Innovation and learning in R&D management; trends in practice

3. Innovation and learning in R&D management; trends in practice Jeff Butler Institute of Innovation Research Editor, R&D Management

4. Global publishing – The world – authors & referees Manchester - Editors Oxford - HQ India – typesetters & copy-editing Singapore - printing Shanghai distribution, marketing Cambridge, Mass. USA Africa - readership http://www.blackwell-synergy.com

6. A small selection of references • Strategic management of intangible assets and value drivers in R&D organizations, Stephen Pike, Göran Roos, Bernard Marr • Managing and reporting intangible assets in research technology organisations, Karl-Heinz Leitner • Competing in the new economy: the effect of intellectual capital on corporate entrepreneurship in high-technology new ventures, James C. Hayton, Mar-2005 • Trends and determinants of managing virtual R&D teamsOliver Gassmann, Maximilian von Zedtwitz: 13-May-2003 • Managing innovative R&D teamsHans J. Thamhain May-2003

7. A small selection of references • A utopian view of R&D functions, Klaus Brockhoff Jan-2003 • Technological collaboration in the korean electronic parts industry: patterns and key success factors, Youngbae Kim, Kwanghoe Lee Jan-2003 • R&D 'inputs' and 'outputs' of technology-based firms located on and off Science Parks, Paul Westhead, Dec-2002 • The allocation of resources for R&D in the world's leading pharmaceutical companies, R.G. Halliday, A.L. Drasdo, C.E. Lumley, S.R. Walker, Dec-2002

8. Special issue on R&D in China, September 2004

10. Increasing access to R&D Management in China

11. The practices of R&D management have been researched by academicsfor more than 50 years • The journals IEEE Transactions on Engineering Management, Research Technology Management, Research Policy, and R&D Management are more than 35 years old • The R&D Management Conferences were started in the 1970s by Alan Pearson

12. View over Salford Docks towards and beyond Manchester

13. Objectives • The presentation will provide a quick overview of various concepts and techniques that have interested academic researchers or have been the focus of management attention. • How managers and academics can share their knowledge of R&D management methods will be introduced, with illustrations from European activities, including reference to the R&D Management journal and its international conferences.. • Implications for research and to advance the state of the art will be suggested. This will provide a general background and introduction for thinking about the theme of the workshop - location of global R&D activities.

14. The evolution of R&D management as an academic subject • Innovation has been studied by economists and others for over five decades: • e.g. Carter and Williams, Manchester University - The characteristics of technically progressive firms – 1956 • e.g. Everett & Rogers, 1970s, the diffusion of innovation • e.g. ‘Wealth from Knowledge’, Manchester University - 1972 • The R&D Research Unit was created in Manchester Business School in 1969 to develop the subject of R&D management and promote it to UK managers • interdisciplinary research is required to penetrate and unravel the complexity and uncertainty of innovation processes and to put R&D activities into an appropriate business context.

15. The evolution of R&D management as an academic subject • R&D management is usually studied at the micro level (e.g. from an organisational design, financial management, operations research, human resources, project, portfolio, alliances …. or international business perspective) • It can be studied at a more macro level (e.g. from an economics, regional studies, innovation, investment …. or international business perspective) • Scientists and technologists can contribute insights from their work experience perspective – but seldom do. • There is a wide international community of scholars and practitioners interested in R&D, innovation and technology management. RADMA is a virtual organisation registered as a UK charity and associated closely with the journal and its conferences and other educational and research activities.

16. what exactly are we discussing here in this workshop? • When focusing on foreign direct investment in R&D, or international R&D, or the global knowledge system or the attractiveness of various locations for creative work then R&D management at the micro or macro level is very relevant and interfaces with knowledge management, IP management, science and technology policy, regional studies, economic development, national innovation systems, the triple helix etc etc • Much about the attractiveness of locations for R&D investment is however seen as economic geography. How do the two come together?

17. some perspectives and perceptions • R&D as a function • R&D as a component of a business process – the innovation process • Innovation and technology management as networked activities • Technology strategy and internationalisation of R&D • Technology commercialisation (V K Jolly) • R&D as a business and as a services industry • Options thinking, Intangible assets • Global R&D networks and open (source) innovation

18. Management emphasis Application period R&D as a function – corporate and government laboratories 1960 – 1980 R&D focused on current business and market needs 1972 – 1995 Interfaces between departments – R&D/production and R&D/marketing. Matrix management. 1975 –1985 R&D serves innovation as a business process Project teams and concurrent engineering 1990 – 1998 Networks of collaborating organisations including business-business and university-industry projects 1995 – 2002 Core competences 1995 – 1999 The virtual R&D organisation 1996 – 2000 R&D “as a business” 1999 – 2001 Knowledge management 2000 – 2002 e-business, e-R&D, e-science 2001- 2004

