Research, development and technology management

best practice brief

Siemens PLM Software

Research, development and technology management

www.siemens.com/plm

Successful companies recognize the crucial importance of managing their R&D investments and processes on a systematic and repeatable basis. Effective technology planning is essential for aligning R&D spending with current and future business strategies, balancing product and process innovations, and leveraging a company’s intellectual property to its fullest potential.

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Research, development and technology management

Table of contents

Overview of R&D management

1

Challenges

3

Best practice solutions

5

Key Siemens solution capabilities 11

Overview of R&D management

Gaining value from R&D spending. Companies that aspire to market leadership realize that innovation is crucial to their business success. In a recent study of 940 executives by The Boston Consulting Group1, 87 percent of all respondents agreed that organic growth through innovation is essential to success in their respective industry. In addition, three-quarters of these executives said that their companies’ spending on innovation would increase during the current fiscal year.
However, the same report also found that 51 percent of the respondents expressed dissatisfaction with the financial returns on investment (ROI) they receive from their innovation initiatives.This anxiety is compounded by additional research that shows “there is no correlation” between R&D spending and sales growth, earnings or shareholder returns.2
At first glance, these conclusions are disturbing. In principle, increased R&D spending should lead to more and better ideas – and it logically follows that better ideas should result in better new products and a corresponding growth in revenue.
Analysis by AMR Research suggests that the disconnect between R&D spend rates and business results stems from the maturity of the management processes used to oversee R&D investment.3 As the study indicates, creating ideas and technology is one thing; leveraging those elements in the market place is another. At the end of the day, it would appear that “How you spend is far more important than how much you spend.”4
According to the Product Development Management Association (PDMA), the ultimate goal of technology management is:
To prioritize and focus research and development efforts on technology opportunities today that will have a positive effective on corporate revenues in the future.5
Looking at new product development processes holistically, these studies suggest that today’s increasing demand for faster, better and less expensive product development requires more effective upfront planning and a cohesive alignment between strategic planning, technology planning, product research and product development. In essence, the alignment and integration of these functions is the delineating factor in determining business winners from business losers.
PDMA expands on this conclusion:
To accomplish their goals, corporations should invest in tools, processes and structure that support the identification of technological opportunities to fuel product innovation and product-to-market excellence.6
Stakeholders in effective technology management. Technology management’s stakeholders involve a wider range of interested parties that extends beyond a company’s R&D organization. Effective technology management needs to be aligned on a cross-discipline basis to meet the needs of the business.

In brief:
To maximize success, companies require management processes that enable them to oversee their R&D investments and connect their R&D spending to real-world business results.
These new product development processes demand more upfront planning and a close alignment between the company’s strategic planning, technology planning, product research and product development functions.

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Parties with a vested interest in technology management

Stakeholder

Why technology management matters

Research managers and leaders

Efficient technology planning and management should sharply focus research efforts, share knowledge and directly influence downstream product development and manufacturing.

Product development management

Effective technology management should result in standardized technology platforms and increased understanding of the important roles these platforms play in meeting market requirements.These improvements provide the product development organization with a clear opportunity to increase quality and reduce development cost.

Product management and marketing

By mapping technology to specific market requirements and product capabilities, product managers are able to more clearly outline how product architectures relate to customer benefits.

Legal

Technology management provides the legal organization with a relatively simple method for signing and witnessing process performance as it relates to regulatory compliance.

In brief: Research organizations, product development groups, product managers, marketing managers and legal organizations are stakeholders in technology management.
3M’s Post-It Note innovation illustrates how an outstanding technology management process makes the difference between an interesting idea and a highly profitable real-world success.

Real-world results. 3M Company has a solid reputation for innovation. One of its best known and widely storied successes involves the invention of the Post-It Note.
3M research scientist Dr. Spence Silver first developed the technology in 1968 while looking for ways to improve the acrylate adhesives used in many of 3M’s tapes.While Dr. Silver realized that he had invented a highly unusual new adhesive, he now faced an intriguing challenge: What was the company going do with it?
For the next five years, Dr. Silver presented seminars and buttonholed 3M decision makers, extolling the potential of a new adhesive and showing spray-can samples and bulletin board usages. Eventually, Dr. Silver raised interest within the new product management organization – whose members championed the technology as a potential product. Ultimately, the company embraced the concept and the Post-It Note concept was born.
But, that is not the end of the story. 3M performed extensive market research to ensure there was a market for its product. Engineering and production overcame substantial technical difficulties to establish effective manufacturing practices.The rest, as they say, is history. In 1981, one year after its introduction, the Post-it Note was named the company’s “Outstanding New Product.”
Often 3M’s success is portrayed in mythic terms – almost as if it was accidental. In fact, nothing could be further from the truth. 3M’s research group has somewhere to go with its ideas.The ensuing steps follow a rigorous process for new product development that is open to exciting and different innovation.The Post-It Note could have been nothing more than inexpensive scrap paper. But it wasn’t – and 3M’s technology management process made the difference.

