R&D Project Selection Strategy: an empirical study in Spain

In this Issue

HI-TECH FABRICATORS GAIN EXPORTADVANTAGE

Tesar and Velu (USA) have looked at a neglected sector of US manufacturing industry: small fabrication shops making processing equipment to customers’ specifications. In the past, such firms have been content to leave technological development to their customers, but the latter are now more and more importing foreign equipment already embodying sophisticated technology. Many fabricators whose businesses are threatened by this trend are now themselves seeking overseas markets and conducting in-house technological development.

The purpose of the author’s study was to see whether fabricators who have entered the export market pursue different strategies from those who have not. Using an elaborate conceptual model, they have analysed the businesses of a sample of over 200 fabricator firms mostly supplying equipment to the food industry.

It emerged that firms opting for export offer hi-tech products employing programmable computer control, while firms continuing to rely on their traditional inland markets put their faith in competitive pricing and product quality, and restrict their technology to automated systems using well- tried elements. The survey shows that the latter traditional strategy is losing out to the hi-tech approach in all markets, whether domestic or export.

STANDARDISATION HELPS INNOVATORS T O BENEFIT FROM THEIR OWN INNOVATIONS

Reddy, Cort and Lambert (USA) substantiate the proposition that product standardisation plays an important positive role in the development and diffusion of new technology. Their case is based on a survey of the literature which has enabled them to formulate and test hypotheses that relate voluntary (as distinct from compulsory) standardisation to the pace of development.

The paper provides evidence that standardisation reduces the likelihood of pioneer

R&D Management 19, 1 , 1989

‘burnout’ and helps to ensure that innovators rather than imitators reap the benefits of innovation. It also appears that the higher the level of voluntary standardisation in a sector the greater the level of innovation. The emphasis is on ‘voluntary’ in that de fucto standardisation, that is, standardisation imposed unofficially and therefore involun- tarily by a dominant firm inhibits innovation. Furthermore, failure to standardise can expose a sector to radical breakthroughs from outside, and participating in international standardisation opens up larger export markets and facilitates a global presence at home and abroad.

The authors point out that the initiative towards standardisation ought to come from the marketing function because it is in the best position to locate a firm’s technological standards within the technological framework of the marketplace.

QLJEUEING FOR SERVICE IN A RESEARCH LABORATORY

Grainge and Pearson (UK) report a study carried out in a large UK industrial R&D establishment aimed at rationalising access to analytical support services within the laboratory. The management had recognised that queueing for service in this and other support departments was becoming a serious problem.

Interviews were carried out with both ’servers’ and ‘customers’ at all levels in the organization. These were supplemented by observations of the actual process in which service was demanded and rendered.

The study revealed the specific causes of the queueing problem and the nature of its undesirable effects. The problem seems to be generated by the functioning of the system as a whole. Its solution is therefore down to the organization as a whole; servers and customers alone cannot solve it.

The situation is also reviewed from the perspective of formal queueing theory. It emerges that improvement could be achieved if a systematic priority allocating system were instituted which took into account not only

2

urgency, but also long-term importance. Unfortunately, given human shortcomings and the limitations of contemporary information-processing technology, rational scheduling is possible over only a short time horizon. To do anything better the authors recommend the development of an expert system for assessing priorities which incorporates past experience into its knowledge base.

IN THIS lSSUE

survey of a sample of industrial companies operating in Spain. The paper includes information on the types of methods used (about 17 methods were encountered) broken down by company size and other similar criteria and comparisons of practices in Spain with those of the USA, France and some other countries.

MODELLING THE MANAGEMENT OF TECHNOLOGY

Danila (France) points out the lack of usable quantitative models that set the management of technology within a specific corporate strategy. Yet, it is becoming widely accepted that management of technology and corporate strategy cannot be separated. The problem is that the strategic management has not been properly conceptualized. The author therefore puts forward a model which represents the three main aspects of the problem - strategy, technology, and management - as separate dimensions. He goes on to show how the model can be used to guide project evaluation and selection.

The paper analyses technology strategy, reviews the families of selection and evaluation methods and concludes with a discussion of some empirical studies of how they are used in France and Japan.

USE OF PROJECT SELECTION AND EVALUATION METHODS IN SPAIN

The short report by Sanchez (Spain), dealing as it does with a survey of the usage of project selection and evaluation methods in Spain, complements the paper by D a d a summarised above. The author conducted a

A BRAIN SUPPORT SYSTEM'!

Bar (Israel) briefly outlines a novel computer- based technique to generate ideas for new products, which he characterises as an External Brain. The technique uses public databanks, such as Dialog, to search for all publications in the database which combine a root concept and words such as idea, innovation, novelty and so on. The computer is instructed to print out the titles of a selected number of publications, defined by the searcher, from each database accessed. The contents of each publication can then be studied at leisure. The technique is illustrated by two hypothetical cases: new uses for water and new uses for metal- powder technology.

The author claims that the External Brain will generate a large number of ideas in a short time at low cost. It can be used selectively and has the advantage of being able to link knowledge from otherwise unrelated disciplines. It is well-suited to use by groupbased innovation such as brainstorming. The main drawbacks are that much of the information may turn out to be irrelevant and it cannot print out the total text from an identified source. Of course, it cannot provide entirely new ideas but it is capable of linking existing concepts in new and unexpected ways.

R6tDManugernent 19, 1 , 1989

Technologically evolving industrial equipment fabricators: their foreign involvement

George Tesar and Raja Velu

College of Business and Economics, University of Wisconsin-Whitewater, 800 West Main Street, White water, Wisconsin 53 190, USA.

Abstract

In the United States fabrication shops build equipment to client specifications. Once their growth and profitability were closely aligned with those of their clients who were generally the larger firms. Now that most of these clients import their needs from abroad, fabrication shops need to compete on their own in both domestic and foreign markets. In order to help them achieve their goal, we need to have some understanding of their internal development and further identify possible barriers to their foreign involvement. To this end, a conceptual model with several operational and planning variables, to discriminate fabrication shops that service foreign markets from those that do not, is postulated and empirically tested. Policy implications of the study findings are discussed briefty. Limitations of the statistical procedures and possible future work are outlined.

INTRODUCTION

In a technologically changing world firms must continuously evaluate their capabilities and systematically relate them to the needs of their markets. Today’s technological changes particularly affect smaller firms serving industrial markets. These firms traditionally have responded to clients’ orders without developing their own technical, marketing, and service capabilities; many of these firms served markets only in their own geographic areas. Their growth and profitability were closely aligned with the growth and profitability of their clients who were generally the larger firms.

Fabrication shops that build processing and/or manufacturing equipment to client specifications are an integral part of the changing technological climate. In the United

States they also occasionally offer other specialized services such as machine shop, welding, and metal cutting. Some of the shops also manufacture and market proprietary products to a specialized market within their scope of expertise. In the United Kingdom fabrication shops are generally referred to as engineering manufacturers performing essentially in the same way as the fabrication shops in the United States. These generally smaller firms create a unique industrial market. Many processing and manufacturing operations are performed on semi-automated and automated specialized equipment custom-built by these fabrication shops, frequently without any major design or development effort. A large processing and/or manufacturing firm’s engineers discuss a particular processing and/or manufacturing operation with a fabrication shop, which then builds, delivers, and even installs the ordered equipment. This unstructured and informal buyer-seller relationship is quickly coming to an end. Large firms are looking for newer processing and manufacturing approaches and equipment that offer more efficiency. Internally designed and engineered equipment is not as efficient as equipment purchased from alternate domestic and foreign sources.

With the emphasis on lower prices, greater efficiency, and lower maintenance costs translated into higher levels of automation. fabrication shops are beginning to realize that, if they are tosurvive and be competitike, they must systematically up-grade their technological capabilities and become actively involved in foreign markets. There are several reasons for this. Large U.S. processing and/or manufacturing firms are importing more highly automated equipment, including programmable computer driven equipment. A majority of the fabrication

R d D Management 19. 1 1989 3

4

shops do not have the expertise to compete with large foreign manufacturers of the new computer driven equipment. Furthermore, their traditional domestic orientation, discussed by Tesar and Velu [1986], does not allow for the rapid organizational, technological, and marketing changes needed to meet the foreign competition.

Public policy concern for the systematic identification of industries and groups of firms facing increasing competitive pressures is apparent on both federal and state levels. To help meet this concern, comprehensive programmes are being developed to assist targeted industries and groups of firms to improve their technological capabilities and to penetrate foreign markets, e.g. Tesar [ 19851. These efforts range from development of programmes for offering competitive information to one-on-one assistance by federal and local entities such as the Small Business Development Centres, state universities, and even state departments of agriculture or business development. These agencies often lack the understanding and expertise required to assist smaller firms, such as fabrication shops, and have a significant impact on their internal development and involvement in foreign markets. Both federal and state agencies need to develop a better understanding of the concept of internal development and foreign involvement among fabrication shops.

The objective of this study is to examine the operations of fabrication shops to determine if differences exist between fabrication shops that do build processing and/or manufacturing equipment for foreign clients and those that do not. More specifically, the study will seek to identify and define any significant differences in operational and planning variables as they relate to foreign market involvement in a rapidly changing technological climate. The fabrication shops constitute a homogeneous group of smaller firms that appears to have a technology path of its own that is dependent on foreign market involvement.

The underlying hypothesis suggests that those fabrication shops that are actively involved in foreign markets successfully confront foreign competitors not only in their traditional domestic markets but also in their nontraditional foreign markets. If a

GEORGE TESAR AND RAJA VELU

sufficient understanding of the differences between those fabrication shops that participate in foreign markets and those that do not can be developed, it should be possible for federal and state entities to offer more meaningful assistance to fabrication shops.

RELEVANT LITERATURE

We found that results of empirical research dealing with the macro aspects of (1) technological competition, (2) technological development, and (3) foreign market involvement among smaller industrial firms, including fabricators of processing and/or manufacturing equipment, are not available in a conceptually meaningful form. However, an overview of international competitiveness of U.S. industry in general has been presented by Tyson and Zysman [1983]. Lewis and Allison [ 19821 have presented general concepts of international technological competition focussing on Japanese competitive issues. Literature dealing with competitive technological development has been recently discussed by several economists, including Cohen [ 19851 and Wachtel [ 19861. General aspects of foreign market involvement by industrial firms have been discussed by Kotler, Fahey, and Jatusripitak [ 1985) within a broad marketing context, providing a useful framework for the fundamental development of public policy and strategy issues.

As mentioned previously, the federal government and some state governments are assisting specific industries and groups of firms with technological development and foreign market involvement. The U.S. Department of Commerce organizes industry missions and trade fairs and provides information for specific industries and groups of firms that have strong potential for competing internationally, as outlined in the U.S. Industrial Outlook [ 19861. Individual states are developing their own approaches to systematic identification and stimulation of specific groups of firms that could potentially benefit from technological development and foreign market penetration, e.g. Posner [ 19843 and Wisconsin Strategic Development Commission [1985]. A recent report to the President of the United States, Coping with Dynamics of World Trade in the 1980s

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In dustrial equip men t fabricators

[ 19841, points out that foreign governments limit competition by also targeting specific industries and groups of firms.

If a homogeneous group of firms such as fabrication shops is to develop technological capabilities to compete internationally, it is necessary for federal and state authorities to understand how these firms function. In the past, these firms were considered small businesses, and little research focussed on their operations. Consequently, both the technological and international marketing aspects of these firms can only be examined as a part of overall research resulting from focussing on a variety of manufacturing firms. While this literature can contribute to the development of a conceptual model dealing with the operations of fabrication shops, it cannot be used to arrive at specific conclusions.

The literature that examines the relationship between technology and competition has grown in recent years. Although most of the studies are subjective in nature, there are some exceptions: Porter [ 19851 examined the competitive significance of technological change, McKenna [ 198S] defined market positioning in high technology industries, Parkinson [ 19851 outlined the buyer-seller relationships with respect to high-technology products, and Robertson and Gatignon [ 1986) discussed the theoretical diffusion of developed competitive technology. While this literature does provide a useful perspective for examining the operation and technological development of fabrication shops, it is not specific enough to clearly identify the path that their technological development must follow.

The literature suggests that critical issues in international competitiveness among smaller firms are not only technology, but also a firm’s inability to penetrate foreign markets. The critical issue, is how to stimulate smaller firms to become involved in these foreign markets.

The available literature in this area is copious, e.g. Bilkey [ 19781 and Dichtl et a1. [ 19841. The literature mostly examines operations of small and medium-sized manufacturing firms: although fabrication shops might be included in these studies, they have not been identified as a homogeneous group of firms. Examining foreign market potential

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S

is an important step in the overall process of determining foreign involvement, as discussed by Wiedersheim-Paul et al. [ 19781. Specific issues related to the involvement of smaller manufacturing firms in foreign markets has also been dealt with in depth by Bilkey and Tesar [1977] and Cavusgil et al. [1979]. Studies of smaller firms’ export strategies and opeaations were conducted by Bilkey 119861 and Suzman and Wortzel 119841. Bilkey [ 19823 has provided some insight into the operation of small firms by questioning the profitability of foreign market involvement through exports.

The information gained from the literature review suggests that international competitiveness, technological development, and foreign market involvement are all interrelated in the operations of smaller industrial firms and can be used to focus specifically on the fabrications shops. This literature can help to develop a suitable conceptual framework for outlining statistically significant and potentially meaningful factors which differentiate between those fabrication shops that build equipment for foreign clients and those that do not.

CONCEPTUAL MODEL

A conceptual model illustrating differences in operational and planning variables relating to foreign market involvement is presented in schematic form in Figure 1. The model suggests that differences between fabrication shops that do and do not build equipment for foreign clients lie in their current and future planning activities, perceived advantage, and size as measured by employment, sales volume, and capital assets (Figure 2).

Such differences would have implications not only for public policy, but also for directing any foreign market involvement stimulation effort toward those fabrication shops whose potential for involvement is high or who are planning future foreign market involvement but currently lack the essential factors needed for such involvement. If the differences are proven to be statistically significant, they would provide an empirical basis for further research into the operations and relationships of these

6 GEORGE TESAR AND RAJA VELU

Planning activities

Perceived competitive Advantage

Fabricators with Foreign

k-1 Equipment 1-1 r, I I Fabricators 1 I 1 Group 2: Fabricators without Foreian u I I Clients

" , Future services

Figure I Schematic Model for the Development of Discriminant Analysis of Smaller Equipment Fahricators

firms to technological development and international competition.

The conceptual model was tested as follows. Fifteen large firms that regularly purchase processing and/or manufacturing equipment from smaller fabrication shops were identified as candidates for a series of pilot interviews. In-depth structured interviews were conducted with engineering and purchasing vice presidents of seven large firms. Interviews with the remaining large firms were not conducted because it became clear at the end of the sixth interview that there was a great deal of consistency in the results of these interviews. The seventh firm was used only for verification.

Discussions were also held with the owner- managers of five fabrication shops. Initially twelve fabrication shops were identified as candidates for unstructured discussions. After the fourth discussion it became obvious that owner-managers can offer only limited information relating to the specific issues relevant to the study. The fifth discussion was used to verify the information generated from the previous four discussions.

The information obtained from the per-

sonal interviews was used in a questionnaire mailed to a randomly selected sample of 785 fabrication shops. The random sample was selected from a total population of approximately 2,500 smaller firms in the Upper Midwest listed by Dun and Bradstreet. The list, however, proved to be relatively inaccur- ate primarily because of self-reporting; that is, some conventional machine shops and other specialty shops include their names in the category of fabrication shops even though they are merely contemplating the fabrication of custom-made equipment.

The survey was conducted in February and March 1985, and 208 fully completed questionnaires were received producing a response rate of 26.5 percent. This lower than expected response rate is a result of the inaccuracy created by self-reporting in the list of primary units. To assure the accuracy of the study, the survey respondents, deemed to be representative of the relevant population of fabrication shops, were asked to identify themselves as either (1) fabrication shops with foreign market involvement, or (2) fabrication shops without foreign market involvement. Their clients were mostly from


Industrial equlpment fabricators 7

Perceived Planning competitive Sales Capital Future Activities advantage Employment volume assets services

Product

Diversification

Market development

Market share expansion

Regional market development

market development

market development

development

National

Foreign

Machine building experience

Craftsmanship

Strong

Technology Machine shop Welding shop Quality Computer

Customer

Location Engineering

services Competitive

prices Tool & die

making shop Sales people

experience

management

expertise

orientation

Number of employees employed in the previous year-6 response groups.

Sales Capital More volume assets- machinery for the 8 response building previous groups. Building year-8 machinery response with prog. groups. control.

Computer prog. & software develop.

Engineering services

Building automated machinery

machinery with prog. computers

Computer applic. services

Building

Figure 2 Variables used in Discriminant Analysis

traditional industries and to a large extent connected with the food processing industry (Table 1).

An interesting but intuitively reasonable point emerges when we compare their clients in terms of size and location. The firms were asked to identify, in particular, whether their clients were generally large national firms not located within their area. Although we did not clearly define what “their area” means, it was taken to indicate the proximity of their clients. This could suggest a possible infrastructure and “willingness” on the part of the management to seek out clients even outside the United States (Table 2).

A stepwise discriminant analysis was used to analyze the two types of fabrication shops. This technique can be used to address two basic and related questions: (1) Can a fabrication shop be accurately classified into the two types outlined above, and ( 2 ) which variables are most effective in discriminating between the two types of fabrication shops as illustrated in Figure l? All coefficients were entered using the stepwise technique called Maxmin F. This technique selects the

RdiD Management 19, 1, 1989

variable that maximizes the smallest F-ratio between pairs of groups and the critical value is set to be F equals one (Fz1.0). Note that this procedure is very similar to stepwise regression, but in the context of discriminant analysis between two groups, it is essentially a test for the difference between means, see Dillon and Goldstein [ 19841.

RESIJLTS

The classification matrix shown in Table 3 demonstrates that discriminant analysis can correctly classify 87 percent of the fabrication shops. These findings indicate that the variables selected can classify the fabrication shops better than chance classification. The Morrison [ 19691 proportional chance criterion states that, if the approach is statistically sound, it should be able to classify more than 40 percent of the fabrication shops and we were able to classify 87 percent. There is no discrepancy in percentages of correct classifications within groups. Eighty three percent of Group 1 fabrication shops (those

8

Table 1 Our Clients ReDresent the Followina Industries


Group types Food Traditional Total

processing industries’ respondents

Group 1 : Firms that presently build machinery for foreign clients

Group 2: Firms that presently do not build machinery for foreign clients

46% 84% 8 1

43% 61% 99

Nonrespondents 28

Includes printing and paper industries * * Rest is distributed over various categories with no special concentration.

Table 2 Our Clients are large national firms not located in our area

Group types Yes No Total

Group 1: Firms that presently build machinery for foreign clients 69 12 8 1

Group 2: Firms that presently do not build machinery for foreign clients 37 62 99

Total 106 74 180

Chi-square = 42.06; p < .01

with foreign market involvement) were correctly classified, while 90 percent of Group 2 (those without foreign market involvement) were correctly classified. The remaining fabrication shops in the sample were also included in the analysis.

It is known that there is an upward bias in estimating the percentage of correct classification if we use the same data to arrive at the discriminant function and also to classify the cases. We followed the “holdout” method to address this issue (see Dillon and Goldstein, 1984). The total sample was split into two subsamples randomly; one was used to construct the classification rule and the other was used for validation. There was some difference in the variables selected in the subsample compared to the total sample but the variables with larger absolute coefficients remained the same. The percentage

for correct classification in the subsample, that used for the computation of discriminant function, was 90 percent and the percentage for the validation sample was 80 percent. Using Morrison’s rule of thumb, it can be easily concluded that the classification functions are useful for identifying the likely exporters.

These results suggest that fabrication shops with foreign market participation differ significantly from those without such participation based on the set of discriminant variables. Since the discriminant function coefficients are not unique (only their ratios are unique) indication of their statistical significance may not be meaningful. How- ever, standardization of the variables prior to discriminant analysis puts the variables on a common reference map, and hence larger positive or negative coefficients indi-

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Industrial equipment fabricators

Table 3 Classification Matrix: Does your firm presently build machinery for foreign clients? (Group 1 = Yes; Group 2 = No.)

Predicted group membership

9

~ ~~

Actual group membership Group 1 Group 2 Totals

~

Group 1 83% (67) 17% (14) 100% (81) Group 2 10% (10) 90% (89) 100% (99) Ungrouped cases 18% ( 5) 82% (23) 100% (28)

Results are statistically significant on 0.05 level. Morrison's C(pro) = 0.40. Total correct classification = 87%.

cate that these variables are more important than those with smaller absolute coefficients.

The standardized canonical coefficients of the discrimination function are presented in Table 4; there is only one set of canonical coefficients for the two groups. Based on these values, it can be easily inferred that each group has a distinct set of variables. Negative coefficient variables represent those fabrication shops that do not build equip ment for foreign clients, while variables with positive values represent those that do.

Another interpretation of the findings presented in Table 4 is that fabrication shops building equipment for foreign clients tend to perceive their technology as their strongest differential advantage and generally are of larger size. Their future plans include developing new products and foreign markets, and offering their clients expertise in computer programming and engineering

services building automated machinery to order. These fabrication shops are technologically-oriented engineering firms that plan to develop proprietary products for foreign markets, with an emphasis on computers.

Those fabrication shops that do not build equipment for foreign clients have the following characteristics. They consider their advantage to be automation experience combined with competitive prices and quality of work. They consider their location an advantage and plan to develop regional markets. In the future they will offer computer applications services along with building equipment with programmable controllers. These fabrication shops are smaller, locally-oriented firms that build conventionally automated quality equipment at competitive prices. It must, however, be emphasized that the perception of competitive prices and quality is their own. In the future

Table 4 Standardized Canonical Discriminant Function Coefficients: Does your firm presently build machinery for foreign clients?

Variable Coefficient

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

10, 11. 12. 13. 14. 15.

Perceived competitive advantage: Automation experience Perceived competitive advantage: Competitive prices Perceived competitiveadvantage: Quality of work Future services: Computer application services Planning activities: Develripment of a regional market Future services: Building machinery with programmable controller Perceived competitive advantage: Location Perceived competitive advantage: Engineering services Perceived competitive advantage: Computer expertise Future services: Building automated machinery Future services: Computer programming services Planning activities: Development of foreign markets Planning activities: New product development Perceived competitive advantage: Technology Employment

'S

-0.29 -0.27 -0.23 -0.23 -0.21 -0.15 -0.13

0.13 0.15 0.16 0.23 0.34 0.41 0.45 0.55

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10

they plan to build technologically more sophisticated equipment.

We also carried out a discriminant analysis ignoring the size factor, variable 15 in Table 4. The resulting percentage of correct classification is 85 percent which is not appreciably different from the percentage reported in Table 3. Thus the analysis clearly indicates that Group 1 fabrication shops offer services that are substantially more advanced technologically and build equipment with programmable capabilities through integrated controllers or computers. Group 2 fabrication shops offer services that are low in technological sophistication based on current standards. Their equipment is generally automated using conventional modes, such as hydraulic, electric, or pneumatic power. These modes of automation are losing their competitive advantage in domestic and international markets, because automation based on programmable controllers or computers represents a higher level of competition worldwide.


is robust enough for this type of violation. Press and Wilson [1978] compared the classification based on these two procedures by using real data with many binary independent variables and found a surprisingly good performance by discriminant analysis, in terms of the percentage of other classifications.

The discrete discriminant analysis using a multinomial model has been advocated by many marketing researchers when categorical predictors are used (see Dillon and Westin, 1982). If the predictors are even moderately correlated, a sizable increase in misclassifi- cation error rate can result. In order to use this procedure effectively, a large number of observations is required, because the number of cells increases exponentially with the number of predictors. With moderate sample sizes, such as is the case in our study, many cells contain too few observations to allow for effective parameter estimation. Further- more, we found only four correlation entries larger than 0.30 but less than 0.44 and, when compared to the number of variables used in this analysis, this violation seems minor.

To determine the accuracy of the findings of the study for the purposes of (1) public policy to stimulate involvement of fabrication shops in foreign markets, and (2) assisting with internal development, we can approach future efforts as follows. The unclassified group of 28 firms that was left over after the classification process because of lack of response to the key question regarding current involvement in foreign markets can be investigated further. For each of these 28 firms, the probability of belonging to either group can be calculated by a computer programme rule of thumb which classifies them into a group with highest probability. In a two group situation, this would be a number greater than 0.50. Table 3 contains five such firms which we plan to investigate at a later date as to their future classification.

The future investigation is based on the assumption that since the five firms in Group 1 in Table 3 have the same profile as the firms that are actively involved in foreign markets, in a reasonable period of time these five firms also ought to be involved in foreign markets. The investigation will consist of series of interviews with top management of these firms.

FUTURE RESEARCH

Based on the previously described findings, we found that discriminant analysis is an effective tool for empirically investigating whether these two groups can be accurately profiled on the basis of operational and planning variables. However, we must point out the limitations of this procedure. Two competing procedures often reported in econometric/marketing literature are logistic regression and discrete discriminant analysis, The use of logistic regression models for analyzing categorical dependent variables (in our case, foreign clientsho foreign clients) on categoricaVcontinuous independent variables has become increasingly popular, as demonstrated by Amemiya [ 1981 1 and Haggstrom [ 19861. This procedure does not use the stringent assumption of the discriminant analysis procedure in which the independent variables are expected to follow multi- variat e normal distributions.

In practice, survey results are usually obtained by using yes/no questions and, because the responses are categorical, the assumption of multivariate normality is violated. The discriminant analysis procedure

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Industrial equipment fabricators

ACKNOWLEDGMENT

Authors would like to thank reviewers for their constructive comments and Martin Gross for his assistance with computer operations.

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R&D Management 19, 1, I989

I ndustrywide technical product standards

N. Mohan Reddy and Stanton G. Cort

Weatherhead School of Management, Case Western Reserve University, Cleveland, Ohio 44 106, USA.