19. Phase of R&D management evolution Period Main attributes of the period 1. R&D for corporate business (or public sector) purposes (1st generation R&D management – a linear model) 1950 -1972 Curiosity and discipline-based activities in relevant technology areas. Technology-push. Matrix management. 2. R&D for customers – the government department or business division. (2nd generation R&D management) 1972 - 1990 Market-driven activities with decentralised laboratories. R&D as a cost centre. 3. Business-driven R&D[i] 1990 - 2001 Commercial attitudes Quality focus. User needs rather than market definition 3rd generation R&D managemen R&D strategy and technology strategy are closely connected 4.Collaborative networks 1993 – 2002+ 5th generation management model[ emerging Networks and consortia. Strategic alliances. 5. R&D ‘as a business’ 1999 – 2002+ R&D projects are each financially viable, using intangible assets concepts, rather than being justified within a programme. Contracting out. Outsourcing. R&D as a profit centre IP and knowledge highly valued. Project results commercialised tangentially R&D strategy and technology strategy are partially independent 6. R&D via business start ups, knowledge intensive service businesses (R&D based businesses) and enterprise developments 2000 – 2002+ Project proposals written as a business plan Spin-off companies from university and other incubators R&D sponsored by venture capital and eventually exploited by flotation on equity markets or by company acquisition IP and knowledge is more highly valued 5th generation management model firmly established 7. R&D activity parallels the growth of knowledge-intensive business services 2004+ Extended 5th generation models. Intangible assets fully recognised. R&D, innovation and technology management are integrated. A new model of R&D management is required? The evolution of R&D management

20. Global business dynamics • The pace of change is currently very rapid in business, technology and the management of technology • implications not just for R&D management but also for innovation management, logistics management, quality management, technology strategy and manufacturing management etc • New ideas - how to manage technology and related activities more efficiently and effectively - are being introduced quite frequently.

21. a historical perspective • But we can learn from longer term trends as well as contemporary issues and competitor activity. • I want in this presentation to reflect on the evolution of R&D management concepts. • I think we can then understand better what is meant by the ‘globalisation’ of R&D. • We might understand more clearly how to attract R&D to particular locations. This might help a wider range of cities and regions – e.g. in Europe, not just China - to nurture the growth of R&D activities • It might help existing centres of excellence to compete more effectively and to retain more R&D in their location! • How the questions are asked and by whom determines the shape of the answers that can be given • It is then useful to ask what will come next in R&D

22. some more issues • It is not just a question of facilitating better R&D management for client companies, but delivering better services to industries and citizens worldwide. This concerns new modes of innovation policy. • It is also valuable to think about the future, and how things could be or might be and how we can strategically intervene to shape the future. • Basic to my presentation is the notion that the terms ‘global R&D’ and ‘globalised R&D’ are inaccurate descriptions of what is currently happening. I don’t have a good alternative term – so you will need, please, to think during the workshop of better terms – better ways of articulating the problem.

23. Analogies and metaphors to stimulate creativity • Terms such as ‘global’ are sometimes metaphors rather than accurate descriptors. By trying to think of a better word we might be stimulated to think of new approaches to attracting and encouraging R&D – although many of the real practical challenges will still remain. • Metaphors in R&D management include: the technology gatekeeper, the product champion, the innovation funnel or pipeline, options thinking, ‘open innovation’ • The term R&D is not an accurate description of some work. ‘research’ – ‘development’ - ‘design’

24. Concepts and issues persist In the early days (the 1970s) academic researchers used to study: • communications in R&D laboratories (e.g. Tom Allen - ‘technology gatekeeper’ concept, and string diagrams of people movements) • Structures for organising R&D – scientific disciplines, matrix management, project teams, dual ladder careers etc • Application of operations research (OR) to project selection methods – not very successfully • R&D was typically organised in major corporate or government laboratories and some research institutes. • R&D outputs MIGHT lead to innovation, but managers expected frequent failure or disappointment • R&D was often viewed by marketing and manufacturing managers as an ‘ivory tower’ [another metaphor] • In various different ways these kinds of problems and issues still exist

25. cycles of R&D investment • R&D was too often regarded as a ‘cost centre’ • To try to improve performance, R&D was decentralised. (The ‘customer contractor’ principle was introduced to UK government labs, and similar principles grew in some other countries) • This lead to the closure of corporate labs and the responsibility for paying for and doing R&D was dispersed across business divisions. This caused R&D work to become less strategic and less innovative. • The tight specification of deliverables reduced the prospect of tactical (project) failure but simultaneously reduced the strategic potential value of the R&D programme