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Challenges

Impediments to effective technology management. Industry research consistently demonstrates that – across all industries – the time it takes to get new products to market is being reduced while the overall number of products being launched is increasing.7 These improvements are driven by increasingly aggressive consumer demands and competitive marketplace pressures.
Now more than ever before, companies are expected to sustain and better these improvements.To accomplish this, companies need to plan more effectively up front by cohesively aligning and integrating their strategic planning, technology planning and product development operations.
Five main challenges inhibit companies from effectively managing their R&D and technology operations, including the ability to:8
• Identify and align resident technology to current and future business needs
• Determine gaps between resident technology and current/future business needs
• Identify resident technology no longer viable for meeting current/future business needs
• Determine best approach for obtaining new technology (i.e., through internal development or external acquisition)
• Identify opportunities for expanding technology usage beyond current business processes
Avoiding potential pitfalls. To ensure the success of their technology management initiatives, companies need to avoid a series of common pitfalls.

In brief:
Companies can effectively manage their R&D operations if they: • Understand how the technology they have
pertains to their business needs • Determine the gaps that this technology
fails to satisfy • Identify technology that has become
obsolete • Determine the best approach for
developing or acquiring new technology • Identify opportunities for future expansion

Common problems inhibiting effective technology management

Pitfall

Effective counter-measures

Isolated focus on investment

Product and process innovation represent two different types of technology investment.Typically, product innovation is the initial investment that companies make when they want to establish dominance in a given market segment. By developing new technology for their product offerings, companies are able to establish early marketplace advantages.

In contrast, process innovation is adopted by companies that compete in mature markets and want to maximize the return on their product development investments by applying new technology to their developmentrelated processes. Companies that balance product and process innovation are able to sustain their product advantages while continuing to optimize their operational processes.

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Section name

Common problems inhibiting effective technology management

Pitfall

Effective counter-measures

Failure to adopt an aggressive patent strategy

Some companies simply fail to adopt any sort of effective patent strategy; others do not utilize the patent portfolios they have in place, or fail to screen their organization’s patentable ideas.

Texas Instruments, Zenith and Dow Chemical illustrate the importance of leveraging an aggressive patent strategy. Each of these companies has licensed their unused patents to generate more than $100 million in royalty revenues.9 Dow Chemical has taken this approach even further by saving $40 million over a 10-year period through the use of patent screening and reduced patent maintenance fees.10

Failure to leverage intellectual property

Many companies are unable to track the output generated by their combined R&D programs.This failing is attributable to the project-oriented nature of many R&D programs, the secrecy that sometimes surrounds these programs and the proliferation of data generated by these projects.This problem is further exacerbated by a multitude of information silos whose data cannot be readily shared.

Failure to align R&D investment with business strategy

Effective technology planning requires more than just successful management on the part of the R&D organization. Effective technology management requires companies to map their strategic business needs to the needs of their target markets. Failing to establish this connection results in wasted R&D investment from beginning to end. In fact, even the most technologically advanced product innovations will be doomed to commercial failure if these innovations are misaligned with the company’s business strategy.

Failure to account for disruptions and the negative impact of business as usual

R&D organizations frequently ignore the more disruptive aspects of their product innovations – or succumb to the temptation of proceeding with “business as usual” assumptions.11 In both instances, product developers need to familiarize themselves with the voice of the customer and understand how the customer’s requirements directly relate to specific product innovations.

In brief:
Technology management improvement initiatives will encounter problems if they fail to balance product and process innovation, if the company has a non-assertive patent strategy, if the intellectual property generated by R&D programs is not effectively leveraged, if R&D investment is not properly aligned with business strategy or if product developers succumb to “business as usual” assumptions.

