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R&D Spending: As with everything else, improved effectiveness is what’s needed

First thought: How are we conducting research? At least for some organizations, historical practice has research and technical support groups developing their project list through fairly informal prop…

First thought: How are we conducting research? At least for some organizations, historical practice has research and technical support groups developing their project list through fairly informal proposal and brainstorming processes. This can result in weak linkage with prevailing business priorities or future strategic agendas and thus inefficient prioritization and resource allocation with respect to strategic needs. As project activity proceeds, the accountability for direction, priorities and progress may be left to the individual project leader with little project management discipline. Terminating projects is also difficult, frequently because there are no replacement projects for the displaced resources. Furthermore, systems for R&T value measurement are often too qualitative or infrequent. Lastly, many CEOs have viewed research as a cost rather than an investment. This theme is in sync with a recent study where R&D spending was shown to be CEO dependent. CEOs with a legal background were the stingiest, closely followed by those with an operating experience. Marketing veterans spent heavily as did (not surprisingly) CEOs with an R&D background. The study also found that over time CEOs were able to mold R&D spending to fit their preferences.

Second thought: Who is now doing the research? In the Forest Products Sector, the process research needs of the industry are being largely met by the companies with the biggest stake – the machinery and chemical suppliers. Generic process research activity by manufacturers has been curtailed, leaving activity only in achieving site-specific operational efficiencies or supplier technology adaptation. By the same token, product development research should also be done by those with the biggest stake – the manufacturers and the value chain. However, for many manufacturers this is either a low level or contracted out activity with a fairly short-term focus. The Consortia Research Institutes try to fill the gaps [reference Pikulik and Crotogino Pulp & Paper Canada August 2002]. The academic community is fairly active in generating non-proprietary knowledge.

Why is this important?

Last thought: What has to change? Research in the future must be more effective. Richard Phillips of IP has articulated this view in a recent hard-hitting analysis. Only when greater efficiency and real results are demonstrated will the investment in proprietary corporate research return. A checklist for R&D or Technical Support Effectiveness:

A clearly articulated Technology Strategy that is aligned with Business Objectives.

Scenarios for alternative external Business Environments that form a broader guiding framework.

Idea Generation processes that aim for 50% more potential projects than the system can handle.

Multidimensional Prioritization tools to select active projects for the R&T portfolio.

Open Community that fully engages the R&T system with the business and client stakeholders on a continuing basis.

Portfolio Balance tools that address an appropriate risk/reward mix – you need many exploratory projects to find the silver bullet.

Quantitative Project Goals and time-lines that are a major part of the compensation system.

Project Management Discipline, where stage-gate project management is a minimum.

R&T Value and accomplishment that is measured on an annual basis.

Learn from Past successes and failures – stories and wisdom are invaluable lessons.

So this brings us back to the question, “How much should a company spend on research?” The spending level will be guided by the anticipated return and better measurement and management processes should be in place to maximize R&T effectiveness. However, any expenditure will have to meet more demanding business criteria in tomorrow’s world. Paraphrasing Kari Ebeling [UPM-Kymmene], “If you don’t spend on R&D, you take technology out of the competitive equation.” Next up: A look at R&D in other sectors.

Alan R. Procter is an international consultant helping organizations to optimize their technical strategies. He can be reached at futureviews@alanprocter.com