David R. Lambert

San Francisco State University

Abstract

Technology, by its very nature, creates a high degree of interdependence in the industrial marketplace. Customers buy products for use with other products in a production system. The consequent requirement for technical compatibility constrains managers’ freedom in developing products and marketing programmes. lndustrywide product standards, and the process of setting them, play a complex and littlediscussed role in enabling managers to deal with these constraints. This article provides a market-based examination of product standards and that role.

INDUSTRY WIDE TECHNICAL PRODUCT STANDARDS

The significant role of technology in decision making is a major reason for formal and informal interaction between producers and users, and among producers, in the industrial marketplace. These interactions result in cross-sectional and longitudinal interdependent networks which are ubiquitous (Hakans- son, 1982; Thorelli, 1986). The cross-sectional networks are obvious. They occur when customers purchase parts and components to build complex systems. For example, builders of the Itaipu Dam on the Brazil- Paraguay border had to buy and coordinate components and equipment from hundreds of suppliers from 43 countries to construct the world’s largest hydroelectric generating and distribution system. Longitudinal networks are more subtle. They occur over time during the process of commercial development of new technologies. The new product, and the technology system that the

product will interface with, must become compatible. Corning Glass, for instance, could not commercially develop fibre optic technology without first investing R&D effort in creating the peripheral equipment required for large-scale fibre optic systems. Similarly, Cincinnati Milacron could not market high-speed machine tools until cutting tools and coolants which could stand up to the stresses of high-speed operation had been developed.

The cross-sectional and longitudinal interdependent marketplace networks exist at all levels of technology. U.S. nut and bolt manufacturers in the 1920s could not achieve broad market coverage and economies of scale in the OEM automobile market until the infant automobile industry settled on standard fastener specifications. Similarly, computer peripheral equipment producers in the 1980s must await development of PC specification standards before they can achieve broad market coverage.

The industrial marketer therefore is on the horns of a dilemma. This dilemma is created by tension between the drive for competitive advantage through unique and creative marketing programmes, and the need to cleave to the common constraints created by the other elements of the network (users system) into which the product must fit (Ford and Ryan, 1981; Steele, 1983). To the extent that these constraints are understood, the manager can develop marketing programmes to influence the network to achieve a desired competitive position.

Industrywide technical product standards play an important role in creating and mediating technological interdependence in industrial markets. Standardization activity is the domain of common interest and shared

R&D Management 19, 1, 1989 13

14 N. MOHAN REDDY, STANTON G . CORT AND DAVID R. LAMBERT

knowledge among producers of the same product, producers of complementary products, and the users. The structural and procedural dimensions of the standard-setting process are aimed at rationalization of the technical characteristics of products to permit commercial development and diffusion of a technology. An appreciation of the standard-setting process will enable the industrial product managers to understand and predict the nature of technical constraints their organizations face.

The topic of standardization, though treated extensively in the production/engineering discipline, has suffered virtual neglect in the management literature. In this paper, we draw on concepts from the fields of engineering, economics, political science, and business strategy to present a framework of product standardization. We demonstrate the relevance of this subject to managers of technology and detail the conceptual basis that can guide further inquiry. This article is divided into three sections. In the first section, we define and explain product standardization and discuss its importance, benefits and problems. A discussion of industry-wide standards as ‘public’ or collective goods is presented in the second section. In the third section, we describe the role of standards in product innovation, technological substitution and international marketing, and evolve a set of testable propositions.

STANDARDS AND STANDARDIZATION

Standards can be broadly defined as guidelines which are accepted for current use through authority, custom or general consent. In a sense, then, standards are as old as civilization and apply to almost everything we use. The literature on standardization distinguishes between ‘natural‘ and ‘organized’ standards (Verman, 1973). Natural standards are those which result from societal norms, culture, and value systems. Organized standards, on the other hand, are the result of formal activity to enhance the efficiency and effectiveness of industries or nation-states. Organized standards can either be mandated by governmental decree (for example, a national system of weights and measures), result from con3cious collective action by

industry members (voluntary standardization), or evolve around the designs of an industry leader (defucto standards). For services, as separation of the service from the service provider is difficult, service standardization and provider certification are often tightly linked. In this article we do not address mandatory standards, or service standards. The domain of voluntary standards is substantial; almost 80% of the standards for intermediate/industrial products in the U.S. are estimated to be voluntary standards (National Bureau of Standards, 1983). It is also in the industrial sector worldwide that one is seeing rapid growth in voluntary standardization.

Dimensions of Standards

Voluntary product standards can be visual- ized on three key dimensions shown in Figure 1: subject, aspect and level (Verman, 1973). (Note 1) This representation is a convenient typology, not a mathematical space of continuous or discrete variables.

Most products and services that are exchanged are subjects of, and have under- gone some degree of, standardization. Engin- eering, food, transportation, and building products are a few examples shown on the horizontal axis. For each subject, standardization may take various forms and focus on various aspects of the product. The focal aspect may be nomenclature and symbols (creation of a language for an emerging technology), simplification (rationalization and reduction of variety), dimensions (interchangeability and compatibility), specification (performance parameters) or inspection, testing and certification (criteria to evaluate any of the aforementioned aspects). Finally, standardization activities take place at various levels of aggregation. Individual companies can develop and implement product standards specific to their needs. These firm-level standards might apply to an organization’s input, production, and/or output stages. Formulation of standards at the industry level involves concerted activity by industry members. This activity takes place in trade associations, engineering societies and other standard-setting bodies (Figure 2). Standard- setting organizations act as forums where


Industry wide technical product standards

International - National

Industry

Company -

- -

15

cn C .- 0 .-

0) s c C m, .o 5 C n s ;G g 'j,

u I L L c - I o 3

.- C a,

C '9 1 1 0

STANDARDS SPACE

Level

t

8F Specification

p Sampling, Inspection, Testing & Certification

From: Standardization: A New Discipline, Verman, Archon Books (1 973)

Figure 1

producers, users and general interests can come together to develop viable standards.

Over 400 such independent standard-setting bodies exist in the U.S. The American National Standards Institute (ANSI) acts as a clearinghouse and central coordinating body for these institutions. In addition, ANSI carries with it the authority to designate an industry standard as an 'American National Standard,' subject to both the standard and the formulating body adhering to certain principles of due process. ANSI's power derives primarily from the fact that it is the official U.S. representative for international standardization activity.

The Process of Standard Setting

The voluntary standards system in the U.S. necessitates a certain level of cooperative action among rival producers and rival users.

Standard-setting organizations provide a forum and due process guidelines to those involved in standardization. Most standard- setting bodies try to consider inputs from producers, users and general interests (represented by academics and governmental bodies). Figure 3 outlines the standard-setting process. Any interested individual or organization can initiate action on formulation and/or revision of a standard by applying to the relevant standard setting body. If there is sufficient interest among the affected parties, the standards organization establishes a core committee, along with subcommittees and working groups. The formulated proposal undergoes balloting and changes at multiple levels before being formally adopted by the standard-setting body. Formal adoption by the standardizing organization by no means mandates use of the standard. Procure- ment or production based on an existing standard is a business decision based on

RdiDMunugement 19, 1, 1989

16 N. MOHAN REDDY, STANTON G. CORT AND DAVID R. LAMBERT

THE STRUCTURE OF VOLUNTARY PRODUCT STANDARDIZATION

international Elect rotech n ical

Other Standard Engineering Societies (ASME, IEEE, SAE)

Associations

Figure 2

market considerations. Most voluntary standards are revised, or evaluated for the need to revise, every five years.

Benefits and Concerns of Standardization

The benefits of standardization to the seller industry are along two fronts. First, standards reduce transaction costs by improving recognition of technical characteristics and avoidance of buyer dissatisfaction (Kindelberger, 1983). Second, standards permit physical economies to the firm. Physical economies

are made possible by simplification of design, production economies, reduced carrying costs and ease of service (Harriman, 1928; Sullivan. 1983).

Physical economies of standardization are also realized by the buyer group due to interchangeability among vendors and network externalities of new technologies (Katz and Shapiro, 1985). Users, in addition, benefit from a thicker secondhand (used) market and the availability of a broader complementary good (spare parts) market (Farrell and Saloner, 1985). Finally, compatibility may enhance price competition among sellers

RBD Management 19, 1, 1989

Industrywide technical product standards 17

THE PROCESS OF STANDARD SElTING

Figure 3

(Katz and Shapiro, 1985). This last benefit to the user group, i.e., escalation of price competition among sellers due to standardization, merits further explanation because it is the only user benefit that reduces a seller’s incentive to engage in standardization.

This hypothesized relationship between standardization and price competition among sellers is based on the assumption that product standardization reduces product differentiation (Farrell and Saloner, 1985; Hemenway, 1975; Hufbauer, 1970; Katz and Shapiro, 1985). According to these theorists, industry standards increase product knowledge in the market. This increase in product knowledge reduces both the uncertainty concerning product performance and reliability, and the importance of intangible choice criteria (for example, brand name/ manufacturer’s reputation) in purchase evaluation. In the absence of standards, intangible choice criteria are presumed to act as surrogates for product performance and reliability. T o summarize, this view posits that, in the presence of industry standards, purchasers’ evaluative criteria for the product under consideration become more price-based. Subscription to this position and reluctance to engage in industrywide standardization has led to fragmented industry positions in new technologies (Business Week, May 1984; New York

Times, March 1983; Wall Street Journal, September 1984), and the advocacy by some theorists (Easton and Latham, 1980; Mon- thoux, 1977) to fight the standards-setting process to avoid standardization.

What is unclear in much of the above cited work, however, is the manner in which the construct of Standardization is operation- alized. Standardization is used as a generic term and has often been a measure of the buyer’s familiarity with a certain product offering, Repeat buying of any product, however complex, would make that a ‘standard product’ for that particular user, even in the absence of an industrywide standard. Thus, what is standard to one buyer with a history of repeat purchases would not be so to another buyer of the same product with limited buying exposure. Furthermore, recent efforts to establish the relationship between industry standards and price levels provide inconclusive results (Reddy, 1987).

From a rather different vantage point, public policy theorists have voiced concerns about the process of standardization. This literature (Garvin, 1983; Nader and Mayer, 1978; Rosenberg, 19761, has keyed in on the potential for misuse of the voluntary standardization system by dominant producer organizations. One outcome of this misuse would be the exclusion of smaller competitors from

R d D Management 19, I , 1989


the benefits of standardization. A second concern is linked to the collusive ability of the producer group to impose artificially high standards on the buyer group. We address these concerns in our discussion of standards as public goods presented in the next sect ion.

STANDARDS AS PUBLIC GOODS

As management theorists and practitioners, our major focus is on competitive dimensions of the marketplace. Understanding standards and standardization necessitates conscious attention to the cooperative structures of collectivities of organizations, both producer and user. These cooperative structures are prompted by the technological interdependence of product networks, some examples of which are presented in our introduction. The work of Thompson (1954) on the early automobile industry and Corey’s (1956) research on the development of markets for the then new end products of vinyl polymers and aluminum provide excellent examples of how standards reduce vertical tying arrangements. Standards decrease the rigidity of the seller-buyer link and permit special- ization among manufacturers. This special- ization, in turn, induces an increase in horizontal interdependence between them because of compatibility concerns, In this section, we explain what the ‘product’ of standardization denotes, and detail the process by which it is ‘produced’. In so doing, we extend our discussion of technological interdependence, the ensuing cooperative and self-regulation activity, and the role of product standards in the marketplace.

Cooperative Action in industrial Markets

Understanding of product standardization is enhanced if one acknowledges the cooperative activity that underlies technologies’ evolution. Writing about competitive strategy, Porter (1980) notes that during the introductory phases of a technology there is a heightened level of collective action by producers. This activity is characterized by the creation of symbols and nomenclature which in large part determines the future

competitive arena for these firms. Porter also observed that there is a return to cooperative activity as a technology matures. The focus of cooperative activity in the maturity stage is an attempt to raise average product quality to counter inter-industry threats. The only two large-scale empirical investigations of collective industry activity on standardization (LeCraw, 1984; Link, 1983) indicate that for industrial products, significant indicators of standardization include intermediate levels of buyer and seller concentration, R&D intensity, product complexity, importance of health and safety considerations, and the role of government as a purchaser. On the temporal dimension, a series of articles in Caves and Roberts (19751 lends support to Porter‘s assertion that industry level cooperative activity is highest in the initial and waning stages of a technology lifecycle.

The nature of standardization activity varies across stages in the technology lifecycle. Activity in the emerging stages of the technology is clearly on language creation, i.e., nomenclature and symbols. This is the only aspect of standardization activity that is not revisited as a technology evolves. Per- formance expectations of the technology, and inspection, testing and certification procedures are formalized rather early in the growth stage. Dimensional and variety reduction standards evolve as the market’s perception and preference for the ‘dominant design’ (Abernathy and Utterback, 1978) start to crystallize. Depending on the nature of the technology, each of these aspects is revised, or evaluated for the need to revise throughout the life of the technology. Standardization thus is not one specific task, but rather a continuum of collective activity to first define the competitive scope of the technology, and second, to reach agreement on the nature and level of interfirm interdependence.

Product standards, by their very nature, mediate and create interdependencies in industrial markets. In their role as mediators, product standards and the process of standardization introduce an element of technological and operating stability into industrial markets. This Stability in turn creates subunits of the technology network that for a period of time take on the


Industry wide technical product standards

characteristics of total independence. With time, technological advances necessitate a move to a higher level of operating stability as the relevant standard-setting bodies re- write applicable standards. The external management of technology hence will mean more conscious attention to the elements of informal cooperative action undertaken by competitors, sellers and buyers. For example, the vendors of automotive components did not formalize relationships among themselves or with manufacturers of automobiles to set standards. Interested parties came together using the Society of Automotive Engineers as a forum to resolve interdependencies. The resultant standards defined the parameters of stability and competitive action.

19

mediate groups fall between these two extremes where the industry membership is small and no one producer (or user) dominates. With few exceptions, producers and users of industrial products can be classified as intermediate groups. Under these conditions each side (producer and user industry) is able to undertake collective action as well as provide the countervailing power to keep the other side ‘honest’.

As stated earlier, the self-regulation process is not without its critics. The concern with potential misuse of the standards system prompted a series of hearings by the Senate Antitrust and Monopoly Subcommittee (1975, 76, 77) and a Federal Trade Commission (FTC) proposal to introduce more governmental regulation into the voluntary standards process. The Senate hearings investigated the possible anti-competitive aspects of product self-regulation, and the FTC evaluated the process of standards setting from the standpoint of an unfair method of competition and restraint of trade. In the final analysis, neither new legislation nor new administrative rules were deemed necessary (Federal Trade Commission, 1983). Most of the private sector complaints and public sector concerns of anti-competitive activity were attributed to blatant misuse of the standards system, a point better addressed by the enforcement capabilities of the judicial system (ASME vs Hydrolevel, 1982). Both investigations concluded that stiff penalization of violators would further improve a system that has worked remarkably well over time.

An overriding objective of standardization activity is to make public information that is perceived to be immaterial for an individual firm’s product differentiation strategy. A public good framework would suggest that the process of standard setting brings together individuals from competing producer organizations with reservoirs of proprietary and non-proprietary knowledge. Similarly, buyer/ user organizations bring a set of common and unique requirements to the negotiating table (Hemenway, 1980). The resultant standard thus represents a consolidation and formalization of:

1 non-proprietary knowledge bases of competing sellers with

Self-Regulation and Public Goods

The ‘product’ of cooperative activity that underlies standardization is titled a ‘public good’. A public good is one which is available for actor B to consume after actor A has consumed it (Buchanan and Tullock, 1962). In other words, public goods are those that when consumed by one party do not reduce the benefit for another. (Note 2) In addition to the dynamic of cooperative activity, self- regulation is an integral part of the standardization process. This self-regulation ensures a broad base of participation so that no one interest dominates the process. Self-regulation, in turn, is made possible by the structure of industrial markets in the U.S.

Using Olson’s (1965) typology of groups, standards-set ting transactions in industrial markets are to a large extent between ‘intermediate’ groups, providing adequate countervailing power between buying and selling interests. Olson distinguishes between three kinds of industry groups: privileged, intermediate and latent. Privileged group process is characteristic when one or two firms dominate the industry. Under these conditions, dominant firms have the ability and the incentive to unduly affect the standardization process in their favour, Latent groups, on the other hand, represent a fragmented industry structure where collective action is possible only through selective inducements to participants. Inter-



2 the common needs of the buyer group

In other words, the standard represents a ‘core’ product for a defined application and makes no statement about the ‘formal’ or the ’augmented’ (Levitt, 1969) levels of the product. This common core enables compatibility in the product/market network and provides a base on which individual suppliers can build the other product levels for competitive positioning. Similarly, buying organizations are able to use this base or core to factor in differing needs. This argument is supported by the fact that very few industry standards completely satisfy the specification requirements of either industrial producers or customers. Figure 4 diagrams this consolidation of non-proprietary producer knowledge with common user requirements. The degree of overlap on each side (seller and buyer group) represents the extent of shared knowledge. (Note 3)

Thus, under the conditions that govern the production of public goods, little new information is introduced into the marketplace in the standardization process (an individual organization has no incentive to introduce proprietary information as little is gained in return). Furthermore, and assuming that due process guidelines have been subscribed to, the intra-industry competitive posture of an individual organization is unlikely to change. Our purpose in outlining the process and dynamics of standardization activity is to demonstrate the lack of incentives for an individual organization to make public any proprietary knowledge. In conclusion, it could be argued that the process of standardization is an attempt to isolate and formalize what is already in the public domain.

STANDARDS AND PRIVATE GOODS

Recent theorizing in economics (Brooks, 1986; David, 1986) and marketing (Robertson and Gatignon, 1986) suggests the importance of industry standards in the diffusion of technology. In this section, we illustrate and discuss how competitive action is inherently tied to standardization activity, and present

a set of testable propositions of industrywide standards’ role in product innovation, technological substitution and international marketing.

Standards and Product Innovation

A curious and disconcerting phenomenon in the pioneering of new technologies is the high rate of pioneer ‘burnout’ (Olleros, 1986), with later entrants reaping the economic benefits of the innnovation. Pioneer externalities, along with market and technological uncertainty, are listed as the major reasons. Pioneer externalities refer to the benefits that accrue to later entrants from the pioneer’s investment in technology and market creation. Market uncertainty is the manifestation of users’ concern with emerging designs, and the search for a dominant design to avoid ‘betting’ and tying oneself to the wrong alternative. Under these conditions users may prefer to wait until a dominant design emerges (Porter, 1980; 1983). Techno- logical uncertainty feeds the market uncertainty because initial attempts by early entrants to differentiate on almost every dimension could delay dominant designs from emerging.

A key dimension that underlies the causes of pioneer burnout is the cost associated with the identification and communication of the technological trajectory for any given technology. A fast follower sitting on the sidelines could leapfrog the pioneer by correctly anticipating the direction of dominant product technology, It has been suggested that pioneers can spread the costs of market and technoiogy creation by infusing technical knowledge into the potential seller group (inter-firm competition is not a major concern at this stage as the objective is not market share, but rather, market development and creation of primary demand). Though gener- ous licensing of the technology may spread the costs of creating primary demand for the technology, it is conscious collective activity by industry members early in the lifecycle that may speed emergence of the technological trajectory and dominant design.

Proposition 1 - Industries characterized by a higher level of standardization activity in


Zndustrywide technical product standards 21

‘PUBLIC-GOOD CONCEPTION OF VOLUNTARY PRODUCT STANDARDIZATION

Buyer-Seller Interface

Industry Standards

C1 -C3: Knowledge bases of U1-43: Technical competitors (technology) Requirements

: Non-Proprietary of users

: Common Requirements

technical Knowledge

From, N. M. Reddy, ‘Voluntary Product Standards: Linking Technical Criteria to Marketing Decisions,‘ IEEE Transactions on Engineering Management,

November 1987, p. 238.

Figure 4

the emerging stages of a technology will exhibit a lower level of pioneer burnout. Proposition 2 - The higher the level of standardization activity during the emerging stages of a technology, the greater the probability that innovators and not imitators will reap the economic benefits of the innovation.

A recent study commissioned by the National Bureau of Standards (Putnam, Hayes and Bartlett, 1982) suggests a positive relationship between industry level standardization activity and product innovation. Parkinson (1972) and Rogers (1983) on the other hand, discuss the ‘lock in’ effects a de facto standard may create on an industry‘s inventive activity. De facto standards are those that emerge in the absence of industrywide standardization activity.

A dominant producer’s product becomes widely accepted and de facto becomes the industry standard. De facto standards increase switching costs of new technologies, as what is accepted as standard may be more than the ‘core’ product. Industry standards, however, by being less restrictive and better known, provide a well-defined reference base upon which to base improvements.

Proposition 3 - The higher the level of standardization activity in an industry, the greater the level of innovative activity. Proposition 4 - The presence of de facto standards will result in a lower level of innovative activity.

In the presence of industry standards, the setting of firm-level standards that differ from industry standards represents an attempt

RCD Management 19, 1, 1989


to ‘tie’ the customers to the firm, in addition to achieving internal economies. This tying is achieved through technical characteristics, not through supplier-buyer relationships. The U.S. farm implement industry has historically followed such a technical tying strategy. Though profitable in the short run, it is risky in rapidly changing technological environments. An innovative breakthrough by a competitor in one product or component may reduce demand for all the products in the ‘tied’ system (Kurdle, 1975).

Proposition 5 - The greater the ‘tying’ by firm-level standards, the higher the probability that a radical breakthrough on one component will reduce demand for all the components of the tied system.

Standards and Technological Substitution

Competitive implications of standards in technology substitution focus attention on inter-industry competition. Industry-wide standardization activity forces members of an industry to repeatedly acknowledge limitations of the performance parameters of their technology (as opposed to the design considerations of their products). This activity will enable industry members to constantly monitor new technologies and evaluate them in terms of the performance capability of their own technology. Identifi- cation of an emerging threat may spur further refinement of their existing technology, and/or early investment in the new technology. The literature on technological substitution (Ansoff, 1976; Cooper and Schendel, 1976; Rosenberg, 1979) highlights the importance of such surveillance activity.

Proposition 6 - Industries characterized by a high degree of standardization activity are more successful in anticipating inter-industry threats.

Standards and International Marketing

If one subscribes to the argument that technology drives everything relentlessly toward global convergence, then international standards will increase in importance. They

will shape the boundaries of competitive arenas as industrial markets increasingly take on a global dimension. Construction of the Itaipu Dam, noted in the introduction, may be an example of this coming globalization.

In the U.S., international standardization suffers from almost total neglect. This neglect persists in spite of the fact that worldwide international standardization activity has intensified considerably in the last decade and shows no sign of waning (Inter- national Standards Organization, 1985). This increased standardization activity, coupled with the fact that almost 75% of the membership of the International Organization for Standardization (ISO) is comprised of developing nations, may speed adoption of formulated standards. International standards enable developing nations to build a competitive and independent domestic industry. Standards permit these emerging industries to source and sell on a global basis. To compete in this growing international industrial marketplace, U.S. industry will need a collective stance on standards and standardization because the industry is the level at which global competitive advantage is won or lost (Porter, 1986).

Operationally, however, industry-level action involves a complex mix of firm-level, national, and international competitive considerations. A brief example may clarify the complexity of reaching industry consensus on international standardization activity. For more than a decade, eight manufacturers of a fluid power component, all of whom enjoy comparable market shares, have operated in a fairly stable market environment. Rigid firm-level standards and consequent technical tying has produced the stability. The firms provide no basis for interchangeability, and there has been no industry-level standardization activity. Recently, however, two smaller European manufacturers have pushed for an international standard. The U.S. firms must respond, since the standards code of the 1979 General Agreement on Tariffs and Trade (GATT) obliges member countries to base their national standard on the international one, if one exists.

The eight U S . manufacturers have no collective position to take to the international bargaining table. Activity is currently under- way at the trade association to develop a


Industry wide technicalproduct standards

U.S. industry standard. Preliminary drafts indicate that it may differ from the one being drafted at the international level. The U.S. firms’ stance seems to be an attempt to seal off the domestic market from foreign producers. Given the sizable replacement market for this product, this stance in turn could diminish the U.S. presence in world markets. At the very least, the industry standard would be at odds with both the transnational standard, and any U.S. national standard which must conform to the international one under the 1979 GATT.

Potential entrants into the marketplace consequently face a complex competitive decision. They can stick to firm-level standards and try to create their own captive market. An entrant, on the other hand, can adopt the industry-level standard and try to pirate market share in the U.S. from a vulnerable competitor. Finally, one can subscribe to the international standard, write off much of the U.S. market, and engage in worldwide market development. The available competitive options are tightly linked to the cooperative action that has taken place and continues to take place. The competitive choices players make will determine the way in which the market is developed for the fluid power component technology. Collective industry activity in turn will shape the structure of the market and consequently of the industry.

Proposition 7 - Industries active in international standardization will have access to and operate in larger export markets. Proposition 8 - The higher the level of industry involvement in international standardization, the stronger its global presence (at home and in foreign markets).

SUMMARY

As the pace of technological change picks up, so will the complexity of technological interdependence facing the industrial manager. In this article we have demonstrated the importance of industry-wide standards in the adoption and diffusion of emerging technologies. Unlike mandatory standards, voluntary standards result from actions of market participants.

23

Firms operating in environments characterized by rapidly evolving technologies have one more reason to foster a tighter linkage between their R&D and Marketing arms. Marketing Department as a key boundary- spanning function can do much to improve the quality of technical decision making at the industry level. By providing market information to the technical manager at various stages and phases of the technology lifecycle, the marketer will enable the technical managers to operate with a clearer understanding of how their technological efforts at the industry level affect firm level competitive strategy. From the R&D side, information flow regarding the course of technology development, from the technical to the marketing function, may markedly reduce the developmental lags in new product planning.

