomenon. Science is distinguished from design as design involves critical and systematic thinking that results in a new phenomenon. The scientific approach to R&D applies and pursues analytical methodologies with the aim of working out the structure of phenomenon (Wiethaus, 2005). In contrast, design is non-analytical as it follows synthetic steps to come with a new product. Examples of products that were invented by scientific R&D include the light bulb, the aircraft and many pharmaceutical drugs. Design approaches to R&D are generally divided into Forward Design and Reverse Design. Forward design is development of a new product by the design approach using a forward flow of information (Fortuin and Omta, 2007). When design and development is initiated it provides information for the development of the product. On the other hand, Reverse design is a process that aims to produce a product similar or superior to an existing product by closely analyzing the existing product. In many instances, reverse and forward design takes place hand in hand. Information gained from reverse design is used in driving the forward design phase of the new product. Successful R&D Case Novartis one of the largest global pharmaceutical companies has for years thrived on superior R&D performance. By using a decentralized research model, Norvartis have been able to integrate different research units to come up with innovative products. Its R&D department is named the Novartis Institutes of Biomedical Research (NIBR) and is headquartered in Boston (Fortuin and Omta, 2007). However, NIBR is not part of the organization bigger pharmaceutical division. NIBR is run as an autonomous organization that reports directly to the CEO. In collaboration with Norvartis, NIBR determines the focal areas of research based on whether there is unmet medical needs and whether deep biological insights can be provided. As a provider of pharmaceutical drugs, the R&D strategy is very well aligned with the overall strategy of Norvartis. Conclusion The alignment of R&D to the overall strategy of the company is an important issue that impacts the performance of the organization in the market. The need for quality beyond that of competitors, cost below competitors and innovative technologies before competitors make it essential for organizations to align their strategy to R&D. Many organizations have been frustrated by their R&D function because of this lack of alignment and therefore the lack of direction for the R&D function. In this essay, the Technology Management Architecture is proposed as a solution to close the gap between R&D focus and overall corporate strategy. The architecture brings about alignment by defining the strategic intent of the R&D in the company. It defines the objectives and scope of the R&D activities and how they will contribute to the overall strategy of the organization. References Fortuin, F. T., & Omta, S. W. F. (2007). Aligning R&D To Business—A Longitudinal Study Of Bu Customer Value In R&D. International Journal of Innovation and Technology Management, 4(04), 393-413. Gindy, N., Morcos, M., Cerit, B., & Hodgson, A. (2008). Strategic technology alignment roadmapping STAR® aligning R&D investments with business needs. International Journal of Computer Integrated Manufacturing, 21(8), 957-970. Herfert, K. F., & Arbige, M. V. (2008). Aligning an R&D portfolio with corporate strategy. Research-Technology Management, 51(5), 39-46. Lyne, M. B. (2003). Aligning R&D with business strategy. Research-Technology Management, 46(6), 44-46. Narayanan, V. K., & O'Connor, G. C. (Eds.). (2010). Encyclopedia of technology and innovation management. John Wiley & Sons. Skinner, W. (2003). Missing link in corporate strategy. Operations Management: Critical Perspectives on Business and Management, 1, 320. Wiethaus, L. (2005). Absorptive capacity and connectedness: Why competing firms also adopt identical R&D approaches. International Journal of Industrial Organization, 23(5), 467-481. Read More