R&D Trends: the Evolution of Strategic Research Thinking

Pulp & Paper Canada
April 30, 2003
By Pulp & Paper Canada
Recent surveys of research organizations in the U.S. (R&D Funding Forecast, Industrial Research Institute, R&D Magazine) indicate the following:

R&D Funding Trends: Overall R&D funding has been in growth mode over the '90s but is now flat or declining with respect to inflation, tracking economic activity. Industrial R&D spending growth in the U.S. is at its slowest in 10 years. Federal R&D is at its highest -- mostly driven by defense and health priorities. Current U.S. R&D funding breakdown is about $80B, $200B, and $16B for federal, industry, and non-profit respectively. While not perfect, R&D spending as a % of sales is one yardstick for comparison of spending by different industry sectors (2002 data). Computer communications equipment is the highest at 18.5%; petroleum refining is the lowest at 0.2%; chemicals and allied products, which might include most P&P suppliers is 6.0%; conglomerates come in at 2.8%. The spending pattern in pulp and paper manufacturing fits into the "refining" slot as an overall average, while many of this sector's leaders might approach the lower end of the conglomerate category.

Business Cycle Effects: Business cycle conditions have a direct impact on R&D spending; what had been so recently considered necessary for long-term survival suddenly became a luxury that could be postponed. However, a slowing growth rate is also a consequence of a decreasing supply of R&D professionals.

The Biggest Issues: Conflicts with respect to short-term benefits and long-term objectives; accelerating commercialization; being competitive as the economy expands; anticipating customer needs; allocation of resources; translating technology into profitable products; relating R&D more closely to business strategy.

Outsourcing: A greater emphasis is being placed on strategic alliances or "partnering," even across industry sectors. Historically this has been directed toward individual projects, but more recently this has covered a broader range of activities with more intimate partnering for long-term relationships. In some cases the entire R&D process is outsourced to an external provider or research management institution with a collaborative rather than merely active role.

Investment in Consortia: Surveys (R&D Magazine and IRI) show that almost half of the U.S. industry does not allocate any funds to consortia research. Furthermore, there is a decreasing involvement in the consortium-type approach to pre-competitive research. This is a reflection of changing attitudes: On the one hand, such consortia provide inexpensive access to new knowledge, new people resources, and greater sensitivity to new directions and competitive forces. However, the growing pressure for greater and timelier ROI on research funds is a counter force.

A Changing Focus: Research to most of Corporate America is "improving the present product." For those that engage in it, "basic research" is in decline; what there is, may be better termed "directed research" with a specific class of applications in mind. There is also a continuing shift away from R&D in manufacturing to non-manufacturing, services, and infrastructure technologies.

New Models: The expansion of alliances, the globalization of markets, and the continuing shift of research down through the supply channels will influence the entire research-to-development-to-implementation chain. There is a shift in R&D strategy and purpose with more emphasis on "new business" growth with alliances and joint ventures, and less on pre-competitive consortia, directed basic research, existing business, and outsourcing to other companies. The "commoditization and short cycle-time of technology" is resulting in new R&D models for acquisition of capability and intelligence by looking outside of company or sector to create new technology-based options, and efforts to be "ahead of the curve" and "change the rules." R&D continues to be tightly targeted for tangible business results; a trend that requires new models of interaction with historically non-commercial entities [Federal labs, universities, consortia].

Why is this important?

Positions and procedures to permit agility and flexibility appear to be the coming shape of R&D. However, there is no fixed recipe. New tools for adaptive portfolio management and technology strategy development are clearly needed. Perhaps the greatest changes in the near-term business environment will be the outcome of technology commiditization, globalization, 9/11, current Middle East events, Asian trends, and the realization of factors that lie deep behind these world-shaping events. Adaptability to a world of disruptive events rather than the peak and trough of traditional business cycles may be the defining measure of competitiveness.

Alan R. Procter is an international consultant working with organizations to optimize their technology strategies. He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

FROM THE ARCHIVES of FutureViews [c. 1900]

In a world of 1.6 billion, dominated by the British Empire, 50% of the workforce is in farming and in industrial occupations, the average workweek is 52 hours. Europe and North America have two thirds of the world's railways -- the major means of transportation, with an average speed of 54 mph. Looking to the future: "Man will not fly for 50 years," Wilber Wright; "The horse is here to stay, but the automobile is only a novelty," bank president to Henry Ford; "Heroin is a cure for morphine addiction and an excellent cough syrup," The Boston Medical and Surgical Journal. In the world of paper, when news happens more people read about it in newspapers. Literacy has soared, bringing with it a huge appetite for popular journalism. The Daily Mail in the UK is the first to achieve a circulation of one million. New formats present news and gossip in easy to read snippets, illustrated with photographs instead of line drawings. Feeding this surge, more mills are planned for North America using new groundwood pulping systems. Paper and wood will join oil and steel as the growth resource industries of the future.

For more recent archives visit www.futureviews.net and click FutureViews.

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