In addition to increasing the level of technical-marketing interaction, managers in technically turbulent environments may be well advised to actively participate in and contribute to the standard-setting process. From the standpoint of market research and competitive intelligence gathering, what other arrangement can bring together as many fellow competitors and customers (on such amicable terms) in one place for a great length of time (a few days to a week)? Standardization opens new doors for industrial managers by broadening their scope of operations and demanding that they be as deft at cooperative action as they are at competitive activity.

Understanding standardization is understanding the phenomenon associated with collectivities of organizations. A recent and growing body of literature is starting to remedy our neglect of collectivity structures. In this article, we add to this growing knowledge base and address a topic that has suffered virtual neglect in the management literature. Thus our treatment, of necessity, is broad, descriptive and suggestive of issues that merit further exploration. In drawing the linkage between standardization and competitive activity, we generate some illustrative propositions. There is little, if any, empirical evidence to support these propositions, other than anecdotal data from the trade press. Operationalization and testing of these propositions, along with



further inquiry into the concerns of voluntary product standardization, may be a first step toward a better appreciation of the inter- section of technical and traditional management dimensions.

NOTES

Hemenway (1975) and Opala (1969) use similar classifications to describe standardization activity. 'Private goods', in contrast, are those where one party's consumption comes at the expense of another's. For example, increase in market share for one competitor can only be accompanied by a corresponding fall in another/other's. As this entire process is a market based one, there is no right amount of overlap. Using the seller group as an example, no overlap would clearly signify no shared knowledge (and hence no standard); complete overlap on the other hand would mean perfect information and no product differentiation among producers. It could be hypothesized that the degree of overlap is positively associated with the age of the technology.

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RBD Management 19, 1, 1989

Managing an in-house R&D service department

N. J. Grainge and A. W. Pearson

Manchester Business School. Booth Street West, Manchester M I 5 6PB, UK.

Abstract

The paper reports a study carried out in a large UK industrial R&D establishment which had recognised that queuing for service from support groups was becoming a serious problem.

The main part of the study was carried out on the operations of an analytical department. Interviews were carried out with both ‘servers’ and ’customers‘ at all levels in the organisation. These were supplemented by observations of the actual process by which service was demanded and rendered, and by analysis of records.

The study revealed why the queuing problem arose and the reasons for its undesirable effects. The authors concluded that resolution of the problems is a matter for the organization as a whole, and not merely for servers and customers.

The situation is further analysed in terms of queuing theory. It is argued that improvement could be achieved if a systematic priority allocation system which took into account both urgency and importance were instituted. However, rational scheduling is possible only over a short time horizon, given current human and computing abilities. To achieve optimization over a longer time horizon the authors recommend the development of an expert system incorporating past experience into its knowledge base.

INTRODUCTION

This paper is based upon a study carried out on behalf of a major U.K. R&D establishment which had recognised that service queuing and excessive waiting time was becoming a major issue.

The study focussed upon both the ‘service’ side - the analytical laboratories themselves, or ‘servers’, and the ‘demand side - the users of the service, or ‘customers’. It was carried out, primarily, through indiv-

idual interviews with staff at all levels within the organisation. These were augmented by observation of the service ‘negotiation’ process and the analysis of departmental records.

Although the study was commissioned by one service area, it was recognised that there were a number of other departments on the site where similar problems were being experienced. In order to maximise the opportunity for gathering more ‘general’ experience and data, interviews were also conducted in these other departments. These interviews were particularly valuable because, as many of the users of these other services were common and demand patterns were similar, they provided an indication of the extent to which the situation in the original department was unique.

Some time was also allocated to a study of similar organisations in other companies in order to determine whether they had the same problems, and how they solved them. It was, clearly, not possible to obtain access to these organisations in the same breadth or depth. Interviews were usually with departmental heads only, hence awareness of operational level problems and objectivity about them may be suspect. Interviews were generally short, hence they had to focus quickly upon preselected topics. No interviews were obtained for the demand-side; hence findings were biased.

This paper sets out the main aspect of the problem encountered, demonstrates why the situation occurs, and why it is so disruptive to both operational and inter-personal functions. It identifies the symptoms, and their effects upon the servers, their customers and the organisation as a whole. This is followed by a discussion of some operational details of the organisation, defining the ‘variables’ that affect both the supply and demand of the subject services, and stresses the need to consider the resolution of the problem for the organisation as a whole

27 R&D Management 19, 1 , 1989

28

rather than just for the demand side or the supply side.

The situation described is then set within the context of conventional queuing theory and the departmental and organisational costs and benefits of queues are discussed. It concludes that the queueing phenomenon observed is a natural consequence and that, through proper management, the negative aspects of queues can be greatly reduced and the positive aspects used to advantage. It is then argued that priority systems used to evaluate job sequencing should use both urgency and importance as determinants and the idea of the ‘consequence to an organisation of delaying a task’ is developed.

Finally, it is suggested that the complexity of operating an urgency and importance priority system over an ‘infinite’ time-horizon is beyond the abilities of both human and conventional computing techniques. It concludes that an Expert System solution, mimicking current practices but extending them over time and in a consistent manner, is an approach worthy of investigation.

N. J . GRAINGE AND A. W. PEARSON

-

-

Customers cannot routinely obtain a reliable estimated job completion time. There is no rigorous and consistent method for selecting the ‘next-job’ from the queue. Some jobs may remain in the queue forever.

-

THE PROBLEM, ITS SYMPTOMS AND EFFECTS

Each individual laboratory (roughly corresponding to a single skill-pool) within the service department may be considered to be operationally autonomous. The laboratory comprises all of the equipment and personnel necessary to carry out the analytical service provided. Users of the services, ‘customers’, employ these services as part of a larger programme of work for which they have responsibility. Customers approach the laboratories, ‘servers’, directly with requests for analysis. For routine analytical work, requests are made through a standard request form. For more complex work the principal communication is verbal, supported by the formal request. Work which is awaiting service is variously described as ‘the queue’, ‘the backlog’ etc, Jobs remain in the queue until selected by the servers for processing. Laboratories normally provide an ‘instant’ service only for the highest priority tasks which raises a number of important issues, for example: - Customers’ programmes may be delayed.

The Servers The most direct effects of this situation upon the servers are the difficulty of selecting the ‘correct’ next-job to process, the interpersonal conflict resulting from not being able to provide an instant service to every customer and the conflict and disruption resulting from delaying jobs and changing job priorities. The servers ‘expect’ to be able to satisfy their customers, the customers ‘expect’ instant service. The existence of queues prevents instant service for more than a few customers. Consequently, servers are dissatisfied with the service that they provide to the majority.

From the servers’ point of view, the ‘ideal’ situation exists when the queue of jobs awaiting processing is only long enough to provide some continuity of employment - perhaps only one job. When the queue is longer, a decision must be taken on which job to select. Clearly, customers different requirements do not allow simple, first-come- first-served decision disciplines to be employed and a considerable number of factors are, in fact, taken into account. The complexity of determining and processing these factors to support decision-making can make the process time-consuming, increasing departmental overheads and exacerbat- ing the problem. Such decision making is a highly dynamic process: each reordering can only represent a ‘snapshot’, appropriate to the conditions prevailing. The subsequent arrival of another job may have a major impact upon the sequence.

The existence of a queue and the dynamic nature of next-job selection make it very difficult for servers to determine when each job will be completed. Only for a very few of the most important jobs can customers obtain reliable, committed dates. For the majority of jobs this task is so complex and so transient that there is no mechanism for its calculation. Hence there is no system for

R&DManagement 19, 1, 1989

Managing an in-house R&D service department 29

communicating dates or changes to them. In consequence, the process-originated relationships with customers can be very poor, and may completely transcend the task-originated relationship. Hence the technical competence of the servers is devalued by their perceived inability to apply it.

The Customers

The effect of the situation upon the customer departments is greater than upon the server, both in real and perceived terms; the effect of delays to jobs, the inability to routinely determine job completion and communicate subsequent progress and the resulting poor relationship with the server areas.

The research and development programmes undertaken by the customer departments may require analytical services at many stages. These jobs will have more or less urgency for the customer depending upon their position within the whole programme; their proximity to the critical path, the start date of a subsequent activity etc. In general, however, customer expectations of analytical service are often highly myopic; they are interested in their own jobs and little account is taken of other jobs competing for the service resource. Further, these expectations may be unrealistically high, even in terms of that single customer’s programme. Analysis may be requested earlier than it is really needed. Hence customers will be dissatisfied with delay both to jobs where real programme delay is sustained and to jobs where they merely perceive that delay has occurred.

Delays to customer programmes sustained through waiting for analytical service are exacerbated by the absence of a system to either determine completion dates or to communicate subsequent changes to them. Only a very few jobs, those which are sufficiently ‘urgent‘ to be selected immediately, receive committed dates. The remainder join the queue awaiting selection. Some may be selected and completed within the customer’s time requirement, others will be delayed. In the latter cases it is often necessary for the customer to monitor this delay and ‘chase’ the job. If the situation is ‘recovered’ no programme damage is sus-

tained. The customer, however, is left in doubt as to the outcome without personal intervention. Almost certainly, they believe, the job would have been delayed. Hence, the customer is left dissatisfied, not by the actual service obtained, but by the process required to obtain it.

Customers, like the servers, regard queues as an aberration and feel that, by ‘running a bit faster’, a queue may be eliminated for all time. The consequences of the customers’ perception of poor service and poor management is conflict. Their programmes are delayed by factors outside their control, they have to ‘chase’ every job - because if they didn’t, ‘it would wait in the queue forever’ - and they have to fight and argue to get their jobs done quickly. They may resort to subterfuge to obtain assurance of timely job completion; exaggerating urgency or importance or holding back jobs until they become urgent. Ultimately, they may use other resources to obtain service; employing external analytical services where suitable ones exist or carrying out the analysis themselves. Both alternatives threaten the quality of the results obtained and, ultimately, the very existence of the central service.

The Total Organisation

The effects upon the organisation are ‘real’ programmedelays, management time lost in determining job sequences and chasing jobs, and the debilitating effects of inter-personal conflict. Servers may ‘win’ at the expense of the customer or one customer win over another but the organisation will always lose.

Although, within the constraints of a given level of resource, the aggregated programme delay - ‘programme-days’ - cannot be reduced below a theoretical minimum, it can be increased by completing some jobs unnecessarily early, at the expense of others which are excessively delayed. Further, because there is not an equivalence between days of delay on different projects, it is vital that the ‘right’ programmmes are maintained and the ‘right’ ones sacrificed. Hence, though delays through service-queueing may be inevitable, the effect of poor control is that

R&L?Munugernent 19, 1, 1989

30 their magnitude and effect upon the whole company niay not be minimised.

The time currently spent in managing the process is wasted. In addition to the expenditure at operational level, disputes inevitably become elevated to more senior level and involve more and more people. The conflict generated in the process can have detrimental long-term effects upon relationships and spill over into the essential professional relationship.

N. J. GRAINGE AND A. W. PEARSON

S ERV 1C E QUEUEIN G

In practical customer/server situations, arrivals are discrete events. Although they have an average rate, the variation in inter- arrival times is a significant feature. Similar- ly, the service process is a number of discrete events with a distribution about the mean of actual durations. The result of these variations and, particularly, the out-of-phase relationship between them is that a queue can still form, even when the mean arrival and service rates are equated. Further, this queue cannot, with certainty, be eliminated by the application of additional service resource; it is only the probability that there will be no queue that can be increased in this way. Just as the distribution of arrival and service times and their phasing creates a probability that an arriving customer will have to wait for service, so there is a probability that the server will fall idle because there are no customers in the system.

Where arrivals and service are random, meaning that any single event is unaffected by any other, and occur over a continuum of time, a Poisson process is described. As such, the times between successive events have exponential probability distributions and may be exactly described by single parameters, the mean rates.

Conventionally the mean arrival rate is designated c1 (lambda) and the mean service rate X (mu). Under these conditions, the foliowing may be determined for a one queue, one server, first-come-first-served system:

Probability that there will be no queue

Average queueing time per customer

X - - ( c 1 - h )

Clearly, since the only time that the server will be idle is when there is no queue, server- utilisation is defined as

h 1 - p = -

I-1

The effect of equating service to arrival rates ( A = p ) is to create a ‘zero’ chance that an arriving customer will be served immediately and create a ‘steady-state’ queue of infinite length. Conversely, server utilisation will be 100%. Increasing the mean service rate above the mean arrival rate will increase the probability that a customer will not have to queue and reduce the average queueing time but will decrease the server utilisation. Even very high levels of ‘over-resourcing’ cannot totally eliminate queues and the reduction will always be at the expense of corres- pondingly high levels of server idle-time. A 2: 1 ratio of service to arrival mean rates will increase the no-queue probability to 50% but will also reduce server utilisation to 50%. Although the situation makes it impossible, therefore, to eliminate the queues per se, their length does respond to the application of additional resource. (It should be noted that in this particular organization, ‘over- resourcing’ is not an issue, since direct service activities are balanced against the departments’ own R&D and ‘overhead activities such as report writing and maintenance).

A principal deviation from this theoretical model found in many practical situations is the assumption of random arrivals and service. If arrivals from any source demonstrate some regularity - say, one every Monday or three on Wednesday morning - the corresponding resource can be deployed to service the requirement. Where this is the case the probability of demand away from the mean level is less distributed than for random arrivals.

RdiD Management 19, 1, 1989


Additionally, where the queue is ‘real’ and may be observed, by either the servers or the customers, there is a probability that arrival or service behaviour will be affected by previous events. Potential customers observing a long queue may decide not to join it and, conversely, a short queue may attract ‘opportunist’ customers. Servers may operate faster or slower in response to queue length. This dependency creates the ‘fixed- queue’ phenomenon; the application of additional resources to clear the backlog, in the first instance will reduce the queue. The unusually short queue will then attract additional customer demand and the queue length will be restored. Conversely, if resources are reduced and the queue lengthens, customers will be discouraged from joining, and its length will, again, be restored. Hence, approximate upper and lower limits for queue length will exist.

APPLICATION TO THE ORGANIS ATION STUDIED.

Analysis of hard and soft data for the individual laboratories supported the ideal- isations described above. Queues exist in the form of shelves filled with samples awaiting analysis. Once commenced, jobs are normally processed in one operation. More complex jobs may involve inter- process queues. Each laboratory can be considered to have its own queue and the precise analytical requirements of a job and the t echnique-based organisat ion maintain fairly strict demarcation between queues. Some laboratories have a simple, one queue, one server system, others are more complex.

In all cases, queues were generally felt to be undesirable but endemic. Only one organisation felt ‘comfortable’ with queueing theory as an explanation of backlogs but it is not clear whether this understanding per- meated all the parts of the organisation affected. None of the organisations captured queue data; queue lengths in terms of time or work content, average queue times, average service rates, etc.

Figures 1-4 show the data which were collected for one laboratory.

Arrivals are not totally random. There is

RLD hfunagernent 19, 1 , 1989

undoubtedly a ‘regular’ component of arrival distribution. Inter-service times will almost certainly not have a ‘natural’ distribution as there is a range of different analyses undertaken. It is these differences that account for the different service times rather than a random distribution about a nominal mean.

QUEUES - PROS AND CONS

The principal organisational needs from any component of a multi-task project are that it is started no earlier and completed no later than other components allow or require. Activity/event planning demonstrates that some tasks within a project, those off the ‘critical-path, may have ‘float’. This means that the time available to carry out the task is greater than the time actually required. Provided the task is started no earlier than the preceding dependent task will allow and completed no later than the succeeding dependent task demands, it may be served at any time within this float period. These relationships exist whether or not they are recognised by formal plans. The idea of ‘latest completion date’ is usually embodied in the expression ‘deadline’ but this term is too indiscriminately used for direct con- version. Although it may be neither possible nor, in their perception, advantageous for a customer to accurately determine the point at which a task actually becomes ‘late’, in terms of organisational needs, this is the only point at which delays really matter.

It is within the context of a multi-project, multi-task environment that the idea of doing a job no earlier than it is required becomes significant. In this environment the task may be completed at any time, subject to its own timing constraints described above, and the satisfactory execution of the other tasks from related or unrelated projects which are competing for the resource. In a situation where queues exist, some tasks may be completed by the time they are required, but it may be at the expense of others which are completed late. The objective for management is to ensure that it is the ‘right’ jobs that are completed on time. Hence the ‘proper’ management of queues can minimise the delay cost.

32 N. J. GRAlNGE AND A. W. PEARSON

359 jobs arrived, 384 jobs were completed.

Assuming 250 working days - mean arrival rate 1.44 jobs/day = - mean service rate 1.54 jobs/day = f l

Probability of a customer not having to queue;

Eo = ( 1 - (1.44/1.54))

= 0.065 = 6.596

Average queueing time for a queueing customer;

ave queue time

prob'y of q'ing Tq =

A

1.44

Tq = 1.54 (1.54 - 1.44)

1 - 0.065

K 10days

Average time spent in the system (queueing and processing);

= 10days

Compared with the actual average time spent in the system;

= 10.62 days

(after data correction; null entries replaced by the monthly ave.)

Figure 1 Comparison of Theoretical and Actual Queue Parameters

RdiDManagemenr 19. 1. 1989

i 00-2 Aman baJ j

cc

34

In-System Time (days)


15

10

5

0

I I

I

- cumulative ave. I I - monthly ave.

I I I I I I I I I I I

J ' F ' M ' A ' M ' J ' J ' A ' S ' O ' N ' D ' I

Month

Figure 3 Job In-System Times

tasks: they are able to select the order in which they are done, either to better match their customers' needs or to improve their own operational efficiency. Forward visibility also provides advanced warning of demand. This allows significant mis-matches with resource level to be addressed.

The regulating effect of the queue upon the demand for service, described above, can be a benefit to the organisation provided that it is only unnecessary or 'unsuitable' tasks that are discouraged from joining the queue and that the 'right' tasks are captured, Provided, also, that the queue is filled with necessary jobs, it assures that servers are kept fully occupied.

Queue Management - Priority and Sequencing

The simple queueing model, introduced

above, describes only the 'average' situation; average queueing times, average service times etc. It also assumes a first-come-first- served (FCFS) discipline, where each customer joins the end of the queue and is served in strict rotation. In many service situations FCFS sequencing disciplines are inappropriate. Alternative sequencing systems can be devised which seek to benefit either the server or the customer. Process-oriented systems benefit the server by reducing the value of in-process inventory by doing the shortest jobs first and delaying value-addition or by maximising server utilisation. Service- oriented systems benefit the customer by reducing tardiness, the amount of time by which the actual completion date exceeds the required-by date. Clearly each of these systems may sequence jobs in a completely different way. The level of service achieved, as measured by the distribution of early/late jobs will also vary. The service situation in



Monthly Total

arrivals - ----, completions

1 1 I I I I I I I I I I

J I F ' M I A ' M ' J ' J I A ' S I O I N ' D 1

Month

Figure 4 Monthly Total Job Arrivals and Completions

35

this study has low in-process inventory costs and the near-match of supply and demand rates ensures that server-utilisation is kept high. A service-oriented sequencing system seems, therefore, the most appropriate.

Sen, ice-Oriented Seq u encing

Where resources are not a constraining factor, service-oriented systems can be employed to give a simple 'first-needed-first- served' type of service. When, however, resources are insufficient to meet all of the required-by dates the planner's dilemma is whether to delay several of the tasks by an 'average' amount or to delay one task by a large amount. In a system where tasks must follow sequentially, there are a number of ways in which the tasks may be scheduled. Given task durations and required-by dates, the 'branch and bound' type of technique


can be used to determine the permutation of tasks which generates the minimum total tardiness - the sum of the individual differences between completion and required-by dates. Figure 5 shows how jobs are sequenced by minimum tardiness.

The weakness of this technique is its assumption that all delay is equal, both in its rate of accumulation and its ultimate consequence. Tardiness is considered to be a straight line function, commencing on the due-date and increasing indefinitely beyond, at the same rate for all jobs. If the task tardiness is the value of the 'y' axis at task completion date, the sequence selected is that which minimises the total tardiness for all the tasks.

There are other sequencing techniques that can be employed in 'finite resource' environments - minimum float, earliest- latest start date, etc. - but all assume day- for-day equivalence of delay. A more

36 N. J. GRAINGE AND A. W. PEARSON

Tardiness

Job 1 2 3

Tj 5 4 3 Dj 6 10 7

Total Tardiness = 0 + 1 + 2 = 3

Tardiness is accumulated for each job, from time Dj, at an equal rate and indefinitely. Commencing with Job 1, the job with the earliest due date, at To it is completed by T5 (0 + Ti = 0 + 5). It has 'negative' lateness, it is 'early', but 'earliness' is assumed, here, to carry no 'credit'. Job 3, the earliest due date of the remaining jobs, is sequenced next and is completed at Ts (Tj, + Tjs = 5 + 3), after Dj3; it therefore has a tardiness (positive lateness) of 1 (Ts - Dj3 = 8 - 7). Similarly, Job 2 is sequenced next and is completed at Ti2 with a tardiness of 2 (1 2 - 10). Total sequence tardiness equals 3 (0 + 1 + 2). Re-sequencing, say, 1,2,3 gives a total tardiness of 5 (0 + 0 + 5). Hence, sequence 1, 3, 2 optimises service-level.

Figure 5 Minimising Total Tardiness

realistic approach to finiteresource sequencing is one which recognises that 'days-delay' alone, is insufficient to determine how those resources should be deployed to maximum effect. The normal method by which this is achieved is jobpriority sequencing.

THE DETERMINANTS OF PRIORITY

Priority is defined here as the quality which any task has which determines its ranking in the queue of jobs awaiting service. The quality is largely subjective and integrates



several objective measures. The two most important of these measures are:

Urgency .- the relationship between the amount of time available and the amount of time required to perform a given task. Importance - the measure of commercial value of a project and the individual tasks within it.

These two measures can be combined to classify 4 extremes of task type;

Urgent/Important - tasks which must be commenced immediately and which would have major commercial impact if not completed. On any scale, these should represent the highest priority tasks. Non-urgent/Non-important - tasks which

can be delayed and for which the commercial consequences of delay are small anyway. On any scale, these should represent the lowest priority tasks.

Urgent/Non-important - tasks which require immediate application of resources but, when completed, will be of little commercial value to the organisation.

Non-urgent/Important - tasks which do not require immediate attention because they can exploit ‘slack’ within the total project but are nonetheless commercially significant to the organisation.

The relative position of these last two extremes and any intermediate task-types in the priority rankings depends upon the relative values within the organisation of importance and urgency.

Clearly, urgency is a function of time and increases as ‘deadlines’ are approached (although, as will be discussed later, not in a linear fashion). Hence, the commencement of important/non-urgent tasks must be planned to monitor their increasing urgency. Importance is not in itself a function of time but may vary up or down with time, due to other factors. Hence, tasks may move around the importance/urgency ‘matrix’, shown in Figure 6, in any direction. This makes relative priority setting a highly dynamic process. Importance can be short- term (customer relations jeopardised) or longer-term (new-product introduction ultimately delayed). It can also have a greater

RbDMunugement 19, 1, 1989

or lesser magnitude of ultimate effect. Importance can, itself, be divided into two factors; project importance and task importance. A task can be a vital part of an important project, an insignificant part of an unimportant project, etc.

In practice, it is very difficult to separate- out these factors of importance and urgency. Common usage of the term ‘priority’ in professional service organisations is con- fused by heavy reliance upon the urgency component, there are two reasons for this: The use of ‘mental-exercise planning’ makes time horizons short - the human brain can only hold a limited number of concepts - so urgency becomes exaggerated. Secondly, urgency, manifested in common timeunits - ‘tomorrow’, ‘by the end of this week’ - can be more easily understood than the more abstract ‘importance’. Satisfying urgent requests assumes the status, almost, of doing a personal favour. The problem in confusing urgency for priority is that it repeats the assumption that one days delay on job A equals one days delay on job B. Additionally, urgency-sequencing encourages short-term planning with the resulting danger of sub- optimisation; an allocation of resources which satisfies the short-term but which ‘stores’ problems for the long-term. Urgency- sequencing also encourages customers to engage in ‘priority-wars’ because it is perceived as the only method of obtaining action and discourages long-term planning because it is seen as non-beneficial. There is also a danger that customers will over-state urgency - ‘sand-bagging’ - so that they can be negotiated back to an acceptable level.

The simple model used to determine minimum total tardiness can be improved by ‘weighting’ individual jobtardiness to simulate importance; Figure 7 gives an elementary example. This provides a better solution than the unweighted method but retains the assumptions of constant rate and indefinite extent of tardiness accumulation for a task.

The Consequence o,f Delaying Tasks

Sequencing theory has been aimed at conventional serverlcustomer relationships

38

i’

r” 4’

Urgent

0 1 ‘

Non-urgent

0 4


! 2‘

\

0 2

0 3’

0 3

1 - 1 ‘ - slippage elsewhere in the project has reduced the urgency of this task.

2 - 2’ - delay to the completion of this task has

3 - 3‘ - delay to the completion of this task has increased its urgency and the general success of the whole project has increased its importance.

increased its urgency.

4 - 4’ - delay to the completion of this task has increased its urgency but poor achievement level of the whole project has reduced its importance.

Figure 6 ImportanceKlrgency Matrix Examples of Task Movement Over Time

spanning company boundaries. In these situations due-dates, although often arbitrary, have meaning, perhaps contractual, to both parties. In general, the server will seek to achieve the customer’s due-date, irrespec- tive of its true effect upon the customer. In the intra-company situation, the whole organisation should seek to be more realistic about the meaning of due-dates so that neither server nor customer is unnecessarily constrained.

Another way of considering priority, therefore, is ‘the consequence to the organisation of delay, should it occur’; where ‘consequence’ incorporates overspending on project budgets, loss of business, reduced competitive advantage or, even, loss of goodwill. Delays to tasks with definite

deadlines can incur costs either in quantum steps or continuously.

Figure 8 shows the ‘consequence lifecycle’ of a task - the day-by-day variation in consequence to the organisation of not having completed the task by a particular day ;

TD - task ‘deadline’ for completion. The time beyond which delay has a consequence; not necessarily the time requested by the customer.

