Growth through Research and Development
The challenge is to first observe and diagnose the latent socio-cultural perspective of society, and see how the target customer fits in there.

Organizations, whether in the industrial or service sectors, have tried to improve their business performance by reducing costs. The term used in the late twentieth century for these endeavors was business process reengineering. Not all such attempts were equally successful. Some organizations viewed the millions of dollars spent as a useful investment, whereas many others considered the entire exercise as a drain on their money or other resources.

In the United States business process reengineering in large organizations has led to downsizing of staff. This, in turn, has resulted in lowering of costs. Organizations have now realized that the limit to cost reductions and quality improvements has been reached. Success, in terms of increase in shareholder value, can come about only by enhancing the volume of business profitably. This route is called ‘going for growth’.

How does an organization manage this going for growth? The easiest and most obvious choice would be to pressurize the marketing and sales department to increase the market share, increase sales, increase prices, etc. to improve upon the bottom line. But this still does not solve the problem of enhancing the top-line revenue by increasing the volume. The answer to this question of how to go for growth may actually rest in the R&D department of the organization. There rests tremendous potential in this department for helping increase the volume and profitability. But ironically, the full value of this department has not yet been tapped in most organizations. There has always been a certain mysterious aura surrounding the R&D department – an aura of scientific and engineering orientation – that is not really connected to the marketing and sales department, and is generally not in tune with the requirements of the firm, and least of all with the needs of the customer. The role of the R&D department vis-à-vis the business objective of the firm has always been nebulous.

The R&D department has a very important role of understanding and translating the trends and needs of the market and the firm’s customers into products that can beat the competition. These products have to be at the right cost, right quality, and the right level of technological sophistication. Only then will the firm’s profitability be impacted positively. The general, incorrect approach in organizations is to treat the R&D personnel as non-revenue generating, cost overheads. This attitude needs to be changed. Every employee of the R&D department should be made aware and sensitive to the fact that his role is crucial in determining the firm’s current and future success.

This change needs to be initiated at and from the top, i.e., at the level of the chief executive and his top management team. They need to be made to recognize that going for growth through R&D is a management issue and not solely a scientific or technological affair. R&D management thus needs to be addressed seriously so that R&D, manufacturing, operations, marketing, and sales work simultaneously in an effort to go for growth.

“Research” versus “Development”
Senior managers in most organizations do not possess scientific or engineering backgrounds. Even if they have formal qualifications of the scientific or engineering varieties, the past decade’s experience of handling finance, marketing or other broad business issues removes them from their original moorings. This makes senior managers feel intimidated by technologists who report to them since they have never handled, or have stopped dealing with, technology eons ago. It is well known that even the term R&D can turn off even the most experienced of CEOs. This is due to a lack of felicity with the issue being discussed and an aversion to displaying this ignorance in public. Technologists can seldom overcome their predilection to inserting technical jargon in their discourses or discussions even if they have been urged to maintain a high level of abstraction while communicating with other members of their organization. Business reengineering processes, though applied uniformly all over the organization, seem to act differently and produce different results in the R&D department when compared with the other departments. The problem seems to rest with a gap in understanding of the real meaning of R&D.

For many years there has been a debate on the relative importance of research versus development. Arguments for indulging in more research rather than in development and vice versa have been advanced. Most of these discussions, instead of enlightening management, usually lead to misleading conclusions. The reality is that R&D has to be managed.

Research – An academic domain
Research appears to be categorized as ‘academic’ or ‘industrial’. Academic research is carried out in universities and research institutes. This kind of research aims at expanding the extant levels of knowledge and technology. The progress of humankind is contingent on academic research. This type of research does not have any limits as it does not have any bounds in terms of tangible goals or outputs. Industrial organizations should not be concentrating on this kind of research through their R&D departments. They should, at best, donate funds to universities or institutes to carry out this activity. Funding or investing in academic research should be carried out with some specification of the nature of the return expected from this kind of investment. But then it may no longer remain academic research.

Many organizations claim to be involved in industrial research. Industrial research is of two types – basic industrial research and applied research. Basic industrial research is actually a disguised form of academic research. As it seeks to push the frontiers of knowledge in that particular industry sector, the deliverables are fuzzy and this activity may not affect the bottom line of the business positively. It is thus best to contract out such work to universities or research institutes. Applied research purports to have a goal or a set of outputs that apply to the sector or industry. But in most R&D departments the basic tract of research is pursued rather than the applied tract. The result is that nothing profitable comes out of this department. The researcher comes to work everyday with the hope of working on something intellectually challenging. The organization has to ensure that his talent is harnessed positively for the benefit of the company and its shareholders.

Development – The domain of in-house management
Development is fundamentally more significant as a contributor to the success of a firm. A company having an evolved development group that can apply scientific, engineering or technological knowledge in a systematic manner to improve performance can go for growth and increase shareholder value.

Development:

• Exploits technology created elsewhere
• Has a final product or process tied to it
• Has finite timescales in which to deliver
• Has finite costs for the end product
• Is targeted at tangible benefits for the customer

There is no standard definition of the term development. It is commonly understood as a set of activities that will deliver a balanced portfolio of derivative, next-generation, and breakout products. Derivative products are those that incorporate incremental improvements, brought about by improving the manufacturing process or component assembly, for example, to reduce the cost of delivering products to the market. Next-generation products are those that are either significantly cheaper for the customer, with the same functionality, or those with significantly more functionality at the same cost. Breakout products represent a breakthrough in the application of technologies that significantly differentiates them from anything that currently exists – for example, the introduction of compact discs to replace cassette tapes and vinyl records. Armed with this understanding of the meaning and role of research and development the chief executive is now in a position to assess his or her R&D department’s imperatives in the organizational context.

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