An introduction to New

Product Development (NPD)

New products Development:

Managing R&D Projects

New Product Development- Managing

Intellectual Property
Learning Objectives
1. Recognize the changing nature of R&D management
2. Recognize the factors that influence the decision
whether to undertake internal or external R&D
3. Recognize the value of providing scientific freedom
4. Examine the link with the product innovation process
5. Recognize the significant of evaluating R&D projects
6. Explain how prior knowledge affects a firms ability to
acquire externally developed technology

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Successful Technology
Management
Essential Ingredients for Successful Technology
Management
Capacity to orchestrate and integrate functional and
specialist groups
Questioning the appropriateness of the existing divisional
markets; missions and skills for the exploitation of
technological opportunities
Willingness to take long term view of technological
accumulation

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The Changing Nature of R&D

Management
Factors of Changes
Technology explosion- 90% of present technical
knowledge generated in last 55 years
Shortening of technology cycle- market life of production
cars decreased from 10 years in 1960 to 6 years in 1990
Globalization of technology- ability to acquire and
assimilate technology into new products e.g. Technology
transfer

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Acquisition of External
Technology/Matrix
Purchase existing
products or manufacturing process
High

By
Granstrand et al.

Level of understanding
of the
technology by
external third parties

Low

High

Level of understanding of the

technology by the acquiring business
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Organizing Industrial R&D

Form of R&D Organization Structure
Centralized Laboratories- critical mass; collaborative
ideas; synergy results e.g. 3M
Decentralized Laboratories- reinforce the link with the
business products and market; foster improved
communication and product development
Internal R&D Market- involves establishing functional cost
centre; similar to decentralized R&D laboratories
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Forms of External R&D

Contract R&D- Business has low level of technology,
contracting to third party is often suitable e.g. University
Research department
R&D Strategic Alliances and Joint Venture- generic terms
for all cooperation through sharing of cost and benefits
R&D Consortia- based on common membership and
collaborate over a long period of time e.g. Keiretsus &
Chaebols
Open Source R&D- free to use e.g. web browser and
Wikipedia

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Effective R&D Management

R&D Requirement

Characterized by

1 Growth Orientation

A commitment to a long term growth rather

than short-term profit

2 Organizational heritage and

innovation experience

Widespread recognition of the value of

innovation

3 Vigilance and external links

The ability of the organization to be aware

of its threats and opportunities

4 Commitment to technology and The willingness to invest in the long term

R&D intensity
development of technology
5 Acceptance of risks

The willingness to include risky

opportunities in a balanced portfolio

6 Cross functional cooperation

and coordination within
organizational structure

Mutual respect among individuals and a

willingness to work together across
functions

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Effective R&D Management

R&D Requirement

Characterized by

Receptivity

The ability to be aware of, to identify and to take

effective advantage of externally developed
technology

Space for creativity

An ability to manage the innovation dilemma and

provide room for creativity

Strategy towards
innovation

Strategic planning and selection of technologies

and markets

10 Coordination of a
diverse range of skills

Developing a marketable product requires

combining a wide range of specialized knowledge

11 Project Management

Good project management skills and systems

12 Market Orientation

An awareness of the needs and changing nature

of the market

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The Effect of R&D Investment on

Products
Profitability and Growth Perspective
Development of existing products-capturing market
share and improving profitability
Early introduction of a new product- strive to be
technology leaders in their industry
Late introduction of a new product- deliberately
postponing until shown by competitors to be valid
reduces the risk and cost
Long term projects- Looking into the future, developing
products that public do not realize they require

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R&D Project Evaluation Criteria

1.
2.
3.
4.
5.
6.
7.
8.
9.

Technical
Research Direction and Balance
Competitive Rationale
Patentability
Stability of the Market
Integration and Synergy
Market
Channel Fit
Manufacturing

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Evaluation Criteria
Categories of Screening Methods
1. Benefit Measurement Models
Derived from a group of well informed and
experienced managers
Subjective assessment
Quantitative and qualitative method
Mathematical, scoring, decision trees

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(Holger, 2002)

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Evaluation Criteria
Categories of Screening Methods
2. Financial/Economic Models
Most popular project selection tool
Too much emphasis on financial formulas
and inherent short term bias
Limited accurate future financial data,
leading to inaccurate estimates of future
revenues

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Evaluation Criteria
Categories of Screening Methods
3. Portfolio Selection Models

Newness- How new is the product likely to be

Time of introduction- is the new product portfolio
going to deliver a constant stream or case of feast
and then famine?
Markets- are the different business markets and
business areas of the company receiving resources
proportionate to size and importance?

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Tutorial
1. Discuss the strengths and limitations of
undertaking external R&D.
2. What is meant by scientific freedom and
why is it important?
3. Discuss the benefits of open source
R&D.

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