TD - T o - task float, during this period the consequence of delay is zero. Late-arrival tasks have TD and To coinci- dent.

TT - upper turning point. The time



I Tardiness

1 Job 1 2 3

39

-4 1 Ti 5 4 3 Di 6 10 7 Wi 1 1 5

Djr DJ3 I 1 I I I t

I I I

I I 1 Ti,

Tj3 1 Tj , I Ti, I

Tj , I I Ti, I t

I Total weighted-tardiness = 0 + 5 + 2 = 7

I I I

I I i I I

Total weighted-tardiness = 0 + 2 + 2 = 4

Using the same sequence of jobs as in Figure 5; Job 1 still has ‘zero‘ tardiness, Job 3 has weighted-tardiness of 5 (tardiness x Wj, = 1 x 5), Job 2 has a weighted-tardiness of 2 (2 x 1). Total weighted-tardiness for this sequence equals 7 (0 + 5 + 2). Re-sequencing Jobs 1 and 3 give weighted tardinesses of 2 (2 x 1) and 0, respectively and a total weighted-tardiness of 4 (0 + 2 + 2). actually the minimum possible for these jobs. Using weighted-tardiness as the objective measure, it is the sequence 3, 1,2 that optimises the service-level.

Figure 7 Minimising Total Weighted-Tardiness

beyond which daily cost accumulation continue to rise almost indefinitely: for reduces. others, TM represents the time after which

T M - maximum cost point. The time it is ‘no longer worth doing it’. beyond which additional delay incurs no Having established the major consequence additional cost. characteristics for individual tasks, the effect

The cost of delaying some tasks can upon the total organisational consequence


40

Consequence of Delay


Time

Figure 8 Consequence of Delay - Lifecyclr

may be evaluated for different sequences of tasks.

In theory, this method should be used to determine an optimum sequence. The practical application, however, has several problems;

1.

2.

3.

4.

The accurate and consistent determination of T D and CM.In service situations which cross company boundaries this is easier, if somewhat arbitrary. Internally it is hard, especially where project networks are not formalised or detailed, The accurate estimation of the amount of time required to complete a job, especially a non-routine one. A ‘back- calculation’ to determine start-time is, hence, compromised. The complexity of searching for the optimum solution, for n jobs there are n! permutations to be considered (the branch and bound method does not, however, actually calculate total tardiness for all of them). The potential sensitivity of the optimum sequence to small changes in individual task ‘consequences’.

APPLICATION T O THE ORGANISATIONS STUDIED

Queues are managed by local laboratory supervision, using manual methods, primarily on an urgency-sequencing basis, with a necessarily short time-horizon. The basic method roughly approximates to minimum float planning - the job with the smallest difference between the amount of time available and the amount of time required to do the job. Urgency planning and short timescales seem to be mutually encouraging. Sequencing of jobs is also influenced by:

Operational factors - availability of suitable labour, test batching, equipment availability, space reserving

Personal Factors - customer approach, customer credibility.

Manual methods can only really deal with ‘urgent’ work. Non-urgent - or postponable - work is relegated to the purgatory of the queue with no indication of a completion date. This, in turn, encourages customers to ‘deal’ in these terms; waiting until jobs

R b D Management 19, 1, 1989


become urgent or fabricating a case for priority. Forward planning of requirements is certainly not encouraged by this method as it has no means of incorporating long- term demands. Although this method is considered, by customers, to work ‘well enough’, it is suboptimal as a sequencing system; it does not take due account of task importance and is short-term and is also inconsistent and open to abuse.

Jobs awaiting processing currently sit, literally, on the shelf. None except the ‘next few’ jobs has any differential status. Some remain in this passive situation for weeks or months. Eventually, those not processed will be cancelled by customers or returned by the servers. If, as each job arrived it were filled into a forward work schedule which included all the jobs awaiting processing, (ignoring for the present how the sequencing could be achieved), there would be two major advantages to the organisation:

i)

iii)

iv)

All jobs awaiting processing would be considered for priority sequencing - an ‘infinite’ planning horizon - instead of a few of the most urgent only. Every job would receive an estimated completion date. This would be continuously modified as new jobs were v) entered into the plan, until its ultimate completion. This would encourage customers to present jobs before they have become urgent and also allow space to be reserved by forward-planning customers.

This forward-planning system could be achieved by proprietary or bespoke computer-based systems. In addition to holding the master plan for each lab, such a system would have six functions:

ii)

v i)

41

laboratories in the department already employs a computer based Laboratory Information Management System (LIMS) for this purpose. Smaller laboratories tend to use a manual logbook system. Progress Monitoring and Reporting - a major criticism of the current system is that customers must actively ‘chase’ jobs. This, itself, is a cause of annoy- ance. An electronic system could generate job progress reports for, say, a particular customer. These could be up-dated continuously ‘on-line’ or be reported in hard-copy, say, weekly. This is the queue ‘visibility’, referred to earlier, which allows customers to determine when delays to their jobs will incur programme delay and to signal the servers accordingly. Cost Recovery Input - the LIMS system is currently used to generate analysis cost information for direct input to the establishment’s project budget system. Laboratories using manual methods generate ‘manual’ input from records of job completions during the previous period. An electronic system could generate this information upon job completion notification. Route Cards/Work-to Lists - a routine could be devised to produce routecards to accompany each job after it is picked up. Work-to lists detailing jobs for, say, the whole lab for a day, or a single technician over a week could also be generated. Results Storage - after analysis completion, results, many of which are already in electronic form from analysis apparatus, can be held for transmission to the customer and long-term storage for future reference.

i) Provide management information - current queue length, monthly and moving average job arrival rates, monthly and moving average service rates, etc. This information is not currently available to management. Sample management - the very large number of jobs, each possibly containing a number of samples and tests, makes control of location and route a major task in itself. One of the busiest

ii)

R&D Management 19, 1,1989

Hence, a properly designed electronic system offers many additional benefits and replaces some existing manual systems.

Sequencing the Jobs

As discussed earlier, the determination of the optimum sequencing of jobs in order to minimise the aggregate consequence of delay is difficult to achieve in practice.

42

stated. Considering, in turn, each of the problems

Determining TD, the time at which consequence starts to accumulate, is much the same as the current difficulty of fixing a required-by date. By determining the magnitude of the consequence, CM, at the same time as TD, more meaningful values for each should result - ‘this job must be completed by (TD), because if not (CD) will happen’. The variable TM should also be stated at the same time - ‘there is no value in processing this job after (TM). Although, without too much difficulty, conventional date notation can be employed for T D and TM, the method of quantifying is more complex and is discussed, separ- ately, below.

The three measures TD, T M and CM can be used in a simplified version of the ‘consequencecurve’ which, at least, r e cognises different rates and finite duration of accumulation. Estimation of job duration must continue to be based upon previous experience and ‘best-guessing’. An algorithm-based mechanism, such as branch-and-bound, could be adapted to include consequenceweighting of tardiness, the mechanism could then be written into a computer programme. Problems arise, however, when the number of jobs is great and for multi- server situations. A simple trial using ‘PROLOG artificial intelligence software was conducted to simulate the branch- and-bound sequencing technique for minimising (unweighted) tardiness. Al- though the system generated ‘correct’ sequences in elementary examples, as the number of jobs increased the processing time became prohibitively long. A 15-job exercise took upwards of 1 hour, in spite of having an ‘efficient’ software design. The consequenceweighting improvement to the model will increase processing time further. The multi-processor situation creates an additional problem, because no rigorous technique exists to optimise the sequence, notwithstanding the very large number of permutations which


must be considered - for n jobs, m servers there are mn (n!) permutations.

‘Importance-scoring’ can be carried out for a block of work, a whole project for example, for parts of the block or for individual tasks. Clearly, finer level s c q ~ n g is more complex but it will also b e o r e accurate; as discussed above, even an important project can have unimportant tasks within it. Because importance is a relatively static factor it should not be necessary to update the values frequently, however, even for scores which must cover a long period. Project scores could be reviewed, say, every 3 months, task scores will probably not require change after they have been submitted.

The scoring can provide either totally discrete values for every piece of work or provide, say, 5 categories, into one of which any piece of work may be grouped. T o preclude overloading of the high-importance end, the distribution of rankings should be defined and maintained. A customer group can have no more than 20% of outstanding jobs rated ‘S, say. The responsibility for scoring should reflect the level at which responsibility for job completion resides: hence, ‘site’-level management should score total projects and scientists score tasks. Projects could be scored automatically by budget size or a related factor (project spend rate, budget per man year, etc.). T o reflect the high level of importance afforded to particular customers, especially sales-related ones, it may be appropriate to grant an automatic and high level score as a matter of site policy.

Another way of scoring importance is ‘by implication’. Using the required-by date to generate an initial schedule then using the strength, or otherwise, of customer reaction to gauge the importance. The danger of such a deliberately iterative procedure is that it may actually increase customer conflict.

The multi-server problem can be simplified, either by predividing the ‘whole’ queue across the number of servers, then con- sequencesequencing each sub-queue or by sequencing the whole queue then dividing them across servers in rotation. Either of these methods may produce a final sequence which is suboptimal and jeopardises the



whole purpose of the exercise. The complexity of determining optimum

job sequences, using the parameters of urgency and importance combined into ‘consequence of delay’, may be too great to allow the use of conventional computer programming. Notably, none of the proprietary scheduling software reviewed uses this method of sequencing. Returning to the manner in which the problem is currently solved suggests an alternative approach.

AN APPLICATION FOR EXPERT SYSTEMS?

At present, when a new job arrives, local supervision must decide where it should be fitted into the current notion of the job sequence. For reasons given earlier, that sequence has a short time-horizon and a new job that fails to enter that horizon will be consigned to ‘the shelf‘ along with many other jobs. This decision is made by the application of a series of tests and rules -

- Is this new job more urgent than the next job that I planned to do? or the next? or the next? Is this new job more important than the next job? (If not - store, awaiting pickup.) If so - how can this job be fitted in? Do I have unallocated resources that I can now commit? Can I, somehow, ‘squeeze’ this new job in without delaying those already committed? If not - which job should I delay? etc.

The basic method is to test for deviation from the existing plan. If, then, a base- sequence were devised, as a oneoff exercise, incorporating all the jobs currently in the queue, new jobs arriving subsequently could be positioned within it by the application of the rule described above. The major difference from the ‘manual’ system would be that the planning timehorizon is extended to include all jobs, hence, every new job arriving can be fitted ‘somewhere’.

This sequ encingl test/ re-sequencing approach appears to satisfy the appropriateness test for an Expert-System application in that it is:

a) Relevant

The ‘problem’ arises every time a new job arrives at a laboratory.

Applying the full sequencefitting exercise to each job - rather than just the urgent ones - would create an unacceptable load upon local supervision. It would not be possible for a human expert to extend the ‘mental’ solution to the ‘infinite’ time horizon, nor would ‘mechanical’ assistance, such as planning boards, give the flexibility and response. These difficulties have resulted in problem avoidance - finite, suboptimal sequencing - in the past.

b) Feasible

Each re-scheduling problem could, conceiv- ably, be solved by a human expert within a few hours and is, hence, not ‘too big’. Local supervision would provide the problem domain expertise, although, the precise rules and application would necessitate further research and development. This expertise could be incorporated in existing represent- ational techniques; delay-consequence could be represented numerically, as above, for example.

c) Optimal

The re-scheduling process requires a series of iterative applications of rules. As already discussed, this makes conventional software inappropriate. A natural-language interface with users would be desirable, especially to justify conclusions.

d} Su ccess- Oriented

Correct sequencing has major advantages for the organisation. Management has already expressed support for both the principle and the detail of an E.S. solution. Most import- antly, existing so-called ‘shell’ systems can be used to develop the system, refine its operation and train users. Clearly, the software selected must be capable of inter- facing with the forward planning system. Figure 9 shows the operational relationships

RdiDManagement 19, 1, 1989

44

L. I. M. S.

core operational requirement


work-to lists ''put - test results

-

sample details

M. 1. S. uses aggregated sample data to summarise service performance.

test requirements

.I

Workload Planning

queue management through forward- scheduling of all jobs

Figure 9 System Schematic Representation

master schedule resource schedules progress reports

- -

between all of the system components organisation when the management of these described. queues becomes conflict-generating. Through

the use of appropriate techniques, however, queue management can minimise conflict

CONCLUSIONS AND RECOMMEND AT IONS and exploit the operational advantages of queues.

Queues are the inevitable consequence of The key improvements in queue manage- the variations in rates of demand for and ment are communications and scheduling. supply of a service. There is a net cost to an Communication to the customer of the

Expert-System Re-Scheduler

RbDManagement 19, 1, 1989

I /

/ A/


estimated completion and progress of every job will assure the customer that the job is being ‘managed‘ and generate trust of the server. Scheduling allows all jobs awaiting service, including ‘booked-space’, to be put into an infinite-horizon forward-plan and, hence, for estimated completion-dates to be determined. The sequence of jobs in the schedule should consider both their importance and urgency. Urgency should be determined in terms of days of delay, or tardiness. Importance should be predetermined on a project-wide or individual task basis and should represent the cost to the organisation if the task is not completed. Importance should be used to weight the task tardiness.

Sequencing must seek to minimise total w eighted-tardiness.

The complex and dynamic nature of this scheduling task limits the practicability of manual or conventional, algorithmic, computer systems. An ‘expert system’ employed to reschedule from a master plan promises a solution which mimics, yet expands and improves, current management approaches. Conversely, the problem is ‘appropriate’ to ES techniques.

Implementation of this solution requires considerable attention to ensure that a correct hierarchy of rules is incorporated and that system design results in a solution

that helps, rather than attempts to totally replace, service supervision. The problem is of a sufficiently widespread nature that, in modified detail and paying attention to differences in weighting, it could be used in a range of servicesequencing and reporting situations.

REFERENCES

Books

Gihson, J. E. (19x1). Managing Research and Developmeni . John Wiley and Sons. New York.

O‘Rrien. J . J . 11%9).Scheduling Handbook. McGraw-Hill, New York.

Harmon. P. and King. D. (19x5). Expert Sysiems. John Wiley and Sons, New York.

Baker. K. R. (1974). Introduction to Sequencing and Scheduling. John Wiley and Sons. New York.

Ruffa. E. S. and Rakesh. K . S. (19x7) . Modern Production,’ Opemtions Management. John Wiley and Sons, New York.

Eppen. G . D . . Gould. F. J . and Schmidt. C. P. 11987). Iniroductory Management Science. Prentice-Hall Inc. . Englewood Cliffs.

Papers

Carrol. V. C. ( 19651. ‘Heuristic Sequencing of single and Multiple Component Jobs‘. Ph.D. dissertation. Sloan School of Management. MIT.

Vepsalainen. A. P. J. and Morton. T. E. (1987) . ‘Priority Rules for Job Shops with Weighted Tardiness Costs’. Management Science. 33. X (August\. 1035- 1047.

‘Executive Perspective of Manufacturing Control Systems’. I.R.M. Puhlication (undated).

R&D Munugernent 19. 1, 1989

Strategic evaluation and selection of R&D projects

Nicolas Danila

Institute of Public Management. I 7, rue Emile Dubois, 750 14 Paris, France

Abstract

The most important families of R&D project evaluation and selection methodologies and associated techniques are briefly reviewed. For each family, generally one or two methods were chosen to be analysed from the point of view of the integration with the strategy. But, first some definitions and some aspects of the new strategic role of the evaluation and selection of R&D projects, which were in mind during the interviews, are presented.

Finally. some empirical results of the use of these methodologies in France and Japan are presented. The strong and weak points of the most prevalent methods are described as they are considered by the users.

INTRODUCTION

For forty years, business theories and practices have used quantitative modelling as an aid to management of such functions as finance, marketing, engineering, production control, manufacturing and economics. Although useful in these areas, models still have not been widely accepted for R&D projects management. In a survey of existing models the author found more than two hundred quantitative and qualitative methods for selecting R&D projects within an organization, but none that was designed specifically for managing the R&D. (Danila, 1983). Furthermore there has been no paper to date about the contribution of R&D project selection and evaluation methods to strategy in general and to technological strategy in particular.

Increasingly, managers have discovered that technology and strategy are inseparable. The most important reason is that in industry after industry, the management of technology seems to be closer and closer to strategy and to the company’s competitive success. For a long time the study of strategy and

more specifically the study of corporate strategy have been distinct from the study of technology (Kantrow, 1980).

To understand the concept of strategy better we first define the different types of strategy.

Institutional Strategy refers to ‘how a company defines and shapes its basic character and vision’ (Hamermesh, 1986, p. 116). This means the organisation has to pay attention to what builds a sense of purpose among all the employees and what creates a good commitment to the goals and mission of the enterprise.

According to one of the oldest definitions (which has become almost a standard), Corporate Strategy is ‘the determination of the basic long term goals and objectives of an enterprise, and the adoption of a course of action and the allocation of resources for carrying out these goals’ (Chandler, 1962, p. 13).

Another definition of the concept of corporate strategy was proposed by Andrews (1980, p. 18):

‘Corporate strategy is the pattern of decisions in a company that determines and reveals its objectives, purposes or goals, produces the principal policies and plans for achieving these goals, and defines the range of business the company is to pursue, the kind of economic and human organization it is or intends to be, and the nature of the economic and noneconomic contribution it intends to make to its shareholders, employees, customers, and communities’. This definition of corporate strategy is certainly one of the clearest and most complete.

Aspects of such a pattern of decision may be a commitment to high technology in general and to research and development in particular.

Corporate strategy, like other strategies, includes both formulation and implementation, which interact with each other and include nonfinancial goals in organizational,

R&D Management 19, 1, 1989 47

48 NICOLAS DANILA

human, and ethical terms.

strategy, which may incorporate several business strategies.

Business Strategy refers to product-market technology choices made by division or product-line management after a thorough

examination of the behaviour of competitors, A company has only one corporate the risks and opportunities in the market,

the resources and proven strength of the division. (Andrews, 1980, p. VII).

Functional Strategy is the combination of purpose and policies that guides the conduct of the function. These functions can be

Figure 1 The relevance tree of the Strategy

R&D Management 19, I , 1989

Strategic evaluation and selection of R&D projects 49

marketing, R&D, manufacturing, finance, personnel. . .

Technological Strate@ is more than just a functional strategy. It covers several functional strategies, such as R&D, engineering, a part of manufacturing (process improvement) a part of marketing (new product development). An effective technological strategy needs a good relationship to some functional strategies.

R&D Planning is not really a strategy but only the programming of R&D projects and is a part of R&D strategy.

Figure 1 shows the relevance tree of the strategy. It is obvious that R&D management in general and the selection and evaluation of R&D projects in particular are among the most important parts of technological strategy.

The analysis of the contribution of R&D evaluation and selection approaches to corporate strategy presupposes a good identification of the concept of corporate strategy and a clear distinction between formulation and implementation.

Figure 2 presents these two aspects of corporate strategy and shows the analysis of strategy as a pattern of interrelated decisions.

The same presentation may be done for all other strategies. Figure 3 describes the formulation, the implementation and the different relationships for the technological strategy.

METHODOLOGY

In the first part, a review of the literature on R&D project evaluation and selection is presented. Past research by the author is used in this part (Danila, 1983). Eight different taxonomies were proposed for the classification of all these methods (Danila 1983, p. 23) such as: the importance of formalisation, the degree of quantification, the starting point (top down or bottom up), the level of analysis (micro or macroeconomic analysis), the kind of thinking (analytical, synthetic, mixed), the number of criteria (undimensional, multidimensional), the type of evaluation (individual or portfolio).

A recent article (Lovelace, 1987) proposed

a very interesting taxonomy constructed along two dimensions: planning direction and level of analysis.

We have chosen a different taxonomy using as a criterion the manner of obtaining and of presentation of the results. Following that taxonomy, we propose thirteen families for the evaluation and selection methods.

In the second part are presented some aspects of an empirical investigation made in France and in Japan.

In France the study covers a wide range of industries in which sixty-four people were contacted for in-depth personal interviews. The complete results were published three years ago (Danila, 1985).

In Japan the study was more focussed o n the biotechnology field, although some different sectors were covered: chemicals, food processing industries, textile, electric and electronic sectors, pharmaceuticals, car manufacturers and agro-business industry. In Japan, fifty-five persons were interviewed, thirty-seven from private companies and eighteen from the public sector. The levels of the interviewed people range from Manager to President or Senior Managing Director.

After the description of the most important families of R&D evaluation and selection methods we will discuss the contribution of these methods to different kinds of strategies.

PART I : T H E MOST IMPORTANT FAMILIES FOR T H E EVALUATION OF R&D PROGRAMS AND PROJECTS

A Descr@ion

Ratio family

The attractiveness of an R&D program or project is measured by a ratio between the benefit (savings, earnings, profit, cash flow . . .I and the cost of R&D (Danila, 1983).

Score index family

There are at least three kinds of R&D indices: economic, financial and mixed. All

R&DManagemen~ 19, 1, 1989

50 NICOLAS DANILA

FORMULATION

of deciding what to do) b (Logical and analytical activity

b IMPLEMENTATION Primarily administrative activities

4 of achieving results)

.1 . Identification of opportunity - and risk in the environment

-2. Determining the company's - resources (material, technological, financial, commercial and managerial)

-3. Appraisal of the company's - competitive strengths and weaknesses

- .4. Personal values and aspirations of top management

-5. Acknowledgment of non economic responsibility to society -

LOWGROWTH STRATEGIES

1. Nochange 2. Retreat 3. Focus on limited special

opportunity

CORPORATE

STRATEGY

Pattern of purposes and policies

defining the company

and its business

I FORCEDGROWTH STRATEGIES

-B 1. Organization structure and 4- relationship

Division of labour Coordination of divided responsibility Information system

+ 2. Organizational processes and behaviour

Standards and measurement Motivation and incentive systems Control systems Recruitment and development of managers

I- 3. Top leadership 4-

Strategic Organizational Personal

1 . Acquisition of competitors 2. Vertical integration 3. Geographical expansion 4. Diversification

Adapted from Kenneth R Andrew, op. cit.

of them try to evaluate the project by an index measured by:

index = expected benefit

For the economic index, the expected benefit includes the probability of benefit and the cost sometimes includes the capital. Indices like the Olsen and Disman formulas ignore capital investment and, for that reason are highly vulnerable. We chose the Pacific0 index because it is the only one which in estimating R&D cost includes the expenses for planning and market research

RdSDMunugement 19, 1, 1989


FORMULATION b IMPLEMENTATION (Logical and analytical activity (Administrative procedures of

of deciding what to do) 4 achieving results) -

. 1. Identification of opportunity + and risk in present technology

. 2. Appraisal of the company's technological resources

--+

- 3. Evaluation of the strengths --+ and weaknesses for each technological field

. 4. Aspirations and expectations - of senior and research management

. 5. Environmental and regulatory -+ problems

TECHNOLOGICAL

STRATEGY

Corn birlation of purpose and policies that guides

and conducts the

technological function

INSIDE TECHNOLOGY (make)

- Internal R&D

- Internal mastery and

- Development inside

Leader < Follower

subcontractors for some tasks

Research outside (licenses)

+ 1. Structure

Choice of an adapted structure for the research organization (matrix versus functional) Coordination with marketing and manufacturing Information systems

2. Eehaviour

Motivation and research systems Control systems Recruitment and development of researchers

I- 3 . Culture

- Charismatic leader - Leadership of research

management

0UTSIDE.TECHNOLOGY (buy)

- Acquisition

- Cooperation (contracts) with

- Take over small high-tech

university

companies

Figure 3 Formulation and implementation of technological strategy

(Pacific0 1964; Danila, 1983). For some R&D programs these expenses can be considerable.

The financial indices are N.P.V. (Net Present Value), I.R.R. (Internal Rate of Return) and R.O.I. (Return On Investment). The three criteria use discounted cash flow to obtain the benefit and the cost. The financial dimension and short term view are prevalent (Danila, 1983).

The index proposed by Ansoff is a mixture of economic analysis and decision theory as is the index of Gordon Teal (Ansoff, 1961). It was the first method which explicitly used a strategic factor as part of an eight-factor model. This strategic factor is related to the other projects, other products, or other markets.


52

Programming family

These methods involved mathematics in order to determine which allocation pattern will maximise benefit contribution of the R&D program or project. There are some sophisticated algorithms of linear, nonlinear, dynamic and integer programming which are more often used. Linear and nonlinear models have linear and nonlinear objective functions, respectively, linear constraint functions and continuous decision variables; however, some allocate R&D personnel or man-hours rather than determine project budgets.

Hess has proposed a method based on dynamic programming. His model explicitly considers the sequential decision making aspects of R&D project evaluation and selection (Hess 1962). It requires the estimation of the discounted gross value of each project as of the nth period of time before achieving technical success. The gross value corresponds to all revenues of the project minus all costs of terminal development and production but excluding R&D costs prior to the achievement of technical success. An estimation of the probability of achieving technical success in each period and of a discount rate of interest is required. The model maximizes, over the set of projects evaluated, the expected discounted gross value. Besides the selection of R&D projects, the result is also an ‘optimal’ allocation of the current budget among the projects selected.

V.P.I. (Virginia Polytechnic Institute) proposes a model for R&D project selection and manpower allocation with integer nonlinear goal programming (Taylor B. W,, Moore. L. J., Clayton E. R., 1982). The model consists of integer decision variables for both the number of researchers allocated and project selection. These two variables are subject to several linear and nonlinear goal constraints. The goal constraints are constructed to relate the profitability of project success to the number of researchers assigned to a project and to expected monetary return.

NICOLAS DANILA

Portfolio family

Many portfolio selection models have been proposed in the financial areas. The best known authors are J. Tobin, William F. Sharpe and Ian Mossin. For the R&D projects the model proposed by Adelson is based on the definition of the utility of project and of expected value of project (Adelson, 1965). In the Cramer-Smith model, for each alternative project, estimates are made of net values and probabilities of occurrence (Cramer and Smith, 1964). Utility curves can also be obtained and the lack of project independence is mentioned.

