Technology generation and development Is often synonymous with the term “Research and Development (R&D)”. However, technology generation involves R&D efforts while technology development involves further stages of translating R&D efforts into marketable products, processes and services. Basically, one can consider the R&D process as having four distinct stages as shown in Figure-1. Recognition of a need for innovation is one of the motivations for R&D. “Research” on existing knowledge for satisfying identified need helps in idea generation – this is the “need push”. The other primary motivation for R&D is to find potential applications for advances in knowledge. “Research” on existing activity for introducing new knowledge also helps in idea generation – this is the “technology-push”. “Development” includes engineering (creation, design and production) and marketing (first use and diffusion) of the generated idea. Through the entire process it is ideas and knowledge which are being pursued and the process is not complete until the new idea is converted into a marketable product or service (a hardware or software intensive technology).
Figure-1 : Stages of Research and Development(R & D) Process
Objectives of Corporate R&D and R&D Projects : Corporate research and development is the principal corporate asset for long-term technological competitiveness. Corporate research activities can be classified by the purpose of the research :
1) To support current businesses;
2) To provide new business ventures;
3) To explore possible new technology basis.
As explained earlier, the R&D projects tend to go through the following stages :
1) Basic research and invention;
2) Applied research and functional proto-type;
3) Engineering proto-type and testing;
4) Production proto-type and pilot production;
5) Product testing and modification;
6) Initial production and sales.
Stages 1, 2, 3 are usually called “research” while stages 4 to 6 are called “development’. Hence, the term “research and development (R&D)”. Each stage of innovating anew product is expensive, with the expense increasing by an order of magnitude at each stage. The management decisions to continue from research to development are therefore very important. Overall, the expenses of modern industry for R&D were considerable. For example, in USA in 1981 the industrial expenditures for R&D were US $ 49 billion representing about 1.7% of GNP in that year. Of this US $ 49 billion, about 25%, was for research and 78% for development. The major purpose of research is to reduce technical risk before production scale investment is committed. It is generally reported that at each stage, the cost escalates by orders of magnitudes of over 1 : 10. It is precisely this reason that technology generation and development is costlier than basic R&D and hence all countries or all enterprises are not able to pursue these activities at similar levels.
Corporate Research and Product Life Times : R&D projects in ‘corporate research create and extend the life times of corporate products, avoiding technological obsolescence of businesses. Extending product life times can be done by :
1) Improving the production processes to lower production costs and increase quality;
2) Upgrading and improving current product models;
3) Creating next generation product models.
The function of corporate research is to create and extend the lifetimes of the company’s products. This is an essential function because all products have finite lifetimes (sometimes as short as one year and sometimes as long as several years). In times of new and rapidly changing technologies, lifetimes tend to be short. A mature technology product may have a very long life time if no clearly superior technology has emerged. But even in a long lived product, periodic reformulations, variation in product lines, and changes in packaging provide some change in the product. To maintain a long lived product, quality must be maintained on par with competing products, if not more, and cost reduction in production must be ahead of competitors. Product lifetimes are dependent on two factors : technological obsolescence and product substitution. Technological obsolescence occurs rapidly and product models have short life times due to new models with improved technical performance. As product life times age, changes in sales volume and profitability should be arrested through introduction of new products by way of R&D efforts.
Production Costs and R&D : Production costs of new products usually decline over times, due to process and product improvement. In any new product line, initial production costs are usually much higher than later production costs. All new products based on new technologies have initially high per unit product costs because of (i) large R&D and plant investment costs, (ii) small volumes of initial production, and (iii) inefficiencies in the production processes and in production design. For a successful product, these factors improve over time. Investment capital becomes amortised over larger production volumes. The increasingly larger volume of production also lowers per unit overhead charges. Innovations and improvements in production processes create more efficient production procedures. Later generation production models and computerised techniques are designed to lower production costs.
Market share, profit margins, and pricing strategy etc. : are also highly dependent on R&D efforts at corporate level and the efficiency at which R&D is carried-out. The entry into a new high technology market is restricted because knowledge is new and is not widely known. Products then are high priced because sales volume is small and production costs are high. Yet, if the price is held there too long, other competitors can enter with “me too” technology products, since high profit margins and growing markets provide the competitive incentive. However if prices are reduced in anticipation of production costs being increased in future, a competitor has less incentive to enter, and may incur losses. The strategic trick is for the technology innovator to ride the markets faster than the competitors and enter new products earlier than others. It is precisely due to this reason that open competitiveness encourages innovations as happens in advanced economies while restrictive policies and assured markets through licensing systems discourage innovations as has happened in India all these years.
Process of Technology Generation : Technology is generated in R&D organisations. An illustration of the various inputs required for generation of technologies is given in Figure-2. Goals, surroundings, criteria and resource allocation are some of the inputs to R&D, the output of which is technology. The input resources into R&D organisations are the traditional inputs such as money, materials, facilities, energy, labour and management, and the intelligence based inputs such as science, knowledge, skills, information and existing technologies. The effectiveness of any R&D is determined in terms of the ‘usefulness’ of the technologies it produces with respect to the overall objectives of the corporation.
Figure-2 : The Process of Technology Production
Besides the various factors discussed in earlier paras, the R&D or technology generation involves many other aspects such as, monitoring and evaluation of R&D projects, funding of R&D, training and development of resource personnel, interactions at all levels, management policies and support, the availability of support structures and incentives at government level, timely collection and interpretation of technical and other information, etc. The quality of resource leadership and commitment of the top management for research is extremely important. In Indian industry or corporate sector, it is generally observed that the research personnel occupy secondary place to finance, marketing and production personnel, and are not given due importance in decision-making at corporate level. Sometimes, inefficient personnel from other departments are posted or transferred to R&D department, thereby indicating a complete neglect of R&D concept. Such management attitudes need to be changed in the overall interest of the company.
Managing and Monitoring R&D : Managing R&D requires special skills and covers a wide variety of issues ranging from technical matters to management techniques and overall business environment at national and international levels. Managing R&D projects, requires attention to performance, timing, cost, and personnel.
Performance is the measure of a product or process to accomplish a specific function or application. The performance parameters must be defined for an R&D project in order to determine how successfully the goals of the project are attained.
Progress in R&D projects can be watched by monitoring :
(i)technical performance parameters against time,
(ii) performance parameters against cost, and
(iii) cumulative cost against time. Timing is important to the success of a project, since lead time created froth timely innovation provides a competitive advantage.
Milestone and PERT charts are useful in identifying the necessary tasks and sequencing to accomplish the R&D project. Costs of the project are essential to its commercial success, for R&D costs must be recovered as part of the investment costs in the new product or process. Personnel are also critical part of any R&D project, since the talents, creativity, dedication, and problem solving ability of the personnel are essential to the success of any R&D project.