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Best practice solutions

The value of technology planning. PDMA12 references well known research13 in its definition of “technology planning.”
Technology planning is the process of knowledge acquisition, which can be later used in the design of new products to meet market needs.
Ultimately, technology planning enables companies to:
• Align their technology acquisition efforts with business and strategic goals
• More clearly focus their technology development efforts
• Better understand, leverage and protect their intellectual property
• Better identify general technological advances for current and future product development
• More effectively utilize technology in product development processes
• Better understand their core competencies
• Provide their products with a competitive edge
PDMA furthers this discussion by indicating that:
Technology planning is the process that results in an actionable plan to leverage new and existing technologies, consistent with business strategies and customer needs.
In this context, technology is defined as scientific know-how that is embodied in people, plants, patents, laboratories and equipments.14 In essence, technology represents the framework that underpins a company’s future products, as well as the development and manufacturing processes that support these products. As a result, it is imperative for companies to clearly understand what technology is available to them and how these technologies can be used to meet the needs of their target markets.

In brief:
Effective technology planning is crucial to enabling new products to meet their market needs.These planning efforts require companies to adopt an actionable plan that details how new and existing technology will be used to satisfy strategic customer requirements. Technology insight, competitive insight and marketing insight are critical for any successful technology planning process.

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PDMA: Technology development vs. product development

Acquire knowledge

Technology base

Use knowledge

Idea base Technology development

Product base Product development

Technology planning process and framework. PDMA defines a framework for the technology planning process that consists of three key areas of input: technology insight, competitive insight and marketing insight. By considering these three knowledge bases together, companies are able to place their technology planning process within a broader business context that helps maximize the company’s business success.
The technology planning process begins with the formation of a cross-discipline team that best represents the functional areas crucial for identifying and developing critical technology. Typically, this team includes key R&D staff having both technical background and strategic vision, their marketing counterparts and consultants/ industry experts.

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PDMA technology planning process inputs
Technology insight • Internal technology capabilities • Industry/supplier direction • Patent activity
Competitive insight • Product information • Technology direction • Consumer habits
Marketing insight • Brand identity/message • Business plan • Customer needs

In brief:
Technology planning starts with the formation of a cross-discipline team that will identify what technology, capabilities and competencies are required to develop a particular product. As the planning process proceeds, the team further defines where these technologies will be applied and what aspects can be commonized. Then, the team looks at the competitive landscape to perform a strengths, weaknesses, opportunities and threats (SWOT) analysis.

Once the team is in place, members are tasked with outlining key capability and competency building blocks. Core capabilities will vary from industry to industry and cover both product and process technological expertise. Ultimately, these building blocks will be utilized across multiple business segments.
With core technology capabilities in hand, the team can align these technologies with functional marketing product categories – providing the team with understanding that is crucial for determining what technologies will be utilized, where they will be applied and what aspects can be commonized.
Then, the team can leverage this alignment – together with an in-depth competitive marketplace review – to position this internal technology and the products it supports against the marketplace as whole.The team typically leverages tools, such as a strengths, weaknesses, opportunities and threats (SWOT) analysis, to facilitate the review.

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PDMA technology planning process: 10 steps

Explore technology via technology mining

Step 1 Form team

Step 2 Identify technology categories – building blocks

Step 3 Align
categories with
functional product
areas

Step 4 Conduct competitive oppurtunity analysis

Step 5
Brainstorm technology opportunities

Step 6 Link
opportunities to business objectives

Step 8 Develop strategies and actions with CFT

Step 9 Update
and publish technology
plan

Step 10 Update publish business plan

Industry competitive
direction
Current technology position

Step 7 Review opportunities
with core business planning team
Technology planning is an iterative, ongoing process.

In brief:
PDMA provides a 10-step process to outline and articulate a full-fledge technology planning process.The first four steps in this process describe the brainstorming techniques required to assess new ideas from a short-term, medium-term and long-term technology perspective.
Later steps are taken to ensure that these technology opportunities are aligned with the company's strategic objectives – with conceptual product prototypes and product roadmaps being prepared in many instances.

Marketing business plan brand identity

Marketing presents customer needs; R&D identifies technical solutions to meet these needs plus innovates new concepts for often unknown customer needs.

As the accompanying diagram indicates, the initial four steps in the PDMA technology planning process form the basis for brainstorming about new ideas for the shortterm, medium-term and long-term technological opportunities defined in step 5.
Once these opportunities are identified, the team should review this comprehensive list to ensure their fit with the company’s strategic business needs.This step provides an initial screen that should extend beyond the company’s own internal technologies. At this point in the process, the team often outlines “philosophical product prototypes” and product roadmaps.

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