In both models, candidate projects are implicitly prioritized by the amount of funds allocated to them. The constraints ensure that the portfolio is balanced for risk, and, for instance, that exploratory projects will not be disadvantaged in their competition with other projects.

Matrices famiry

The method proposed by the former D.G.R.S.T. (DClbgation GCnCrale pour la Recherche Scientifique et Technique) uses two kinds of matrix (Danila, 1983). The first one measures the consequences of the research projects, the second one the impact of the results of the research on industrial sectors. The multiplication of the two matrices gives the impact of research projects for the different industrial sectors.

PROFILE (Programmed Functional Indices for Laboratory Evaluation) tries to explore the structure of project selection in the context of R&D management and to provide an aid in the design and the implementation of management systems for planning, appraising and controlling resource allocation among different projects (Cetron 1967). Nine out of ten criteria are quantified and are used to define a ‘profile’ of each project.

QUESTAR (Quantitative Utility Evalua- tion Suggesting Targets for the Allocation of Resources) presents in a matrix the contribution of an R&D project to the commercial value of a product, on one hand, and the commercial value of the R&D project, on the other (Danila, 1983). These models help

R&R Management 19, 1 , 1989

Strategic evaluation and selection of R&D pro.jects 53

to improve the strategic programming of the R&D.

Systemic farnib

This family covers a wide range of methods. FACTOR ANALYSIS tries to identify the

independent factors involved in the evaluation and selection of R&D programs and projects and to make judgments from these factors (Danila, 1983). It is a more useful method for the identification and the formulation of a project than for the evaluation itself.

PERT (Program Evaluation and Review Technique) is a well-known method for the scheduling and control of R&D projects, but at the same time it is a good aid in a decision- making process of evaluation and selection of R&D projects (Danila, 1983). The human factor is also included, in spite of the many difficulties in the way of estimating it.

Checklist familv

In a checklist model, candidate projects are checked against a set of criteria chosen for the evaluation.

The KIEFER method is one of the oldest checklists proposed in literature. Fifty-six criteria are proposed, grouped in five classes: Financial, R&D, Production, Marketing and Corporate Position (Kiefer, 1964). For each criterion the evaluation result can be very favourable, average, unfavourable or very unfavourable.

The EIRMA checklist, proposed by the European Industrial Research Management Association, uses two kinds of factor, those which influence the probability of technical success and those which induce the probability of commercial success (Eirma, 1975). The scale runs from 1 to 4 to avoid selecting the mid point of the scale.

The BECKER model is the most recent checklist and is the result of the Research on Research Committee of the Industrial Research Institute (Becker, 1980). The criteria chosen were found to fall into three checklists: one for selection of research projects, one for selection of product development projects and the last one for

R&D Management 19, 1. 1989

selection of process development projects. A very interesting finding is that the criteria appeared to be independent from the business strategy.

Relevance trees

The relevance tree family is a kind of combination of decision theory approach and operations research approach.

PATTERN (Planning Assistance Through Technical Evaluation of Relevance) was the first application of the heuristic ‘relevance tree’ concept developed in 1958 by H. Wells in his Ohio State University Master’s thesis (Jantsch, 1968). The model considers national survival, threat force structure, capability, prestige, cost, effectiveness, requirements, scientific implications, feasibility, effort, risk, capability improvement, and operational advantages. It requires considerable effort to assign quantitative relative values to the importance of conducting R&D projects on different technology deficiencies.

The CPE (Centre de Prospective et &Evaluation) was developed by the French Ministry of Defence. A ‘support tree’ is formulated to evaluate dependent projects. The scores range from 0 to 100 and separate the projects in two classes: the good ones and the bad ones (exclusion option). The rating scheme uses a formula including four factors: military utility, probability of technical success, possibility of realization and direct and indirect economic impact.

Table fami&

The table family is very close to the checktist family, the most important difference is in the presentation of criteria used for the evaluation and selection.

TECDEV (Technique et Development\ proposes thirty-six factors, chosen in four categories: manufacturing, commercialization, competitive position of the enterprise, and probability of success (Leclercq, 1970).

The MONSANTO table tries to define a profile of the R&D project based on twenty- six criteria which belong to four families:

54

financial aspect, R&D, production and commercialization dimensions (Tejtel, 198 1).

The CAREY or ‘social merit’ method uses twelve criteria from three classes: economic, cultural and political considerations (Danila, 1983).

NICOLAS DANILA

Graphic family

PI (Potential of Innovation) presents eight factors with a total weight of 100%. A profile is drawn depending on the appreciation of the R&D project against the factors (Paolini et al. 1977).

ICEPS (Interactive Cross Evaluation and Project Selection) is a graphic method based upon a checklist (Eirma, 1976). The criteria are related to science and technology, the market, the means and the consequences. Strengths, risks, success and motivation (desirability) are also analysed. The method can be used for single project analysis and evaluation or for project ranking and portfolio selection.

Mu it icrit eria family

This family is sometimes called the scoring family.

MARSAN-ELECTRE (Mkthode d’ Analyse pour la Recherche, la SClection et le lancement d’ActivitiCs Nouvelles - ELimi- nation Et Choix Traduisant la REalitC) has two phases, one exploratory and one for selection (Roy, 1972). The ranking of projects is based on out-ranking relations and a computer program has been available since 1968.

ELECTRE-ORESTE (ELimination Et Choix Traduisant la REalitk - ORientation Economique Sociologie et TEchnique) was developed more for the dependent projects which are, in fact, the most usual R&D projects (Danila, 1979). Configurations are defined by the description of technological blends of different tasks to be performed.

Consensus family

The very well-known DELPHI (Gordon et al. 1964) method was principally used for technological forecasting. Some organizations also use this technique for the selection of research projects. Experts are asked a series of ever more closely defined questions. However, it appears difficult to phrase appropriate questions and to avoid inbred answers.

Japanese decision makers use the RINGI method following five steps: request, drafting, examination, consultation, imple mentation (Amako 1982).

RULE OF THUMB is a consensus method in which R&D managers and project managers have to agree about the risks and rewards that have to be balanced.

Integrative family

The BOTTOM UP AND TOP-DOWN approach is very close to the ICEPS method and addresses three levels of development of projects: shaping of ideas, feasibility study and development (Eirma, 1976). The first level leads to the scope of the project, the second level to the assessment of project and the third level to the program for project exploitation. It requires an inventory of rejected projects.

ALADIN (AnaLysis About Development and INovation) is a new integrative method (Danila, 1986b). From the old lamp to the new method, the multi-dimensional model works on checklists, matrixes, multicriteria, consensus and graphic aspects. In fact this method was built on the strength of each of these methods by systematically eliminating weaknesses.

B THE CONTRIBUTION OF R&D EVALUATION AND SELECTION METHODS TO THE FORMULATION AND IMPLEMENTATION OF STRATEGY

A description of the methods used by and a record of the discussions with the French and Japanese permit a qualitative evaluation of the contribution of these methods to different kinds of strategy.

The biggest contribution is to R&D planning, For implementation as well, some

R&D Munugenient 19, I , 1989


methods (QUESTAR, BECKER, RINGI, ALADIN) are very good. For the formulation of R&D planning, some methods seem even to be excellent (VPI, QUESTAR, ELECTRE-ORESTE, ALADIN). Figure 4 presents all the results.

The contribution of these methods to R&D strategy, which means not only the planning but also the budgeting and information systems, the rewards and control of researchers, is presented in Figure 5. Nine methods remain very good for formulation and three for implementation.

The accuracy of R&D evaluation and selection methods for technological strategy remains important (see Figure 6). A score index (ANSOFF), a portfolio (CRAMER SMITH), a checklist (BECKER), two multicriteria (MARSAN-ELECTRE and ELE- CTRE-ORESTE), a consensus (RINGI), a graphic (ICEPS) and an integrative (BOTTOM-UP AND TOP DOWN) are estimated to be very good. An integrative method (ALADIN) is rated as excellent. Two methods are very good for the implementation of technological and business strategy (BOTTOM-UP AND TOP DOWN and ALADIN), although the contribution of these methods to other strategies is somewhat less valuable (see Figure 7). For corporate strategy, only three methods make a very good contribution (RINGI, BOTTOM UP AND TOP DOWN and ALADIN). N o method is very good for implementation (see Figure 8).

The contribution of the evaluation and selection methods for R&D projects to the institutional strategy is very small, except for one method (CAREY). Figure 9 presents the results on all the other methods.

SOME OTHER RESULTS

For major companies, especially those which are technology-based, the evaluation and selection of R&D projects are very often integrated into s’trategic planning, generally portfolio planning. The most important objectives of strategic planning in these technology-based companies are on one hand, to improve the quality of resource allocation and the quality of business unit plans and, on the other, to ensure that key


corporate-wide issues, for instance major technological changes, are addressed. In successful companies, top management typically uses planning for one purpose at a time. In these companies the discipline of formal strategic planning is the best way to develop strategic thinking.

In France, the most used methods for the evaluation and selection of R&D programs and projects by the 52 organizations analysed are the following (Danila, 1985, p. 100):

* Consensus (22) * Financial score index (13) * Checklists (7) * Multicriteria ( 5 ) * Systemic (5).

Compared with the total number of organizations, the utilization is not really strong. No method is used by more than 50% of the organizations. One reason is that knowledge of these methods is quite limited and a better ratio is perhaps that of utilization to knowledge. Three methods have a good utilization/knowledge ratio: consensus (63%) financial score index such as NPV or IRR (62%) and ALADIN (50%).

French users prefer consensus methods because they seem to be flexible, and incorporate a higher participation level. The decision-making process becomes collective and the impact of choice of project on the technological strategy is more evident (Danila, 1985, p. 11 1).

The biggest weakness of these methods is the cost because they are really time- consuming. At the same time, consensus methods do not let the outsiders and champions try new projects because usually the committees are co-opted.

In Japan, we found that at the macroeconomic level, the existence of the working textbook has a crucial influence over the form of Japanese industrial policy, industrial structure and corporate strategy, including R&D strategy. Another author has already emphasized this point of the Japanese corporate strategy (Yamauchi 1983).

For the Japanese, the most important success factor in R&D activity seems to be a clear target with the right timing and in accordance with the working textbook.

In the past, Japanese companies have

56 NICOLAS DANILA

A R&D planning

Family

1 Ratio

2 Score Index

3 Programming

4 Portfolio

5 Matrix

6 Systemic

7 Checklists

8 Relevance trees

9 Tables

0 Multicriteria

1 Consensus

2 Graphic

3 Integrative

iroach

Method

Ratio

A) Economic

B) Financial

C) Mixed (ANSOFF)

A) Linear (NUTT) B) Linear 0-1 (DEAN) C) Dynamic (HESS) D) Non-linear

(PACIFICO)

(NPV, IRR. ROI)

integer goal (VPI)

A) ADELSON B) CRAMER-SMITH

A) D.G.R.S.T. B) PROFILE C) QUESTAR

A) FACTOR ANALYSIS B) PERT

A) KIEFER B) ElRMA C) BECKER

A) PATTERN B) CPE

A) TECDEV B) MONSANTO C) CAREY

A) MARSAN-ELECTRE B) ELECTRE-ORESTE

A) DELPHI B) RING1 C ) RULE OF THUMB

A) P. I. (Potential of Innovation)

B) ICEPS

A) Bottom up and top down

8 ) ALADIN

Excellent (outstanding)

Good Good Very good

Formulation

Poor

Good

Very good

Very good

Good Good Very good Excellent

Good Very good

Good Poor Excellent

Poor Poor

Good Good Very good

Good Good

Poor Good Good

Very good Excellent

Good Very good Poor

Good

Very goad

Very good

Excellent

Poor

- Implementation

Totally unreliable

Poor

Good

Good

Poor Poor Poor Poor

Poor Good

Poor Poor Very goad

Good Good

Poor Poor Very good

Good Poor

Poor Good Poor

Good Good

Poor Very good Very poor

Poor

Poor

Good

Very good

Bad Very poor Totally unreliable

Figure 4 The contribution of R&D evaluation and selection methods to the formulation and implementation of R&D planning

poured enormous business resources into basic technology or original products. development for product improvement, in Needless to say, technology for the improve- quality and design, and proces:i innovation as ment of products and production processes an R&D strategy, rather than developing depends on the more practical and day-to-

RLeD Management 19,1, 1989

Strategic evaluation and selection of R& D projects 57

1 Ratio

2 Score Index

3 Programming

4 Portfolio

5 Matrix

6 Systemic

7 Checklists

8 Relevance trees

9 Tables

10 Multicriteria

11 Consensus

12 Graphic

13 Integrative I

I---....-

-__ Method - Ratio

A) Economic

6) Financial

C) Mixed (ANSOFF)

A) Linear (NUTT) 6) Linear 0-1 (DEAN) C) Dynamic (HESS) D) Non-linear

(PACIFICO)

(NPV, IRR, ROI)

integer goal (VPI)




A) KIEFER B) ElRMA C) BECKER A) PATTERN 6) CPE

A) TECDEV 6) MONSANTO C) CAREY


A) DELPHI B) RING1 6 ) RULE OF THUMB

A) P.1, (Potential of Innovation)

B) ICEPS


B) ALADIN

R&D Strategy

Formulation

Very poor

Good

Good

Very good

Poor Poor Good Good

Good Very good

Good Good Very good

Good Good

Good Good Very good Good Good

Poor Poor Good

Very good Very good

Good Very good Poor

Good

Very good

Very good

Excellent

Implementation

Totally unreliable

Very poor

Poor

Good

Very poor Very poor Poor Poor

Good Good

Poor Poor Good

Good Good

Poor Poor Good Good Poor

Very poor Poor Poor

Good Good


Poor

Good

Very good

Very good

Firtire 5 The contrihulion of R&D evaluation and selection methods 10 the formulation and implementation of R&D strategy

day business activities in the production division rather than on the purely scientific activities of the laboratory.

Today, Japanese industry is switching from its basic position of follower to a position of leader in some industrial fields. Such a switch entails a reformation of industrial structure and corporate strategy.

Some big technology-based Japanese companies have used methods for evaluation and selection of R&D projects for more than twenty years.

For instance one industrial group has used a score method for about 20 years. They have used an economic index method obtained as explained below.

RXDManagement 19, 1, 1989

58 NICOLAS DANILA

Approach Technological strategy

Family

1 Ratio

2 Score Index

3 Programming

4 Portfolio

5 Matrix

6 Systemic

7 Checklists

8 Relevance trees

9 Tables

10 Multicriteria

I1 Consensus

12 Graphic

13 Integrative

Method

Ratio

A) Economic

B) Financial

C) Mixed (ANSOFF)

A) Linear (NUTT) B ) Linear 0- 1 (DEAN) C) Dynamic (HESS) D) Non-linear

(PACIFICO)

(NPV. IRR, ROI)

integer goal (VPI)

A) ADELSON 6) CRAMER-SMITH



A) KIEFER 6) ElRMA C) BECKER

A) PATTERN B) CPE


A) MARSAN-ELECTRE 8) ELECTRE-ORESTE

A) DELPHI B) RING1 C) RULE OF THUMB

A) P.I. (Potential of Innovation)

B) ICEPS


B) ALADIN

Formulation (deciding what to do)

Totally unreliable

Poor

Good

Very good

Poor Poor Poor Good

Good Very good

Good Poor Good

Good Good

Good Good Very good

Good Good

Poor Poor Poor

Very good Very good

Good Very good Poor

Good

Very good

Very good

Excellent

Implementation (achieving results)

Totally unreliable

Very poor

Poor

Good

Very poor Very poor Very good Poor

Good Good

Poor Very poor Good

Poor Poor

Very poor Poor Good

Good Poor

Very poor Poor Poor

Good Good

Poor Good Very poor

Poor

Good

Very good

Very good

Figure 6 The contribution of R&D evaluation and selection methods to the formulation and implementation of technological strategy

INCOME OF R&D PROJECT: SALES-EXPENSES OF R&D PROJECT

The expenses are the following : number of persons, material and manufacturing expenses, equipment investment and, what is more unusual, floor space.

The sales are calculated by the multiplication of estimated sales and the probability of technical success.

The Japanese decision-makers believe that the method identifies factors which may influence the progress of projects, measure their relative weights, and grade each factor.

R&D Management 19. 1 ~ 1989


t -

Approach Business strategy

Family

1 Ratio

2 Score Index

3 Programming

4 Portfolio

5 Matrix

6 Systemic

7 Checklists

8 Relevance trees

9 Tables

10 Multicriteria

11 Consensus

12 Graphic

13 Integrative

Method

Ratio

A) Economic

B) Financial

C) Mixed (ANPOFF)

A) Linear (NUTT) B) Linear 0- 1 (DEAN) C) Dynamic (HESS) D) Non-linear

(PACIFICO)

(NPV, IRR, ROI)

integer goal (VPI)




A) KIEFER B) ElRMA C) BECKER

A) PATTERN B) CPE

A) TECOEV B) MONSANTO C) CAREY

A) MAR SA N- E L ECTR E B) ELECTRE-ORESTE



6) ICEPS


B) ALADIN

Formulation

Very poor

Good

Good

Very good

Poor Poor Good Good

Good Poor

Good Poor Good

Poor Good

Good Good Very good

Good Good

Good Good Good

Good Very good


Good

Good

Very good

Excellent

lmplementa tion

Totally unreliable

Poor

Good

Good


Poor Poor

Poor Very poor Poor

Very poor Poor

Poor Poor Good

Poor Poor

Poor Poor Poor

Good Good


Poor

Good

Very good

Very good

Figure 7 The contribution of R B U evillui~t~on and selection methods to the formulation and implementa[ion of business striltegy

The drawbacks of these approaches viewed by the Japanese users are linked to the information need. The method requires a process of grading about 100 factors per project, which takes a long time to obtain and, at the same time, it is difficult to evaluate different kinds of project with a single measure.

The most prevalent method in the Japanese industrial settings is still the RINGI. These consensus methods are very time-consuming but the implementation is quick, following the sequence slow, slow, slow, quick, quick. Slow to get the information, slow to check and evaluate the information, slow for the decision. Quick for the implelnentation and

R&D Munugement 19, 1, 1989

60 NICOLAS DANILA

Approach Corporate strategy

Family

1 Ratio

2 Scorelndex

3 Programming

4 Portfolio

5 Matrix

6 Systemic

7 Checklists

8 Relevance trees

9 Tables

10 Multicriteria

11 Consensus

12 Graphic

13 Integrative

Method

Ratio

A) Economic (PACIFICO) B) Financial

C) Mixed (ANSOFF)

A) Linear (NUTT) B) Linear 0- 1 (DEAN) C) Dynamic (HESS) D) Non-linear

(NPV, IRR, ROI)

integer goal (VPI)



A) FACTOR ANALYSIS 8) PERT

A) KIEFER B) ERMA C) BECKER

A) PATTERN B) CPE





B) ICEPS


B) ALADIN

Formulation

Totally unreliable

Poor Poor

Good

Poor Poor Poor Poor

Poor Poor

Poor Poor Good

Very poor Poor

Poor Poor Good

Good Good

Poor Good Good

Good Good


Poor

Good

Very good

Very good

~

Implementation

Totally unreliable

Very poor Very poor

Poor

Very poor Very poor Very poor Very poor

Very poor Very poor

Poor Very poor Poor

Very poor Poor

Very poor Very poor Poor

Poor Poor

Very poor Poor Poor

Poor Poor


Poor

Poor

Good

Good

Figure 8 The contribution of R&D evaluation and selection methods to the formulation and implementation of corporate Strategy

quick for the control of the results. The planning research in particular is the process was largely discussed for the evaluation and selection of strategically biotechnological projects (Danila, 1986a). worthwhile projects and programs. In this

decision-making phase, communication between general management and R&D staff

CONCLUSION must be effective. Unfortunately, the managers often lack a strong research background

One of the most important difficulties in and the researchers lack the skills to technological strategy in general and in communicate in an understandable and really



Approach Institutional strategy

Family

1 Ratio

2 Score Index

3 Programming

4 Portfolio

5 Matrix

6 Systemic

7 Checklists

8 Relevance trees

9 Tables

10 Multicriteria

I 1 Consensus

12 Graphic

I3 Integrative

Method

Ratio

A) Economic (PACIFN B) Financial

(NPV. IRR, ROI) C) Mixed (ANSOFF)

A) Linear (NUTT) €3) Linear 0- 1 (DEAh C) Dynamic (HESS) D) Non-linear

integer goal (VPI)

A) ADELSON €3) CRAMER-SMITH

A) D.G.R.S.T. €3) PROFILE C) QUESTAR

A) FACTOR ANALYSI B) PERT

A) KIEFER €3) EMMA C) BECKER

A) PATTERN €3) CPE

A) TECDEV €3) MONSANTO C) CAREY

A) MARSAN-ELECTRI €3) ELECTRE-ORESTE

A) DELPHI €3) RING1 C) RULE OF THUMB


8) ICEPS


B) ALADIN

Formulation

Totally unreliable

Very poor Very poor

Poor


Very poor Poor

Poor Poor Good

Totally unreliable Poor

Totally unreliable Totally unreliable Poor

Good Good

Very poor Poor Excellent

Good Good

Good Good Poor

Poor

Good

Good

Good

Implementation

Totally unreliable

Totally unreliable Totally unreliable

Very poor

Totally unreliable Totally unreliable Very poor Very poor

Very poor Poor

Poor Very poor Poor

Totally unreliable Poor

Totally unreliable Totally unreliable Poor

Poor Poor

Totally unreliable Poor Very good

Good Good

Poor Good Very poor

Very poor

Poor

Good

Good

Figure 4 The contrihurion of U&D ev;lluation and selection methods 1 0 the forniulaiion i ~ m l i n i ~ i l e i i i ~ n l ~ i i i ~ ~ r i oi insti iution:iI siraiem

credible way with the managers. For this Some methods seem to have enough reason a good method is necessary, but a possibilities to contribute not only to R&D method not only to evaluate and select but strategy but also to corporate strategy. also to manage the R&D programs and In a very competitive world, the organ- projects. ization owning and using these types of

This paper has examined the contribution methods will have important strategic of R&D project evaluation and selection advantages. methods to the different kinds of strategies.


62 NICOLAS DANILA

REFERENCES

Adelson. R. M.. (1965). 'Criteria for Capital Investment: an Approach through Decision Theory'. Operational Research Quarterlv. Vol. 16. no. 1. pp. 19-SO.

Amako. T.. ( 1982). 'Quand les entreprises japonaises integrent la gestion americaine'. Revue Franfaise de Gesrion, no. 35. pp. 59-63,

Andrews, K . R.. (1980). The concept 0.f Corporate Strategy. New York. Dow Jones-Irwin, 180 pages.

Ansoff. H.. (1961 1. Evaluation o fApp l i ed Research in a Business Firm. Technological Planning at the Corporate Level. Division of Research. Harvard Business School. Boston.

Becker. R. H.. (19801. 'Project Selection Check lists for Research. Product Development. Process Deveiopment'. Research Managemenr. Vol. 23. no. 5. pp. 34-6.

Cetron. J. J . . and Davidson. M. R.. (1969). 'Macro R&D'. Indusrrial Management Review. Vol. 10. no. 2. pp. 87-100.

Chandler. A. D., (1%2). Strategy and Structure. The MIT Press. 463 pages.

Cramer. R. M.. and Smith. B. E.. (1964). 'Decision for the selection of research projects'. The Engineering Economist.

Danila. N.. (1979). 'Methodologie d'aide a la decision dans fe cas d'investissements fort dependants'. these d e doctorar 6s Sciences des Organisations. Universite de Paris IX-Dauphine.

Danila. N.. (19831. Straregies rerhnologiques. FNEGEIIDMP. Paris. I68 pages.

Danila. N,. (1985). Pratique frartfaise des strategies rechnologi- ques. FNEGE/IDMP. Paris. 216 pages.

Danila, N.. i 1986a). 'Strategies lechnologiques el evaluation des projets de recherche biotechnologique en France et au Japon', papier presenrk au Sixieme Colloque Inrernational sur la Prevision. 15-18 juin 1986.

Danila. N.. (1986bl. 'La Methode ALADIN'. La Progres Technique. no. 4. pp. 23-32.

De I'Estoile. H.. (1968). 'La programmation de la recherche appliqute'. le Progres Scientifique. no. 118.

Eirma. (1975). 'Methodes devaluation des projets de R&D, Rapporr du groupe d e rravail. no. 16B. Vol. 7. Crkdibilite du succes commercial: definition. estimation et intbgration avec la credibilite du succes technique. Paris. France. 60 pages.

Eirma. (1976). 'Methodes d'evaluation des projets R&D'. Rapport du groupe d e travail, no. 16A. Vol. 6 , Paris. France. pp. 71-82.

Gordon. T. J., and Helmer. 0.. (1964). 'Report on a Long- Range Forecasting Study'. Report P-298. The Rand Corp- oration. Santa Monica. California.

Hamermesh. R. G., (1986). 'Making planning strategic'. Harvard Business Review. Vol. 63. no. 4. pp. 115-20.

Hess. S. W.. (1962). 'A dynamic programming approach to R&D budgeting and project selection'. IRE Transactions on Engineering Management. Vol. EM -9.

Jantsch. E., (1968). La prevision technologique. Paris, France, OCDE. 440 pages.

Kantrow, A. M.. (1980). 'The strategy-technology connection'. Harvard Business Review. Vol. 58. July-August. pp. 6-21.

Kiekr . D. M.. (19641. 'Winds of change in industrial Chemical Research'. Chemical and Engineering News. Vol. 42, pp. 88- 109.

Leclerq. R.. (1970). Le developpement du produit nouveau, Paris. France. Dunod. 86 pages (Collection OBM. Cahier no. I IDEE).

Lovelace, R. F.. (1987). 'R&D Planning Techniques'. R&D Management. October. Vol. 17. no. 4. pp. 241-51.