26. More detail • In the early 1990s quality management was introduced into R&D – after most other management areas had embraced the concept. This lead to performance measurement. • R&D often became a profit centre, and in order to utilise resources more efficiently might then serve other companies as well as the parent and internal business customers • Ganguly (Unilever, India) has referred to business-driven R&D and going beyond this concept the trend in R&D has been to organise R&D “as a business” • technology strategy and strategic portfolio management (core competences and technological capabilities) became more important

27. More topics • Technology complexity and sophistication – this means longer cycles of skill development and project experience • Flatter organisations and leaner businesses • Outsourcing of manufacturing activities • Growth of information and communication technologies to promote collaborations, dispersed teams and virtual organisations • The internationalisation of R&D • Concurrent engineering • Outsourcing R&D • Business process engineering

28. more issues • knowledge management • Licensing IP • Strategic exploitation of knowledge • Business incubation and intrapreneurship (plus ‘extrapreneurship’ is needed to facilitate this) • Technology as know how or dynamic capability • R&D as a knowledge acquisition process • R&D as the assembly of knowledge from different sources • Google, Autonomy, other powerful search engines

29. integrating R&D management with business and policy issues • A shift from R&D (a function) to innovation process and technology strategy issues in business • Increasing interest in science and technology planning and innovation policy – at national and European levels • Foresight and technology intelligence • Technology roadmapping (a means of communicating across companies and industries) • Network mapping • Patent scanning and other data mining techniques for competitor analysis, technology focus and to identify emerging technologies ad industries • Increasing knowledge intensification and more emphasis on design and creative industries (including media)

31. Innovations in management • University-industry interaction • revitalisation and restructuring of public national laboratories and research and technology institutes • Industrial R&D ecologies • Options theory and options thinking • Open innovation • Intangibles – reputation and image and the credibility to be an R&D partner

32. Partnerships in learning • Industrial Research Institute (IRI) in US and European Industrial Managers Association (EIRMA) – learning ‘clubs’ for major R&D investor companies. Also in Korea and Australia. • Knowledge Transfer Partnerships – LINK – many other schemes in UK – to promote and facilitate university industry collaboration. • Some European ‘mobility’ schemes including PhD level – mainly for individual career development – but have been used by industry • European Doctoral Summer Schools in Technology Management and European Summer Workshop in Strategic Technology Management – a company focused project-based learning for masters students

33. The R&D Management Conferences • In Europe - Manchester, Kiel, Fontainebleu, Ghent, Zurich, Lausanne, Twente, Pisa, Avila, Lisbon, Hyderabad, Delhi, New Zealand • Themes have usually been relevant and contemporary, frequently coinciding with industry themes as defined for conferences by EIRMA, IRI etc • RADMA (a UK charity) supports participation at these conferences and the Doctoral Summer Schools • Other conferences include IAMOT, PICMET, ITMF, IEEE EM, PDMA, EIASM

34. The R&D Management Conferences • Internationalisation of R&D • Interdisciplinary R&D • Knowledge Networks • R&D and entrepreneurhip • Quality management and R&D • R&D as a business • People and R&D • Leveraging R&D • Organising R&D – a balancing act

36. European R&D as a learning and innovation opportunity • EC Framework R&D programmes – encouraged and supported much collaboration between partners who were often strangers • EUREKA – a decentralised programme of near market R&D support – funds from national governments • Commercial ventures – e.g. Airbus • Mergers and acquisitions • Action learning, management workshops • Gate2growth.com – fusion of innovation, finance and entrepreneurship • INSPIRED project – intended to focus on less innovative or less R&D intensive regions

37. Imperfections in knowledge • science and technology practices and how they are managed • the academic theory of R&D management and its practice • consultancy advice and implementing recommendations • policy research and management research • policy design and policy implementation (e.g. OECD EIRMA seminar in Paris to inform policymakers worldwide about business management methods) • the statistics and reality of R&D activity (OECD, Eurostat, UK R&D scoreboard (now a European version in 2005) • indicators of innovativeness (for countries) and aggregate and composite information • innovation ‘trendcharts’ and what next for those at the top of the league tables (e.g. Finland)

38. R&D concentrations • By industry sector (as classified) but only a few sectors • By focus – products and processes but not services – 80% US GDP is service economy and 60% of R&D is for manufacturing • By company –typically the larger companies in each sector • By geographical area – R&D is concentrated in only a few countries even in advanced economies and only a few cities and regions within those countries

40. Manchester – a historical perspective • The oldest railway station in the world • The first stored program computer designed and built (in 1948) in Manchester University • The oldest industrial estate in the world – about 109 years old – Trafford Park (which is also home for Manchester United) • 1956 – Jodrell Bank radio telescope – now connected to a Japanese satellite • 2005 – Manchester the most buoyant economy in the UK • Exciting architecture and constructions • The Commonwealth Games – The B of the Bang • Economy based around ‘knowledge capital’ and creative sector.