Pacifico. C.. (1964). 'Is it Worth Risk.?. Chemical Engineering Progress, Vol. 60. May.

Paolini. A,. Jr. and Glaser, M. A,. (1977). 'Project Selection Methods that Pick Winners'. Research Management. Vol. 20. no. 33. pp. 26-9,

Roy, B., (1972). 'Decisions avec criteres multiples: problemes et methodes'.RevueMETRA,groupeSEMA. Vol. 11. no. 1. pp. 121 -51.

Taylor. B. W.. Moore. L. J.. and Clayton. E. R.. (1982). 'R&D project selection and manpower allocation with integer nonlinear goal programming'. Management Science. Vol. 28. no. 10. pp. 1149-58.

Tejtel. M.. (1981 ). 'Analyse du risque de I'entreprise innovatrice. les enseignements de I'exp6rience americaine'. Revue Franfaise d e Ges f ion . no. 29, pp. 6- 17.

Yamauchi, J., (19831. 'Long-range strategic planning in Japanese R&D'. Futures. pp. 329-41.

RdDManagernent 19, 1, 1989

Notes & Comments

R&D Project Selection Strategy: an empirical study in Spain

Angel Martinez Sanchez

University of Zaragoza, Poetisa Maria Zambrano, 50, 500 15 Zaragoza, Spain

Abstract

The author has investigated the role played by project selection methods in defining a firm's technology strategy, as exemplified by a sample of innovative companies in Spain. The information was collected by a combination of questionnaire and interview with key personnel.

The author was able to classify strategies into four groups: ( 1 ) a planning strategy, essentially a negotiation comprising top-down and bottom-up elements; (2) an economic strategy in which a large number of economic criteria set in advance by top management are used to evaluate projects; (3) a market strategy in which R&D is seen more or less as an adjunct to the Marketing function, which defines the products needed and negotiates the programme with top management; (4) a technical strategy, used in circumstances in which technological innovation is essential and in which, therefore, economic factors take a subsidiary place.

The author's data show that in companies operating a planning strategy project selection methods of various, perhaps ad hoc kinds play a key role in reaching a company consensus. For those using an economic strategy the selection criteria are predetermined and selection methods inflexible. In the case of the market strategy, evaluation methods are used solely to help to rank projects prior to selection. Firms employing the technical strategy clearly base their decisions purely on the technical merit of the various projects put up for implementation.

The paper includes information on the types of selection method used, broken down by company size and other similar criteria, and

comparisons with practice in the USA, France and some other countries.

INTRODUCTION

The stage of R&D project selection and evaluation is one of the most critical fields of management for those responsible for R&D due to the technical and economic uncertainty surrounding the process of technological innovation (Twiss, 1974).

To provide an aid for this stage many R&D project selection and evaluation models have been produced, mainly in the 19SOs, 1960s and the mid 1970s (Albala, 1975; Augood, 1973; Baker, 1974; Clarke, 1974; Danila, 1983; Fox et al, 1984; Jackson, 1983a, 1983b; Saint Paul et al, 1974). Since then the limitations of these models and the criticisms made of the methods used have meant that this tendency has changed and at the moment there are very few new models produced each year (Baker et al, 1975; Eirma, 1970; Mansfield, 1981; Souder, 1978). This does not mean that things have come to a standstill but rather that a new philosophy of the methodology used for the evaluation and the selection of R&D projects has appeared. The methodology is based on expert information systems, artificial intelligence, the modelling of decision processes, human factors and preferential structures. This development is laying the foundations for a new theoretical and possibly empirical growth of these methods, although perhaps their main purpose is not yet to answer specific R&D questions but rather to pose those which generally affect the technology of a company (Souder et al, 1986). This

63 R&D Martagement 19, 1 , 1989

64

temporary situation has not prevented the carrying out of complete empirical studies in this decade (1980s) which have updated the use and the knowledge of these methods in different countries (Balderston et al, 1984; Danila, 1985; Higgins et al, 1986; Lee et al, 1986; Liberatore et al, 1983). Along these lines the study which will now be described has been carried out in Spain.

ANGEL MARTINEZ SANCHEZ

telephone interviews to check the information contained in the questionnaires (Tables 1 and2).

Because of the existing dissimilarity for the classification of different methods, the classification used by Nicolas Danila (1985) in his analysis of French companies, was adopted, with the aim of being able to establish homogeneous comparisons of the results.

METHODOLOGY OF THE STUDY

During 1986, 188 of the most innovative Spanish industrial companies were sent questionnaires, first having been contacted by telephone. Sixty questionnaires, found to be of use, were returned by them and followed up by 10 personal interviews with R&D directors in these firms, and 50

METHODS USED FOR THE EVALUATION AND SELECTION OF R&D PROJECTS

In the first place and with reference to the well-known methods it can be noted that the quantitative methods (index, ratios, programming) are better known than the qualitative methods (checklists, scoring, consensus) in the different sectors studied.

Table 1 Number of companies that replied to the survey

Industrial sector Number of companies ~

1. Energy 9 2. Chemical Products 22 3. Machinery, except Electrical 8 4. Electric Machinery & Equipment 6 5. Electronic equipment 12 6. Other companies 3

Table 2

Respondent Company

1) Age 1) % R&D/Sales

Company and respondent survey demographics summary.

x =45years x=2.5 CX = 8

2) Years in R&D 2) Full time R&D employees/ 1000

x =13 x=33 01 =8

x =15 Basic research 5.8% iy =8 Applied research 57.7%

4) Highest degree earned Experimental development 86.5%

Bachelors 4.3% Product 65% Masters 67.4% Process 35% Doctorate 28.3% 4) Patentability and sale

Technician 98% Yes 74% Economist 2% No 36%

3) Years with company 3) Type of R&D

of technology

RXD Management 19. 1, 1989

Notes and comments: R&D project selection strategy 65

From a comparison with studies carried out in other countries, it can be inferred that these qualitative methods are not at all well known in Spain, especially in comparison with France where checklists and consensus methods are the best known ones (Table 3). From the survey carried out, in this area of innovation management, these comparisons would appear to indicate possible shortcomings in educational training. A most illustrative example of this was obtained by calculating the average number of methods known by each company interviewed (Table 4). With respect to the ratio in Spain, in the United States it is more than twice this ratio

(113%) and in France (134%). It must however be pointed out that the survey carried out in the United States only indicated 12 of the 17 methods put forward in Spain and France. By carrying out a simple linear extrapolation the difference is increased given that the ratio in the United States is on average 10 methods known per company.

When analysing knowledge of these methods in terms of the size of the company, with a criterion of less than 500 employees to define small and medium-sized industries (SMI) and 500 or more to define large industries (LI), the relative classification

Table 3 Level of knowledge (%) of R&D project selection and evaluation methods in the industrial firms of 3 countries.

Selection and evaluation methods Spain France United States

~~

Ratios Economic index Financial index Mixed index Linear programming Integer programming Dynamic programming Multigoal programming Portfolio models Matrix models System analysis models Checklists Stochastic decision trees Scoring models Multicriteria models Consensus models Graphics

46.7 30.0 70.0 3.3 26.7 8.3 10.0 6.7 8.3 11.7 16.7 21.7 6.7 13.3 10.0 25.0 16.7

73.7 15.8 84.2 7.9 36.8 5.3 7.9 5.3 42.1 47.4 55.3 84.2 55.3 47.4 73.7 84.2 42.1

~

- 92.5 87.5

50.0 12.5 12.5 10.0 32.5

95.0 80.0 95.0 80.0 80.0

-

-

- -

Note: - Not included in the survey

Table 4 Average number of well-known methods by the firms surveyed

Sector 1 Sector 2 Sector 3 Sector 4 Sector 5 Large Industry Small and Medium lnd. Spain France United States

4.70 2.04 1.50 3.17 4.42 4 2 3.31 7.76 7.05

R&D Management 19, I . 1989

66

obtained is similar in the first (20 SMI) and second (40 LI) groups. Nevertheless it is shown that the average knowledge of these methods is less in the SMI (2 methods) than in the LI (4 methods) and the same can be said with respect to the degree of knowledge of the most common methods: indexes, ratios and programming. In the SMI the multicriteria methods and graphs were completely unknown, the quantitative methods still being the better known ones in this group as in the LI group.

This degree of knowledge is not influenced by the majority share or not of foreign capital in the company in question, Thus, whilst in the subgroup of 16 companies with a majority of foreign capital, the average knowledge of methods by the company is 3.32, in the rest this knowledge is 3.33, therefore indicating no difference whatsoever.

The methods most used are also the most quantitative ones, together with qualitative methods such as checklists. No clear difference between the different sectors analysed was observed in this respect. A possible explanation for the preponderance of these quantitative methods may lie in the fact that the research carried out by the companies which were interviewed is primarily concerned with development and

ANGEL MARTINEZ SANCHEZ

to a lesser extent Applied. The small importance given to basic research in the sample of companies studied inhibits the use of these qualitative methods, which are more appropriate in the first stages of research when the absence of precise quantitative data makes the use of methods such as ROI more difficult due to the relative unreliability of these data.

When comparing these ratios of use with those of other countries (Table 5 ) it can be observed that great importance is given to the consensus methods in France and Belgium where they are put in first place in the respective national classifications. In the United States the financial indexes are methods which are most frequently used, as in Spain, but the rest of the methods show much greater use, once again, of the more qualitative methods.

When calculating the average number of methods used by each company (Table 6), the fact observed and worthy of mention is that the ratio in Spain is similar to that of other countries studied. This is different from what was observed in the case of knowledge ratio. This suggests the hypothesis that, in Spain, the methods are basically known by those who use them whilst in other countries a greater preparation in these management themes means that the degree

Table 5 Level of use (96) of R&D project selection and evaluation methods in some industrial firms of 4 countries.

Selection and evaluation methods Spain France USA Belgium

Ratios 35.0 10.5 Economic index 25.0 0 57.5 71.4 Financial index 65.0 36.8 65.0 30.4 Mixed index 3.3 0 Linear programming 6.7 0 0 0 Integer programming 0 0 0 0 Dynamic programming 0 0 0 0 Multigoal programming 0 0 0 0 Portfolio models 0 5.3 2.5 4.3 Matrix models 3.3 5.3 System analysis models 8.3 10.5 37.5 - Checklists 16.7 28.9 37.5 26.1 Stochastic decision trees 0 7.9 32.5 6.5 Scoring models 6.7 2.6 37.5 - Multicriteria models 1.7 21.1 37.5 4.3

71.7 Consensus models 18.3 52.6 - Graphics 5.0 2.6

- -

- -

- -

- - Note: - Not included in the survey

R&D Management 19. 1, 1989

Notes and comments: R&D project selection strategy 67

Table 6 Average number of methods used by the firms surveyed

Sector 1 2 Sector 2 1.36 Sector 3 1 Sector 4 2.33 Sector 5 2.83 Large Industry 2.27 Small and Medium Ind. 1.35 Spain 1.95 France 1.89 United States 2.85 Belgium 2.63

of knowledge is much greater. The use of these methods however depends on factors such as the type of research to be carried out or the type of decisions to be adopted.

In terms of the size of the company the average number of methods used is considerably less in the SMI than in the LI. There is a larger proportion of financial index methods used than the rest of the methods.

Finally, if a subsample is taken of those companies which use methods other than indexes and ratios, the following conclusions can be reached:

In this subsample of 18 companies a greater share of foreign capital than in the rest of the companies can be observed. Indeed, 56% of the companies in the subsample have a majority of foreign capital whilst in the rest only 34% represent this type of company. It therefore seems that there is a positive correlation between the use of more sophisticated methods and the pene tration of foreign capital. There also seems to be a correlation between the level of effort in RSrD (RBDISales) and the use of more sophisticated methods. This subsample shows 3.2% whilst in the rest this percentage is 1.6%. In the same way another measurement of research effort maintains this correlation. In this subsample, 38 people out of every 1000 employees are devoted to R&D tasks, whilst in the rest of the sample only 22 people are devoted to this. In this subsample the percentage of PhDs

4.

(40%) who are directors or technicians in charge of this innovation function is very much higher than in the rest of the sample (22%) which could indicate another possible correlation with the use of more sophisticated methods. There does not seem to be any significant influence in the average age or the number of years devoted to R&D by these people, as both subgroups give very similar results. In the same way there does not seem to be any influence with respect to the existence of the sale of technology and the possibility of patenting it.

ACKNOWLEDGMENT

This paper is based on research supported by the CONAI (Consejo Asesor de Investigacion - Research Fund Board) from the Aragon Regional Government (Dipu- tacion General de Aragon) under Grant CHS 15-85. The author is solely responsible for content.

REFERENCES

Albala. A , , (19XL 'Stage approach for the evaluation and selection of R&D projects. IEEE Transactions on Engineering Managemenr. Vol. EM-22, no. 4. pp. 153-63.

Augood. D.. 119731, 'A review of R&D evaluation methods'. lEEE Transactions on Engineering Management , Vol. EM-20, November. pp. 114-20.

Baker. N.. 11974). 'R&D project selection models: an assessment'. IEEE Transactions on Engineerinn Management. Vol. EM -21, no. 4. pp. lh5-?1.

Baker. N.. and Freeland, J . . (197S). 'Recent advances in K&D benefit measurement and project selection methods'. Manage- men( Science. Vol. 21. no. 10. pp. 1364-7.5

R& D Manogemem 19, 1, 1989

68 ANGEL MARTINEZ SANCHEZ

Ralderston, J.. Rirnbaum, P.. Goodman. R.. and Stahl. M.. (1984). Modern management techniques in engineering and R&D, Van Noslrdnd Reinhold Publishing, New York (USA).

Clarke, T.. (19741. 'Decision-making in technologically based organizations: a literature survey of present practice'. IEEE Transactions on Ei1gineerin.Q Management. Vol. EM-21. no. 1. pp. 9-23.

Danila. N.. (19831. SrrareEies technologiques: methodes devalunrion er de selection des projects de recherche'. Fondation Nationale pour I'enseignement de la gestion des entreprisedlnstitut de Management Public. Paris. France.

D a n k N.. (19851. Prarique francaise des strategies technologiques. Fondation Nationale pour I'enseignement de la aestion des enterprisesilnstitut de Management Public. Paris. France.

EIRMA. (19701, Evaluation et examen periodique des projects, Asmiation EuropCenne pour I'Administration de la recherche industrielle, Paris, France.

For. G.. Raker. N.. and Bryant. 1.. (19841. 'Economic models for R&D project selection in the presence of project interactions'. Management Science. Vol. 30. no. 7. pp. 890-902.

Higgins. J.. and Watts, K.. (1986). 'Some perspectives on the use of management science techniques in R&D management'. R B D Management. Vol. 16. no. 4. pp. 291 -6.

Jackson. R.. 11983al. 'Decision methods for evaluating R&D projects'. Research Managernenr. Vol. 26. no. 4. pp. 16-22.

Jackson. R.. (1983bl. 'Decision methods for selecting a portfolio of R&D projects'. Research Marragement. Vol. 26. no. 5. pp. 21 -6.

Lee. J. . Less. S.. and Rae. Z., (19861, 'R&D project selection: behavior and practice in a newly industrializing country'. IEEE Transactions on Engineering Management. Vol. EM-33. no. 3. pp. 141-7.

Liberatore. M.. and Titus, G . . (19831. 'The practice of management science in R&D project management'. Mariagemerir Scienre. Vol. 29. no. 8 . pp. 962--74.

Mansfield. E., (1981 1. 'How economists see R&D'. Harvard Business Review. November-December. pp. 99- 106.

Saint-Paul. R.. et Teniere-Ruchot. P.. (19741. 'Innovation et evaluation technologiques', Enrreprise Moderne dEditiori. Paris. France.

Souder. W.. (19781. 'A system for using R&D project evaluation methods'. Research Management. September. pp. 29-37.

Souder, W.. and Mandakovic. T., (19861. 'R&D project selection models'. Rerearch Management. Vol. 29. no. 4. pp. 36-42.

Twiss. B.. (19741. Managing Technological I n n ~ ~ ~ u i i o n . Longman Group Limited. London. England.

Rd: D Management 19, 1, 1989

A systematic technique for new product idea generation: the external brain

Jacob Bar

Israeli Industry Center for R&D (I.I.C. R.D.)

Abstract

The author outlines a novel computer-based technique to generate ideas for new products. Essentially t h e technique uses the so-called Dialog databank, claimed to have access to 152 million units of information, to search for all publications in the database which combine a root concept and words such as idea, innovation, novelty, and so on. The computer can then be instructed to print out the titles of a restricted number defined by the searcher from each database accessed. The searcher can then study the contents of each publication at leisure. In principle other similar databanks can be used.

The technique is illustrated by two hypothetical cases: new uses for water and new uses for metal-powder technology.

The author claims that the technique will generate a large number of ideas in a short time at low-cost, can be used selectively (eg to search within a stated time-period), will link otherwise unrelated disciplines, and is well suited to brainstorming. The main drawbacks are that much of the information may be irrelevant, it cannot provide entirely new ideas though it can link existing concepts in a new way, and it cannot print out the total text from an identified source.

INTRODUCTION

The relatively low success rates in marketing new products and the elimination of many ideas for new products during the screening process, (Kotler 1986 and Cooper 1985, Figures 1 & 2), make it essential that a great many ideas are available at the outset of the process. Starting the screening process with a large number of ideas from a wide variety of non-interdependent sources, increases the choice of ideas. as well as the chances of

reaching the market with a larger number of successful products.

The methods and sources of idea generation for new product development have been widely studied by Knut (1985) and others (Adler, 1983; Geschka, 1978; Kamin, 1982; Kotler, 1986). See Figure 3.

Total utilization of the potential of the above mentioned methods to obtain many ideas from a variety of independent sources, is not possible due to practical considerations such as time and money (especially senior executives’ time).

The multitude of existing sources and methods available for new product idea generation on the one hand, and the data explosion on the other, seems to indicate our lack of ability to take advantage of most of these methods and sources in a quick, cheap and systematic manner. This however is not the case! The incredible developments in the field of computers and communications, today enables anyone who so wishes, to access any online databanks, which each contain enormous quantities of data and information of all types, and deal with every topic under the sun. These databanks include a significant amount of the above mentioned sources for new product ideas.

How Does The Technique Operate?

The new product idea generation technique described in this article is based on Dialog’s databases, but can be easily adapted for use with other databanks such as BRS, Newsnet, Easynet, etc.

The Online Database Industy

There are approximately 500 databanks throughout the world, containing approximately 5,OOO databases. With the aid of a

RRD Management 19, 1 ~ 1989 69

70 JACOB BAR

Number of

surviving ideas

1 Cumulative time

Figure I Decay Curve of New Product Ideas

Idea

+ Screening & evaluation 1

I Product development I

Commercialization

Figure 2 Major New Product Developmen1 Steps

personal computer {or terminal), a modem, and a telephone line, one can access these databanks. Using the language of a specific databank (each has its own language), one can ask questions and almost instantly receive selective data and information on

any subject. The Dialog databank, (described in this article), contains in excess of 152 million units of information, covering a broad scope of disciplines: from directory type listings of companies, associations or experts, to in-depth industry reports, confer-


A systematic technique for new product idea generation

Internal Sources: External Sources:

Company's sales force & staff Customer complaints & suggestions

* Company's distributors & agents Competitor's customers & employees

* Analysis of various sales data

Brainstorming Delphi method Scenario analysis

* Value engineering &analysis Focus group interviews

* Scientific, industrial publ. Trade magazines Patents Scientific & trade shows

* Experts & consultants Competitors products & publ.

* Inventors * Trade & professional assoc.

Government sources * Universities & research inst. *

' Newspapers * International publ. sources

Doctoral diss. & master's thes.

71

Figure 3 Possihle sources of ideas for new product development.

ence papers, patents, trademarks, journal articles, new product announcements, trade magazines, market, product and consumer

information, scientific articles and books, government reports, etc.

Online lnformation Retrieval System

~~

Company Annual Reports journals

Encyclopedias Patents Conferences Government Documents Dissertations Reports Reviews Statistics Market Data

\ I Books Chemical Formulas I u, Modem

Communication Network


72 JACOB BAR

64 of the 400 ideas generated appear below. Below is an example of online searchprint

out. The boxes contain explanatory information from the author.

Using Dialog, a search was performed in 4 of the 100 possible (suitable) databases. These databases included information on: patents, trade journals, science and technology. Due to lack of space, the titles of only

CASE STUDY 1 : What else can be done with water

Date and time 13may8.9 12:23:30 Userof1284

Bcgln 8 13 1 4 8 350 Instruct computer to access 4 databases containing information on patents, trade journals, scientific

5ystem:OS - DIAL017 Onesearch Fllr! 8:COMPENDEX PLUS - 70-88/Hhl l

COPR. ENGINEERING INFO INC. 19RR)

it has accessed the required 4 databases (files)

FLIP l3:INSPEC - 77-08flSSlO (COFR. IEE 1988)

ille 148sTRADE AND INDUSTRY INDEX Ol-S8/APR (COPR. I988 IAC)

rile 350:voild patenti Index. 1963-1980 EQUIVALENTS TIIRU DV-8809

Computer is instructed to search (s) for all publications containing

title (ti). The ?

Set Items Desctlptlon _ _ _ ____- _ _ _ _ _ _ _ _ _ _ - ' s ( {deal ?+ldea7+bypr oduct ?+ptonecr 'ft lnnovd t 7+saphls t lea tltsuqqcs t lon?+top) It I ; s(succc~s~tqrcatcr+tnvent?+new+super~or?+n~vclt?+unIque?+valuablc+ellte~/tJ: 3( blqgc~t+breakLhr0uqh7+best?? 7+alqnl f 1cdnt7 +recent trevolut lon7tbe t t er )/t 1 :

s(adapt?+addl tional7+unused+usaqe+posslbl1?rposslbl7 +potent ial?+sul t ? )/t 1 : ~(altcrnatlv~?+aneviappllcat?~applledtapply7+dlveri~~lcat?+development?)/tl:

s 351nh+37+sn439

~ ( p l o n c c r ? + a d v a n c e ? + a d v a n t a q e ? ~ a t t r a c t l v e ? t p ~ ~ f c c t ~ + n l n ~ ~ 7 7 ?+uscEul7)/tl: S sl+sZ+S3rS4

s (benc~ l t7+beyond7+modl t l ca t7+opportun7+end7) / t l : a(cholcc?+complcment?+usc? ?+utlllt?~utIlIr?+orlqlnal7+v~y? 7ihandl?)/tI:

Sl 52366 (lDEAL7+IDEA?+BYP~ODUCT?+PIONEER7t~NNOVAT7+SOPHlSTlCAT?+SUGGE- STIONItTOPI/TI

82

6 3

54

55 8 6

S?

FR

59

259199

17035

1sa6e3

501087

JOOISR

129875

51012

330632

I (SUCCESS7+GkEATER+INVENT7+NEV+SUPERIO~?+NOVELT?+UNI~UE7tVALl IA- BLE+ELITE)/TI (BICGEST+BREAKTHROUGH7+8EST?7 ?+SXGNIFICANT7+RECENT+REVOLUTION?bBETTER)/TI (P IONEER7+ADVANCE7+A\DVAN'ThOE7+ATTRhCTI?+PERiECT?+WlN77?7

I ? + U S E i U L 7 ) / T I Sl+SZ+S3+S4 (ADAPT?+ADDITIDN~L7+UNUSED+USAG~+PO8SIBlL?+POSSl8L?+POTENTlAL ?+SUITII/TI

I (hLTEIINATIVE?+AN6V+hPPLICAT7~At'PLIED+APPLY7 +UIVERGliIChT?*DEV ELOPMENT7)/TI ~BENEiIT7+BEYDND7+MD~IF~CAT7~QPPORTUN7+0PTIC~N7+~ROPOShL7+RECD

I nnrno?)/rI (CHOICE7tCOMPLEMENT7+USE7 ?+UTILlT?+UTILIZ7bORIGINAL7+VAY7 ?+llANDL7)/TI

Computer performs search and indicates number of records in each group. For example, in line SI. the computer found 52366 publications containing the 'root' words IDEA, IDEAL, etc. in their titles.

R&D Management 19.1, 1989

S10 122710.9 S5+s6+s7+s8bsP

73

Computer found 1, 227, 188 publications dealing with the IDEA concept in their titles.

811 141572 WATERIT1

753 u a t c r / t l and sl0

Computer instructed to search the word WATER and finds 141, 572 information units containing the word.

Computer instructed to combine the publications containing the word WATER and IDEA

dealing with the concept of

S 1 2 19652 'WATER/TI AND S10

titles from each database (file) accessed.

'ttl2/6/1-50 from each

200 requested) dealing with the different uses of water. Each title represents an idea

'* FUEL FAOH WATER? NEW BREAKTIIROUGH BRINGS DAY CLOSER: TEXAS RESEARCHERS DEVISE MORE EFFICIENT UEANS OF PRODUCING HYDROGEN FUEL.

n * CONTROt.LING AIRCRAFT ENGINE EXllAUST NOISE - BY PltHPING IlIGIl PRESSURE WATER UP INTO EXllAUST GASES IHHEDIATELY ADJACENT ENGINE EXHAUST.

'* POLARISED WATER PRODUCTTON APPARATUS - FOR USE IN AGRICULTURE AND BIOLOGY '* BOTTLING HINERAL WATER IN SPRAYER FOR THERAPEUTIC USE - USING PRESSURE

CnRATED BY NITROGEN CONTENT.

* * APPAIlATU5 SUPPLYING WATER AT CONSTANT PRESET TLUP. FOR HEDICAL USE.

USE IIYDIIAULIC TIJRDINE TO RECOVER ENERGY FROM CIRCULATING WATER (FROU TIIERPIAL FOYER STATION).

*' A NEV WAY TO EXTRACT BOUNTY FROH THE BRINY. (USINU OCEAN TEHPERATURE DIFFERENCES TO nlrm ELECTRICITY AND F R E S ~ I VATER).

* " UNIQUE NEW WATER FILTERS FIND NICHE IN IIOUSEVARES.

* * WATER VAPOR IHAGERY: A NEW OBSERVATION FOR WEATMER ANALYSIS.

PREPARATIVE WATER FOR THAWINU. WASHING ETC. SHELL FISH OR FISH - CDHPRISES ACIDIC SOFT VATER OPTION VITH EDIBLE SALT TO IHPROVE FRESHNESS AND APPEARANCE OF FISH.

** CONTINUED DEVELOPMENT OF A COAL/WATER SLURRY-FIRED SLOW-SPEED DIESEL ENGINE: A REVIEW OF RECENT TEST RESULTS.

'* USE OF WATER PRODUCTS IN THE PRODUCTION OF CERAUIC HOLDS USINQ PERIIANENT PATTERNS.

* * USE OF SEWAGE WASTE IN WARN WATER AQUACULTURE.

** CDI'IPUTER AIDED DECISION HAKING IN WATER RETENTION AND ALLOCATION.


74

i17.18) M r r A L / ' r i 2 8 0 4 7 POWllEll/TI

JACOB BAR

founded in the 4 databases accessed.

'' F I B E R OPTICS OFFERS NEW TEST FOR POLLUTANTS. (OPTRODES CAN TEST GROUND WATER FASTER. M R E ACCURATELY)

* * WATER V I S I O N I COnPUTERS MAY ENABLE UNMANNED UNDERWATER VEHICLES TO SEE BETTER.

'*.' AN INNOVATIVE SOLUTION TO POTh8LE WATER PROBLEMS.

NEW SOLAR RlSTEM FOn WATEn TlIERM~lI.YRIS WITH A I l I G l l RNERCETIC Y I E L D .

HYDROMCCIIANICAL VARIA8LC-FTRflKE MCCHANIBH TOR WATER-PUUPINO WIND-TURBINES.

OPTIMAL USE AND THE VALUE OF WATER RESOURCES I N E L E C T R I C I T Y GENERATION.

DEVELOPMENT OF A DEEP WATER H I G H SPEED RETRIEVABLE INSTRUMENT SLEDGE.

PERFORHANCE OF CONVENTIONAL AND ADVANCED WATER SCRUBBERS FOR CDNTROLLING UNDtR(iI lUUNU D I E S E L BXHAUSI EHISSIONS.

NEW GENRRATION UF WATER nASE0 Tl l ICKENRR.

NEW PRO.lErT KEY TO S n t V I N 9 CITY'S WATER PRODLEU.

SUPPORTED L I Q U I D MEHORANE TECIINOLOGY APPLIED TO THE RECOVERY OF USEFUL ISOTOPES fRon REACTOR e o o L W A T E R .

HARRY O'I lAlIE HOPES TO TIlRN WAT'ER INTO COLD: TY-0-OOL INVENTOl l PLANS TO TAKE ON n r s GUYS VITII NEW FILTRATION METNOD.

CONSIDERATIONS FOR CONVERTING AN INDUSTRIAL BOILER TO COAL-WATER FUEL F I R I N G .

TIIEnHODYNAliIC PROPERTIES OF I .1Tl l I l lM BROMIDE/WATER SOLUTIONS.

CUTTER WITH HELICAL DLADES FOB SUCTION DREDGER - HAS ARRAY OF NOZZLES ON EACll BLADE EJECTING PRESSURISED J E T S OF WATER DIRECTED AT S O I L TO BE UREDCED.

I I T I L I S h T l O N OF E A l I l l l l tAUIATIOt1 - t*llCJVlllEG I 'ERIOl f ICAL WATER HOVEWENT V l l l C l l CAN BE USED FOR POVEn OENBllATlON AND OTllER YIJIIPOSES.

TOY POKER GAME - FOR USE I N VATER.

USE OF UOTOn VEI I ICLES ON VATEn

CASE STUDY 2: How can we use metal powder technology??

Computer instructed to search 1 1 the words metal powder with : I s (metal? and pouder)/tI and s 1 D IDEA concept. 61 2 items were

~~

* * APFLICATlON Or POWOCll METALLUROY TECl lNIOVC TO PRODUCE IHPRVVED BbARlNO ELEWENTS FOR CRYOGENIC AEROSPACE ENGINE TURBOPUMPS.

* * X-RAY SHIELDING HATERIAL - COHPRISING UETAL (CPD.) POWDER-FILLED RESIN, UEErUL TOR BHICLDINO IC AND Ot'TICAL IIRRC C O H P O N ~ N T 9 i INTEGRATE C I R C U I T ,

b * POWDER- METAL AREAS O r TECIINOLOGY.

FORGING UP HEAVY-DUTY COMPONENTS FOR APPLICATION I N VARIOUS

R&D Management 19, 1,1989

A systematic technique for new product idea generation 75

rOLOl lREII ALUMINIIJM PIGMENTS PREPARATION UBCTVL I N COSMETICS - COMPRISES D I P P I N O Al.UMlNI l lH (COATED) POWDER I N WEAK A C I D OR SOLUTION CONTAININO UETAL SALT6 CTC.. AND OPT. APPLYING WATER-REPELLINO TREATHENT.

DRESSING OF CHROME LEATIiER - INVOLVES PIGMENT TOP COATING PREPARATION FROM PIGUEtIT. METAL POWDER AND AQ. ETHYLENE GLYCOL T R I - A N 0 TETRAMETl lYLAMINE(SJ.

COMPOSITE METAL TURBINE USES POWDER COPPER ALLOY.

USE OF POWDER METAL PARTS IN EXCAVATOR HYDRAULIC CYLINDERS.

METAL n A T n I x COUPOSXTES BY P o w n t n METALLURGY.

ALUMINUM POWDER- METAL ALLOYS OFFER UNIQl lE PROPERTY UIX.

NEW POWDER UETAL TECHNIQUE INCREASES B A L L BEARING UESIGN F L E X I B I L I T Y .

UFG. WOODEN HEAT INSULATING WINDOW SASH USING A COMPOSITE UATERIAL OF ALUMINIUM OR OTllER METAL POWDER.

PRODUCTION OF AMORPHOUS S I L I C O N N I T R I D E WHISKERS OBTAINED FROM ITS POWDER MIXED WITll IRON. NICKEL, OR COBALT AND S I L I C A , USEFUL FOR I lRINFORCING ALUMINIUM METAL,

FORMING REFLECTIVE F I L M USEFUL FOR TRAFFIC SIGNALS BY COATING E . C . METAL W I T l l R E S I N IlNDERCOAT CONTAINING ALl!MINIlJM POWDER AND THEN COATING WITH R E S I N CONTAINING GLASS READS.

NEW PRODUCTION PARTS FROM METAL POWDER.

POWDER METAL GEARS PUT NEW TEETH I N PT DRIVES.

TAKE A POWDERI ( INCREASED INDUBTRIAL USES FOR POWDERED METAL) .

1NVESTIGATION OF A COMMERCIALLY AVAILABLE CHEMICAL POWDER FOR EXTINGUISHING L I Q U I D METAL POOL F I R E S .

TIIE BENEFITS OF COMMEnCIAL1.Y PURE WROUGllT POWOEn METALLURGY ALLOY STRIP IN LITII~UM n h r T E n Y ANU NICKEL chlrnlun ENEnGY SYSTEMS.

TIIE DEVELOPMENT OF METAL POWDER FOR MAGNETIC RECORDING.

POWDER METALLURGICAL INNOVATIONS FOR IMPROVED I IOT-SECTION ALLOYS I N AEROENGINE APPLICATIONf i .

POWDER METALLURGY GIVES UNIQUE CONCEPTS.

APPLICATION OF f lETALLIZED ALUMINA POWDER FOR I IEATER.

POWDER METALLURGY APPLICATIONS TO ALUMINIUM ALLOYS.

PRODUCTION OF REFRACTORY COMPOIIND MATERIALS FOR ELECTRONIC ENGINEERING APPLICATIONS BY THE POWDER METALLURGY METllOD.

U T I L I Z A T I O N OF SPACE BHUTTLE EXTERNAL TANK MATERIALS A Y MELTING AND POWDER IlETALLURGY.

T I T A N I U M POWDER METALLURGY-PRODUCT6 AND APPLICATIONS.

STRUCTURE L PROPERTIES OF NEW STAINLESS STEELS. h NEW IIIGH SPEED STEELS PRODUCED BY POWDER UbTALLIlRGY TECHNIQIUEB

NEW NQRIEONS I N ALUMINIIJM POWUEII METALLIIRGY.

T I T A N I W POWDER METALLURGY--PRODUCTS AND APPLICATIONS.

POWDER METALLUROY AND IT6 ROLE I N DEVELOPING NEW MATERIALS.

7 cost

11nqm 13:35r47 u n c r 0 1 4 2 8 4 9 1 5 2 . 4 5 Estimated t u t a l sesslon c o a t 1 .058 l l r s .

Search completed at 13.35 p.m. 1.058h after commencement of search. It cost $ 152.45. Approx. $95 must be added to this figure to cover communication expenses (from Israel to USA). Total $247.45.

If more than just a title is required, the computer can be instructed to print an


abstract of the article, patent etc., (see Figure 4), or in certain instances, full text.

76 JACOB BAR

(Item 2 7 from f i l e . 1 3 )

Tl lE DEVELOPMENT OF HETAL POVDER FOR MAGNETIC RECORDING AKASHI, G. LABS. OF HAGNETIC RECORDItlG. F U J I PHOTO F I L H CO. LTD. . KANAGAVA. JAPAN

FERRITES. PROCEEDINGS OF THE I C F 3 . THIRD INTERNATIONAL CONFERENCE ON FERRITES 5 4 8 - 5 2 1982 PUhl : R E I D E L . DORDRECAT. NETHERLANDS Document Type: CONFERENCE PAPER Language?l: ENGLISH FERROHAGNETIC METAL POWDER I S SHOVN TO B E ACCEPTABLE FOR HAGNETIC RECORDING. VARIOUS KINDS OF PREPARATION METHODS PROPOSED SO FAR ARE B R I E F L Y REVIEVED. AND TAKING THREE TYPICAL METHODS: ( A ) HYDROGEN GAS REDUCTION OF ICULAR IRON OXIDE: ( E l SODIUN RORGHYDRIDE REDUCTION OF FERROUS I O N I N THE ESENCE OF UAGNETIC F I E L D . AN0 ( C ) CONDENSATION OF VAPORIZED RETAL I N THE V PRESSIJRF. INERT GAS ATMOGPMERE I N THE PRESENCE OF MAGNETIC F I E L D I WPAllEO I N THEIR CHARACTERISTICS FOR MAGNETIC RECOllDING MEDIA. METHOD ( A ) Tl lE MOST PROMISING RECAUSE I T S COST AND HAGWETIC PRdPERTIES ARE I N GOO0 LANCE. METHOD ( C ) HAS PARTICl lLhA ADVANTAGtP. I N ITS LOVER NOISE LEVEL AND CELLENT S T A R I L I T Y AGAINST OXIDATION BUT ITS PRESENT HIGH COAT HUST BE DUCED DRASTICALLY. METHOD ( B ) HAS AN ESSENTIAL COST PROBLEM AND THEREFORE MAINLY USEFUL ONLY FOR EXPERIMENTAL PURPUSES.

WATANABE. I{.: IIDA. 5.: SUGIHOTO. n. ( E d i t o r s )

Figure 4 Abstract of article

Principles of the Technique

As this article is intended for decision makers involved in product development, who will not perform the online search themselves, I have not gone into detail regarding the search techniques involved, but I will mention that: choice of the most suitable files for searching, and the search method are based on the MMS approach (Multifile Multidisciplinary Search approach). (Bar) The search can be vertical, i.e. in databases containing data and information (from various sources), in one specific field, e.g. medicine only; or horizontal in databases containing data and information from a variety of disciplines, e.g. medicine, agriculture, defence.

The search for ideas can also be limited to specific sources such as: patents, scientific conferences, new product annoucements, trade journals, etc.

Use of this technique requires the presence of a professional with extensive experience in searching online databases, especially using the MMS approach. He/she should also have a broad education and a good imagination. In addition to the information specialist, people involved in marketing and R&D should be present during the search, (or an interdisciplinary contingent invited by the plant), in order to guide the searcher and conduct discussions during and after the search. This technique is also recommended for companies who search for new

product ideas using group techniques. (Davies and Pearson, 1980)

Advantages of the Technique

1.

2.

3.

4.

5.

It is possible to obtain a large number of good ideas within a very short time and at relatively low cost. This technique can be used systematically to obtain new ideas. By entering a suitable command into the computer, only new and up to date items of information will be selected. Thus the decision maker can receive a preselected list of abstracts containing the latest ideas in his specific field, once a month, on his desk. A large variety of possible sources of information are used simultaneously for idea generation, something which was not previously possible using conventional sources. New applications for technologies and products can be found in disciplines which would otherwise not have been contemplated due to the individual's inability to deal with areas not connected to his field of expertise; e.g. technology based on IR radiation in the field of agriculture. The large number of ideas which are usually obtained through this method can be limited to a very narrow pre- defined technology, such as ISDN technology in the field of building.


A systematic technique for new product idea generation 77

6.

7.

8.

9.

This method facilitates immediate independent accessibility from the office desk to the opinions and ideas of many experts from several countries without any form of interdependency. It offers us the opportunity to assess the ideas objectively, without the presence (and possibly influence), of the idea generators themselves. The continuous flow of ideas during the thinking process creates synergistic and associative effects which increase creativity. When this system is used for brainstorming, the entire process can be made more efficient, quicker and cheaper. Use of computerized databases enables one to perform the following either before or after the new product idea search: ** Quick initial screening of ideas in

order to make Go- No Go decisions, as regards market size, competitors, patents, expected GM, chances of success/failure, technological fore casts, etc;

** Locate experts in a very specific field, consult them, and acquire their services for further idea generation (where necessary);

** Locate technology transfer suppliers or technology components in order to complete the R&D process.

Disadvantages of the Technique

RLD Management 19, 1, 1989

1.

2.

3.

As a result of the method of online searching, from time to time some of the information included is irrelevant. Ideas generated throughout this technique stem from ideas which have been publicized ehewhere prior to the search, either as a journal article, a conference lecture, or a patent etc. It is not always possible through online searching to reach the most detailed sources of ideas (full text), and one has to make do with titles, bibliographic references, or at best, abstracts, This necessitates further efforts to obtain a photocopy of the original; a process which might involve some delay.

SUMMARY

The proposed technique is not meunt 'to invent' new items, (such as Edison's light bulb), but rather to make efficient use of existing human knowledge, in order to obtain ideas which otherwise would not have reached those that need this knowledge, due to their inability to deal with the enormous amounts of information produced.

Idea generation with the proposed technique is not 'free standing', and represents only part of a process. It can only be properly used once the following steps have been taken:

Identification of the needs not fulfilled and/or problems of potential users (locate the most promising markets and products). Establishing criteria for introducing a new product or applications, and identifies areas of opportunity that are compatible with those parameters (Gag- liano), such as: Coal parameters: Revenue/volume, return on investment, profit, general programme and development time. Implementation parameters: List of a company's assets and limitations, investment/development/money available, technical/physical capabilities. Policy parameters: How a company runs its business, corporate fit, qualityhmage, market, etc.

Only after the above has been performed, is it possible to successfully use the proposed technique.

Initial trials recently conducted by the author have indicated that it is possible to perform early identification of promising products and markets using online databases, and to then apply this technique to the resulting information.

BIBLIOGRAPHY

Adler. I-. (198.71. 'Using Marketing Research t o Explore for Excitinu New Product Ideas'. Sales & Marketing Management. Vol. 130 no. 5 . pp. 126- 130.

Bar. .I. (in press). 'The Multifile Multidisciplinary Search approach: lustification and Principles'. Online Review.

78 JACOB BAR

Methods'. Research Managemenf. vol. 21. no. 3, pp. 25-28. Kamni. J . R . (19821. 'Idea Generation (Chapter 21 - How to

Manage the New Product Development Process'. American Management Associations Extension Institute Self Study Course. pp. 15-32.

Knut. H. ( 1985). 'Userilriented Product Innovation: Some Research Findings', technovation. vol. 3. pp. 199-208.

Kotler. P. ( 1986). Principles of Marketing, 3rd edition. Prentice- Hall. Englewood Cliffs. N.J,

Cooper, R. G. (1985). 'Selecting Winning New Product Projects: Using the NewProd System'. J . Prod. Innov. Manag., vol. 2. pp. 34-44.

Davies. G . R. and Peanon. A. W. (19801. 'The Application of Some Group Problem-Solving Approaches to Project Selection in Research and Development'. IEEE Transactions on Engineering Management. vol. EM-27. no. 3.

Gadiano. C. C. (19851. 'How to Mine and Refine New Product Ideas'. Business Marketing, November. pp. 102- 11 1 .

Geschka. H. (,1978). 'Introduction and Use of Idea Generating

R&DManagement 19, 1, 1989

The state of the art in R&D management

Report of a conference to mark the 21st Anniversary of the R&D Research Unit of the Manchester Business School.

This conference under the title ‘State of the Art in R&D Management’ was convened to mark the 21st Anniversary of the establishment of the R&D Research Unit of the Manchester Business School, Manchester, England. The intention was to provide an opportunity to take stock of the progress that had been made in the theory and practice of R&D management since the inception of the Unit.

A total of 24 papers covered a wide spectrum of activities within the fieId of R&D Management grouped under the sub-titles of Formulation, largely concerned with strategic issues, on the first day, and Implementation on the second. Because of the diversity of the topics this report cannot do justice to the individual papers and will confine itself to some general conclusions. A selection from the papers will be published in later issues of the journal, beginning with the Single Topic issue in April this year.

Two themes ran throughout many of the papers

- Many of the problems which were evident 21 years ago remain of current concern and are to a large extent unsolved. The volume of research and the interest in R&D management has been growing strongly throughout the period,

At first sight these might appear to be discouraging conclusions. However, this was not the general tone of the conference. There was a feeling that the subject as it ‘came of age’ was reaching a stage of mature growth based upon a greater perception of the nature of the problems. Some of the enthusiasms of youth, such as the emphasis placed upon sophisticated evaluation models in the earlier days, had now passed, to be replaced by a deeper understanding of the complexity of the issues.

A number of papers dealt with the strategic management of R&D. In recent

-

years there had been a growing concern with strategic issues and the role of technology as a business resource, although in many companies the integration of R&D into this process was far from accomplished. Even when this is achieved it is no guarantee of successful implementation. One speaker illustrated this with two cases from successful Canadian companies where they mis-diag- nosed the complexity of technical change and the interdependency between sub-technologies; he put forward the idea of a technical audit to establish the credibility of the initial plan. Whilst there was a general agreement on the need for a strategic approach, there was also a sense of uneasiness about the constraints which it might impose upon the R&D departments.

This was exemplified by the case of one company which maintained a clandestine development after it had been formally abandoned for strategic reasons, only to achieve success at a later date when the corporate needs had changed. This debate underlined the need for future research into the interface between strategic planning and technical judgment, both highly desirable, but not always totally compatible.

One possible way in which this gap might be partially closed was indicated in a paper discussing the history and evolution of the UK Government’s Programmes Analysis Unit in relation to public policy. Initially the emphasis had been placed on the development of evaluation techniques to determine an optimum policy. This evolved into the presentation of quantified options to the decision maker who was left to apply his own criteria, often judgmental, in his final selection.

The strategy literature and many of the papers imply that the purpose of a technical strategy is to serve the needs of the corporate strategy. However, this dependent role may not lead to the best utilisation of the corporate potential of technology. Consider- ation of the ‘technological trajectory‘ and

R&D Management 19. 1 1989 79

80 CONFERENCE REPORT

the term technology transfer which is now used to describe the internal transfer within an organisation, for example between design and manufacturing.

Most of the papers were presented by academics. Two interesting exceptions were the application of social engineering to the redesign of Unilever’s Port Sunlight Laborat- ory in the UK and the establishment of joint ventures to commercialise stagnant technologies. The absence of more papers of this type may reflect a weakness in the direction and dissemination of research in this area. It would appear that relatively few industrial managers are aware of the findings of this research. The research itself can be typified as analytical or ‘looking at’ from the outside. Because of this there seems to be a lack of knowledge transfer from academia to industry in R&D management. One consequence of this is the small amount of industrial experimentation in new approaches. The sequence of analysis, hypothesis and experimentation does not seem to be applied in R&D management research. This cannot be accomplished without the cooperation of individual managers, which is unlikely to occur if they are unfamiliar with the state of the art in the subject. Perhaps this is another direction in which effort should be devoted in the years ahead, for industry must be the laboratory for management research.

Although not a major focus for this conference, there were several references to the environment in which R&D is conducted. A number of factors point to the increased need for effective R&D management - the growth of international competition, the pressure on R&D budgets, and the increasing costs of product and process development. One aspect which has received little attention was raised by Alan Pearson, Director of the R&D Research Unit, in his opening speech. This is the impact of demographic trends on the supply of scientists and technologists in the 1990s. He suggested that this problem could be alleviated by the recruitment of more women and the extension of the working life of older researchers.

The R&D Research Unit at the Manchester Business School was one of the first institutions devoted to the study of R&D management. This latest in a series of successful conferences provided all research-

what one speaker termed ‘re-innovation’ indicates that the imperatives of technological development can lead to the formulation of an R&D strategy which is derived from a consideration of the inherent opportunities provided by technology. Thus the desirable end may be a marriage of these two independent streams of thought, the corporate and the technical, to serve a common end. This is another area where future research might fruitfully be directed.

Whilst the interest in strategy is of growing concern the emphasis placed upon research into the problems of implementation has varied over the years. An analysis of the topics covered in the journal RhD Manage- ment 1971 - 1987 revealed some interesting variations in emphasis over this period. Although publication can be taken as an indication of research activity in the various areas, it was less likely to present an accurate reflection of their importance. Two examples of this were project selection and project management, in which the number of articles has decreased considerably. In the words of the speaker, ‘This is not, we might add, the result of all the problems being solved. The problems retain their importance in many people’s eyes. Rather, the problems are very difficult and are in need of a creative break through’.

Several of the papers indicated one possible area where this breakthrough may already be occurring. Much of the early research was conducted within a narrow or single discipline field - strategy, quantitative techniques, creativity, organisational theory, or the management of teams or individual professionals. But the problems are too complex to be confined to one area, they are multi-disciplinary and an holistic approach is needed. A number of speakers used the word ‘integration’ in a variety of ways: the integration of corporate and R&D strategy, the growth of internationalism, the breakdown of functional demarcations, or responsiveness to the market. To some extent this need to integrate was reinforced by rapid communications based upon information technology, and it was suggested that the impact of I.T. on R&D was a field requiring research. These changes in approach were reflected in the meaning and importance nowadays attached to the use of


The state of the art in R&D management

em in the field with a valuable opportunity to take stock of progress to date. The review papers indicated how the subject had evolved, the research papers presented the findings of recent work, but perhaps more important was the realisation that there remain challen- ging problems to address. The main con-

81

clusion from this conference is that for the future R&D management research should build upon the work of the past 21 years, but rather than follow past patterns in greater depth, it should also seek new and wider perspectives.

BRIAN C . TWISS

R&D Management 19, I , 1989

Book Reviews

Managing New Product Innovations Wm. E. Souder, D. C. Heath, 1987.

The author has been involved in research on the management of research and development for many years. In this book he draws upon information from 289 innovations within 53 firms which were studied over a ten-year period by interviews and by questionnaire, the aim of the work being to produce an approach to managing new product development which would improve the likelihood of success.

The scene is set by a rather general and very short chapter titled ‘The Concepts of Innovation’. Most of our readers will be very familiar with the statements made here and will quickly skip through it. Chapter 2 describes the database used and the approach used in the research study. Chapter 3 looks at three historical cases in some detail, namely hybrid seed corn, longwell coal mining, and water-jet cutting. Again many of our readers will be familiar with these, but will certainly find the presentation and analysis of interest and worth reading. There is also no doubt that they provide some very interesting insights into the innovation process and could be very useful for class teaching. Not unexpec tedly, a major conclusion is drawn that ‘they illustrate the importance of multiple persons playing many roles throughout the processes of innovation’.

Chapter 4 looks at cost and duration, Chapter 5 at the causes of project success and failure, and Chapter 6 at organising for new product innovation. In Chapter 7 the discussion is widened to embrace climates that stimulate innovation.

Chapter 8 is titled ‘Picking Winners’ and looks at the areas of project selection, with most of the commonly-encountered methods being mentioned, e.g. checklists, prioritising and portfolio models. Chapter 9 progresses to a discussion of the topic of managing new product innovation projects and focusses primarily on structures for improving the effectiveness of the process. R&D/Marketing interface issues are introduced in Chapters 10 and 11. Chapters 12 and 13 deal

respectively with Technology as a determinant of project success, and Techno- logy Transfer: from the lab to the customer.

The final chapter attempts to summarise the findings in a conveniently useful form for innovators, managers and students of innovation processes. In practice, ten principles ‘are presented as guidelines on the best state-of-the-art’ and it is argued that ‘practising them well will significantly increase the chance of success. As one might expect, these are of a very general nature and in no sense could be said to be surprising. For managers, as distinct from students, of innovation this must be the key point, and there is no doubt that some of the suggestions made in the book could be very helpful. However they are probably difficult to translate into practice.

In short therefore, an easily readable and self-contained book, surprisingly not drawing upon other innovation research which the author knows well, but making a number of useful and practical points which managers need to be aware of.

A. W. PEARSON

Managing Product Design, Mark Oakley, Weidenfield & Nicholson, 1984, hardback, €1 1.95, paperback €4.95.

It would seem appropriate that at a time when Government and the CBI, along with other commentators are criticising the training of management on one hand and extolling the virtues of good design on the other, that a book should be written on the Management of Design.

The book clearly outlines the methodology of design and goes a long way in dismissing the myth that ‘design’ is a single discipline that can be neatly put into an academic pigeonhole. It rightly stresses the numerous inputs from a variety of sources and the need to recognise the necessary interaction between design and the other manufacturing inputs when devising a management system.

The book is written with both engineering

R b D Management 19, 1 , 1989 83

84

undergraduates and practising engineers in mind and in the main succeeds in fulfilling the two requirements. Certainly engineers studying on MBA Programmes should be aware of the necessity of managing design alongside production management, finance management and other management systems. Undergraduates will benefit from the details of design case studies, although a few pictorial examples would have enlight- ened the text. It also goes into some detail, explaining the position of design in the product cycle, something undergraduates do not always appreciate. Practising engineers will benefit from the examples of Venture management compared with ‘Production Process’. All too often the sometimes subtle differences between the processes and the people involved in these processes are either not recognised or are ignored, leading to a breakdown in communication or, even worse, impossible constraints on the design specifications.

I was less than happy with the references to Industrial Designers as the ‘artistic’ input. Industrial Designers’ courses and Enginee- ring Design courses have developed considerably in the last few years to an extent that there is a great deal of overlap and certainly the idea that Industrial Designers only put ‘artistic touches’ to the design is somewhat out of place.

However, passing over this minor point I found the book well written and informative and would recommend it to anyone involved in the process of design.

R . RUE

BOOK REVIEWS

11, the International Development Research Center (Canada) has become and additional sponsor.

The main purpose of the Programme is to examine in detail the standard assumptions by economists studying the processes of industrialisation in developing countries - (a) that a stock of technological knowledge

exists in the developed world, waiting to be ‘poured’ into less developed countries and

(b) (as a complement) that recipient societies would respond in a virtually passive manner to the injection of new technological knowledge.

The first part of the book deals with the state of theory of innovation, including the neo-classical and ‘innovativethrough-search’ models as well as more recent search models in which a random outcome is assumed. R. Nelson concludes that the assumption contained in most search models, viz. that the set of all possible searches is known, together with the probability distribution of outcomes, is one that hinders progress towards real understanding. To the extent that technologies are tacit, firm production sets are blurred; to the extent that imitation is substantial, the idea of an industry-wide production set whose elements are accessible to all firms is a misleading abstraction; to the extent that technologies are not sharply defined, invention possibility sets are misleading, and the interaction between learning through R&D and learning through experience is essential to the invention process.

The second part is a group of case-studies, on individual firms (steel plants in Argentina, Brazil and Mexico; a rayon plant in Argentina; and two petrochemical plants) and on industries (the Argentine cigarette industry, the Argentine construction industry, and the cement industries of Argentina and Mexico) and, on the macroeconomic scale, Peruvian industry as a whole, and the Argentine experience of selling industrial plants and engineering expertise internationally.

The two papers in the third part attempt to draw some theoretical sense from the significant features emerging from the case- studies. The main obstacles to applying

RdtDManagement 19, 1 , 1989

Technology Generation in Latin American Manufacturing Industries, Jorge M. Katz (ed,) Macmillan Press, 1987, PI xi+-549 diagrams, €40.

Sixteen papers by nineteen economists and engineers in all, present case-studies and anlyses developed mainly in Stage I (1975- 78) of the Latin American Research Programme on Science & Technology. This was sponsored by the Inter-American Development Bank, the Economic Commi- ssion for Latin America, and the United Nations Development Programme. For Stage

Book Reviews

conventional theory to less developed countries are the amount of technical innovation generated within the firms themselves, high degrees of national instability, and higher-than-wanted technological search efforts being made as a consequence of unduly low pay for skilled labour, which could result in over-extended lifecycles of outmoded plant.

The main conclusion arising from Phase I is that it is not yet possible to produce a theoretical model of the workings of the firms and nations investigated by the Programme. However, some theoretical ‘building bricks’ have been set down, and these should open up future paths for research leading towards some uniformity of analysis.

The book concludes with a list of fifty- seven working papers - the first individual studies to be published as a result of the Programme.

For a book so full of technical data and literature references, the index is scarcely adequate, and should have been split into subject and author indexes.

K. E. JERMY

a5

Managing Financial Resources, 4. Legal and Social Obligations, 5. Marketing Products and Services, 6, New Ventures and 7. References and Bibliography. The first chapter on organization provides an interesting historical view of the major innovators in engineering management such as Frederick Taylor and Frank Gilbreth in fairly brief form. It also covers the growth of large corporations and the concepts of hierarchy and functions. It then goes into feedback and corporate planning. In this first chapter the author goes into implementing and reviewing objectives covering ideas such as Management by Objective. After covering the topic of Managing Change the chapter is finished with a discussion of Management Styles and Culture. While this chapter has many useful ideas and makes several practical points related to managing engineering projects, the reader is left with a feeling that a number of somewhat unrelated topics were put under the chapter heading of ‘Organization’. There was no coverage of organization structures or of recent research that relates technology to organizational designs. A topic such as ‘Managing Change’ is put next to another topic such as ‘The Project Concept’ without any apparent reason or association.

The second chapter titled ‘Managing People’ describes a number of aspects of behaviour in organizations such as motivation, leadership, appraisal, the personnel function and career development. The two pages given to leadership tend to emphasise Adair’s work, particularly action centred leadership, but ignore contingency and situational leadership approaches to leadership, which have had considerable support in most recent texts on management and organizational behaviour. While Johnston includes topics that are important for any professional engineer to know about, the 36 pages allocated to Managing People don’t do many of them justice, especially areas such as motivation. The entire area of personality, for example, and concepts like the need for achievement or internal’ external locus of control are ignored.

The third chapter covers the basics of financial accounting. This section gives the basics of accounting and gives the accounting practice references for more specific

Management for Engineers, D. L. Johnston, Peter Peregrinus Ltd on behalf of the Institution of Electrical Engineers, IEE Management of Technology Series 6, 1987, 219 Pages, paperback, €20.00

A book which aims to bring an understanding of management to professional engineers, especially those who have moved up to managerial responsibility, can make a much needed contribution to the field. This book attempts the rather major task of providing the reader with an understanding of organizations, the management of people, managing financial resources, legal and social obligations, marketing and new ventures. While overall I admire the author’s courage and do feel ‘Management for Engineers’ is a useful attempt at the topic, this book attempts to do too much in a rather random or at least unexplained manner.

The book has seven major segments; 1. Organization, 2. Managing People. 3 .


86 BOOK REVIEWS

premises. The remainder of the book (titled chapter

7) is a list of books and references that the reader may use to go further into any of the topics. They are listed under the main topics covered in the book; ‘Managing People’, ‘Marketing’, etc and the inclusion of a number of engineering type references makes this section quite useful.

In summary, ‘Management for Engineers’ attempts to cover a lot of ground as an introductory book for the professional engineer in management. While it is meeting a definite need, there are a number of weaknesses in the somewhat haphazard way it covers a number of topics. In terms of writing style, the author is concise but at times writes more as if it were an engineering specification than a descriptive book on management concepts. I had hoped this book might be used at a graduate diploma or masters degree level in a course on engineering management but have come to the conclusion that it would be more suitable for a professional engineer who is not doing academic study but who wishes to become familiar with the area of management in relatively short personal time. This book does provide a good overview to the field of management for professional engineers and if one does not expect it to do more than that, it serves its purpose well.

RON CACIOPPE

information. The reader is given points to look for when preparing financial records and statements. While this chapter seems also to attempt too much in a short space, it does follow a more consistent sequence and is clearer in its direction than the first two chapters in the book.

Chapter 4 deals with the legal and social obligations of a firm. The chapter provides a very brief but useful look at areas where managers need to consider law in the workplace; consumer legislation, health and safety, employment and contract law and international requirements. For an engineer who is not familiar with any of these areas the very brief descriptions outlined here will help. Any engineer who wants to or needs to go into law to any real extent will find that this chapter has too little real indepth consideration of these areas of law. The author does give useful references which the reader can explore in depth on his or her own.

One of the best features of this book is the use of practical engineering examples as well as information about engineering related to the topic. This is especially the case in chapter 5, where marketing products and services is covered. Included are topics on engineering marketing, professionalism, market driven and global marketing, and product strategy, specification and development. The author shows that in marketing he is aware of the latest directions in the field by including a section on the marketing of services, which is an important topic in marketing today.

In the final chapter, new ventures are described in the form of brief case histories, Companies such as Micro Systems Group, Barkway Electronics. SID Inc and Filtronic Components are described in about one page for each case. The cases are concise and interesting reading and give the reader some idea of the way in which new ventures grow and the difficulties they encounter. While these cases are well written the author could have done more to tie them back to the earlier concepts and points relevant to engineering made earlier. This chapter is ended with a section on physical facilities which doesn’t seem to quite fit with the previous case studies but attempts to give the reader some ideas on how to secure new

Technological Innovation: Strategies for a New Partnership, Denis 0. Gray, Trudy Solomon and William Hetzner (eds.) North- Holland, 1986.

This is Volume 14 in a series entitled Studies in Management Science and Systems. The purpose of this volume as stated by the editors is to ‘set out to produce a book which would describe a wide range of recent strategies and practices for technological innovation in a way which was both practically and conceptually meaningful’.

It is a collection of 20 articles organised into two parts. Part I which is entitled ‘Strategies’ takes a macro view whereas Part I1 ‘Practices’ is more concerned with the specific. Within each part there are three


Book Reviews

sections - Federal, State and Industry. Over two-thirds of the papers, those

appearing under the headings of Federal and State, are concerned with initiatives to foster basic research and its transfer into industry by the Federal and State Governments in the U.S.A. The current interest largely stems from the fear that the short term orientation of most industrial companies provides a poor basis for meeting Japanese competition in high technology. Because of factors unique to the American situation such as anti-collusion legislation and the US tax laws much of what is written is specific to that country. For this reason these papers are likely to be of little direct relevance to most readers in other parts of the world. although it may provide an interesting background reading for non- industrial makers.

The reader gains the impression from the historical review of Federal policies that government intervention has been generally unsuccessful. Either the initiatives have come to a premature conclusion because they have failed or because of a change of government or its policies before they have had time to come to fruition.

The State initiatives are extremely diverse reflecting their different objectives. Under- lying all these approaches, however, it is evident that the aim is parochial; to attract industry to a particular state to foster its own economic ends. Some of these initiatives are described in detail, for example the Industrial Technology Institute established by the State of Michigan to design, develop and implement CIM systems.

Most readers will probably be more interested in the papers dealing with the industrial scene, In only six papers no comprehensive view can emerge and they contribute little to the literature on technological innovation. The most interesting of these are: ‘Collective Industrial Research: Initial Concepts’ and ‘Research and Develop ment Partnerships: An Agenda for Research on a New Form of Collaboration’ which describe a wide range of approaches within the broad field of pre-competitive research. The others discuss - innovation in manufacturing, organisational design for technological innovation, human resource issues and participative management.

R&D Management 19. 1 , 1989

87

It can be seen from this brief description that the contents of this book are much more limited than the title and stated purpose imply. It is not a book that readers of this journal outside the U.S.A. are likely to wish to purchase. However, if they can borrow a copy to browse through they may find some aspects of interest to them.

B. C. TWISS

The Colours of Your Mind, Jerry Rhodes and Sue Thame, Collins, 1988. 252 pages, hardback €12.95.

For me, this book has not yet met its publisher’s claim of ‘guaranteed to revolu- tionize the way you work, think and live’. Nevertheless, many readers of this journal who, like me, think predominantly in ‘hard green’ mode will as the book rightly predicts ‘find this book a fund of ideas ripe for plagiarizing with a light heart’.

Our formal education, and much of our continuing education during our working lives, is geared to knowledge acquisition in our speciality. It rarely covers even the basic skills of how to think. Attempts to raise our consciousness in this area have been led by people like Edward de Bono. Whereas de Bono’s books concentrate on lateral thinking and creativity, this one starts by helping you discover your own predominant thinking styles.

Its theoretical basis comes from work on ‘skilful thinking’ that Jerry Rhodes did between 1977 and 1981 in co-operation with the Dutch multi-national Philips. Together they developed problem solving tools and methodologies aimed at improving management performance. Their work identified 25 ‘thinking operations’ (‘thunks’) which account for all significant operations of the mind. These later evolved into the three colours which form the basis of the book.

You are actually encouraged to perso- nalise the book by filling in the questionnaires and colouring the charts. (This aspect will undoubtedly appeal to ’hard red’ readers!) The first block of questions helps you identify your primary modes of thinking. RED is the colour code for that which is

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known - the thinking that collects facts and organises them. GREEN thinking explores the unknown - it is creative, imaginative and intuitive. BLUE is the colour of judgment - it draws the other two colours together for deciding, forming opinions and making choices. You next determine whether your bias is hard or soft, hard being ‘scientific’ and soft ‘artistic’. When colours and bias are coupled, there is a total of six thinking styles which different people use in different proportions.

Subsequent chapters are devoted to interpreting your own preferred style and identifying other peoples’. Suggestions are given on how to better balance your colours and eliminate extremes. There are exercises to help you enrich your weak thinking styles. So far, so good.

The remaining third of the book describes how to apply the knowledge gained. The first of these is the management of relationships which includes negotiation, creating a harmonious and productive project team, selecting a candidate for a job etc. It contends that the main problems in this area arise through the divide between hard and soft people, rather than their colour clashes. The second application is the mapping of your thinking styles to different tasks or for your own self development. The starting point is to colour the phases of a task as to what thinking styles are appropriate at each phase. For example, in a project, green thinking is needed in the early stages to create the idea, then red to develop and communicate it, and finally blue to sell and gain commitment.

Compared with the rest of the book I found the application of colours difficult to get to grips with. This may be because in the field of inter-personal relationships, there are other more practical tools with which I am already familiar. It may also be that benefits of any new technique are appreci- ated only if they can be applied in a real and relevant context. This is probably where an in-house workshop, rather than reading the book, would come into its own. From personal experience, I have found that most of my working tools, including time management, brain mapping and inter-personal relationships, have entered my daily routine only after a short course or ‘show-and-tell’

BOOK REVIEWS

from a colleague. Despite these misgivings, I am sure that

this is a book that will grow on me as I read and re-read it. I have a feeling that the development of thinking skills is an area that research workers and managers will need to devote more time to, if they wish to reach the peak of their potential. This book should certainly help them on their way.

D. J. SKYRME

New Oflicic. Information Technology: Human and Managerial Implications. Richard J. Long, Croom Helm, 1987, hardback, €30.00.

This book is a first class introduction to the human and managerial implications of the new office information technology. It is well written, straightforward, and seems likely to become a definitive text in the area. With so little to criticise, all I can do in this review is to give you some idea of the content, along with a recommendation to see for yourself.

Although this is a book about information technology, it is not a technical book. Long describes the new technology as being a result of the convergence of three separate technologies: computers, office machines and telecommunications. The hardware is explained in just enough detail for the reader to know what it can do: one does not need to know how to build a computer in order to use it effectively.

A strength of this book is the way the technology is not viewed in isolation from its surroundings. Long asserts that it is impossible to predict or even understand the implications of the new technology without a realistic understanding of the office and its context. He therefore devotes one chapter to describing current research on the workings of offices and their staff. It is argued that system designers and implemen- ters frequently lack this understanding, with the result that their systems rarely live up to the dramatic claims that are made for them.

Throughout the book, Long supports his statements with evidence from research findings. The task of prediction is never easy, and computer science has had more than its fair share of false prophets. It is therefore


Book Reviews 89

paragraph biased and naive, a shame for such an otherwise authoritative book. But don’t let that put you off this book is well worth reading. My congratulations to Richard Long on such a thoughtful and thought provoking piece of work.

encouraging to find an author whose feet are so firmly on the ground. Long addresses many important questions: Will jobs become more or less interesting? Will the role of the manager change and how? What will happen to productivity and will there be mass unemployment? He does not shy away from answering these questions, and his conclusions are given weight because they are backed up with empirical data. Only at the very end of the book does Long allow himself to slip from this excellent practice: but more of that later. Long’s prediction technique is to put the technology into its historical context, examining the effects it has already had on office work at all levels. From this base he makes carefully considered extra- polations about possible future implications: advantages and disadvantages of the technology, effects on individual workers, effects on organisations and on society in general.

Obsolescence is a problem for books about rapidly developing technologies. Long’s emphasis of the organisational aspects, which change more slowly than the technology, helps to minimise this problem. The understanding of office work is valuable in its own right and should stand the test of time, providing readers with a firm base from which to make their own judgments about possible future technological developments.

This book is intended for and deserves a wide audience. Managers with the task of overseeing the introduction of new technology should find it invaluable, particularly those who are less familiar with computers. I would also recommend the book to computer scientists and systems analysts. An awareness of the issues raised in this book should help them produce systems which, as well as being technically correct, are also matched to organisational and user needs. This book is also, of course, relevant to students in a variety of fields. Those in business administration, computer science and social science departments might find it especially useful. For those intending to put theory into practice, Long provides several helpful appendices at the end of the book.

If I have an argument with anything Long says, it is with his concluding remarks where he implies that a socially beneficial use of new technology is the sole prerogative of democratic countries. I found his final


HILARY ROBERTS

In the Wake of the Future: Swedish perspectives on the problems of structural change. De Geer, Hans et al., Aveburyl Gower, 1987. hardback, €18.50

What does the future hold for Sweden? That is the question the several authors of this book are seeking answers to. It occurs to them that the trends they identify will lead other societies in similar directions, which is one reason for the (very readable) English translation, and for this British review.

The trends, and their consequences, are identified at different and linked levels, e.g. society-culture/corporate/labour market/ political structure-ideology/and personal, and the many trends are themselves connected. The (verbal) model is complex. The authors, from many desciplines, are to be praised for having produced, from out of the complexity, a coherent and cogent analysis.

In a short review the best that can be done to convey the book’s method and message is to summarise the from-to’s, the ‘where-are-we-nows’, to the ’where-are-we- goings’, to examine the connections, and to comment on whether the analysis and its implications fit the British case.

I extracted from the text 13 trends. Other readers may find more - or less.

Trend No 1. From a society where the rhythms of life

are governed by the wage labour system to one where there is much more personal choice, much more mobility, and an increasing blurring of the distinction between work and leisure.

2. From a society predominantly based on manufacturing to one predominantly based upon service.

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although Britain has never (except perhaps in wartime) ever had the social, political, and labour market consensus enjoyed (?) by the Swedes, it would be hard to deny the existence of the trends identified by the Swedish authors. Perhaps the divisiveness they anticipate will be much less noticed in a society prone to divisiveness anyway. But the conflicts might have an added edge born of long practice. Second, the multi-discipline model the Swedes have tried to develop is worth working on further to give it sharper focus and a wider relevance. Indeed, Trend 14 could be. 14. From out-dated discipline divisions and

boundaries to more holistic and policy- relevant approaches.

TOM LUPTON

3. From mass consumption to individual expertise, uniqueness and choice in personal buying.

4. From social consensus to social division between on the one hand elites located in knowledge based concentrations linked by networks and closely inte grated with university research, and on the other non-elites in traditional less prosperous and backward looking peripheral locations.

5. From standardised control and reward systems to individual performance related negotiated contracts.

6. From a concern with ownership based on fixed capital assets to a concern with mobile, flexible, human capital and the primacy of knowledge, creativity and competence in interpersonal relationships predicating an integration of science, technology, and the human sciences and arts. No two cultures any more!

7 . From the search for equality in pay and opportunity to a recognition of ‘sheep and goats’, and high differentials.

8. From big and centralised to big and decentralised or small and entrepren- eurial.

9. From bounded enterprises to personal knowledge and information networks.

10. From the welfare state to open battle for the ‘goodies’.

11. From low to high geographical and social mobility.

12. From class distinction based on work and tradition to shifting groupings based on personal leisure interests,

13. From work as a chore to wealth producing and consuming activities as satisfaction and pleasure in achievement and self-development.

These trends are generally recognised in the advanced industrial societies. Their strengths relative to each other, and their rates of change will differ, but perhaps less so as the elites become internationally mobile.

For Sweden, the authors predict little effect on political alignments, although the issues on which politicians fight for power will change radically to reflect the trends.

Two comments from the reviewer. Fitst,

Managirig Organisational Change: Human Factors and Automation Fred Fallik, Taylor and Francis Ltd., 1988, 155 pages, cloth $28.00, paperback $14.00.

This book is the third volume in the Taylor and Francis series ‘Case Studies in Ergonomics PracticC. It describes and interprets the experiences of the US Government’s Internal Revenue Service (IRS) prior to, during and after the introduction of office automation. The author works as a member of the IRS Human Resources Technology department which was closely involved in the planning and evaluation of this large scale automation programme.

The case study is written in three sections. The first gives the background to the automation programme and details the role of the Human Resources Technology department. It also presents the prevailing attitudinal and contextual background to automation and human factors more generally. The second section describes the change process and the results that ensued, as well as giving details of the human factors, managerial, personnel recruitment and training aspects. The final section provides a summary of ‘Iessons learned‘ from the change process and makes general recom-

R b D Management 19, 1. 1989

Book Reviews

mendations for managing technological change in organisations. Overall, the book is clearly written and covers a substantial body of theoretical issues as well as describing a number of practical methods to aid the change process (e.g. focussed group interview techniques to encourage team building).

During the last decade it seems that the majority of reports and case studies on technological change in organisations draw two main conclusions, namely: ( i ) that technological change has both intended and unintended consequences, and (ii) that users and other relevant personnel should have been involved at an earlier stage in the change process. This case study is no exception - which is particularly disappoin- ting given the close involvement of the author (and other human factors experts within the Human Resources Technology department) in the change process.

From a human factors prespective, the IRS automation programme was not fully successful. Users of the new automatic technology reported decreased satisfaction with work pace and the amount of control, variety and challenge compared to their previous, manual intensive, jobs (p. 68). It is significant that it was these work aspects which most worried employees before the new technology was introduced (p. 54).

Unfortunately, the book does not examine the social dynamics of the change process in any depth in order to explore the reasons for these attitudinal outcomes. In addition, the author effectively avoids any consideration of the reasons why the IRS programme failed to incorporate a majority of his department’s recommendations. As the book is intended to give valuable guidance to managers and their consultants involved in planning the introduction of new office technology, this lack of self reflection is particularly frustrating for the reader. This is compounded by the nature of the ‘post facto’ recommendations set out at the end of the book, which seem to merely restate the problem. These recommendations include: ‘Plan for the unplanned, ‘Talk to each other’, ‘The user knows best’ and ‘Change managerial behaviour before you attempt to change attitudes‘.

The nearest the book comes to examining


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the reasons for the programme’s failure vis- a-vis human factors is in the fascinating chapter by James Lantonio (former Assistant Commissioner for Human Resources at the IRS) on the politics of automation. In this tantalisingly short (eight page) chapter he alludes to the lack of cooperation between the Human Resources Technology department and top management created by the latter’s adherence to a very rigid time schedule for the programme. Unfortunately. Fallik does not elaborate or even refer to these issues in his appraisal of ‘lessons learned in the final section, although he admits (p.xi) the study was ‘less than ideal’. Furthermore, his own frustrations do surface periodically within the book.

These criticisms aside, the book gives a fascinating insight into the workings of a large corporation and the problems inherent in any large scale programme of technological change. It reflects well on the IRS and the US Department of the Treasury that they approved the publication of this book - very few organisations are willing to publicise any shortcomings in their own change programmes.

In conclusion. the book presents a very interesting case study which shGuld act as a stimulus to the current debates about the social dynamics of technological change. The study provides an academic audience with many insights regarding human and organisational behaviour under change conditions. It is perhaps less valuable as a ‘guidepost’ to managers and consultants with responsibility for the introduction of new technology (p.xi), except as a timely reminder that a successful technological change programme often crucially depends on the close collaboration of users, human factors specialists and managers from the onset of design.

J . MARTIN CORBFT’T

The Greening of the Cities, D. Nicholson- Lord. Routledge & Kegan Paul, 1987, xvi + 270 pages.

This book sets out a solution to urban decay, imaged as the greening of the cities and founded on a radical ecological and

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environmentalist critique of the function of the city in the late twentieth century. It should be of interest to planners and forecasters and, because of its cross-disciplinary content, to academics as well.

The author sees the situation like this: Now that the functions for which the city was originally designed to fulfil are for the most part no longer needed, persons who can afford to are deserting the city. Those who have to stay behind suffer physical and psychological deprivation. Hence, those signs of urban decay - poverty, dirt, crime and despair. The author addresses the problem of halting the decay and recon- structing the city on lines appropriate to the last years of the century.

His solution combines several themes. The first, his overall aim, is the physical reunification of the city and the countryside, to build the rival city, that is, the city without walls.

He gives this concept a philosophical underpinning - a generalisation of the environmentalist ethic - which calls for the parallel spiritual reunification of Man with Nature. Cities, in their modern form, are artefacts from which nature is excluded. Human beings have a basic, preconscious need to be united with the rest of nature, for the ‘recovery of the primitive’. Hence, for example, the emergence of the ‘back-packing society’, city dwellers every now and again leaving the city for a week or two to seek the Wilderness Elsewhere. But as long as the wilderness is elsewhere the city/not-city divide is accentuated. You shouldn’t have to drive hundreds of miles to find the wilderness: it should be here in the city around you, not elsewhere.

The greening of the cities is not the product of a back-to-nature ethic. The process that will lead to the building of the rival city will need the deployment all the major resources of twentieth century technology, but - and this is the third theme of the book - those who will pass their lives in the green city must play a major part in deciding what technology is to be deployed and how it is to be applied. They must be allowed to participate in some of the actual physical processes of building it.

We have to be aware that chere is a ladder of citizen participation on which, to use the

BOOK REVIEWS

author’s words, ‘each rung on the ladder represents a different state in the ascent from a powerless and manipulated citizenry through the “tokenism” of consultation and placation to partnership, delegated power and, finally, citizen control.’ The ascent will not be easy for ‘each rung scaled also involves the displacement of some powerful entrenched interest.’ But the ladder must be scaled if greening of the cities is not to become a euphemism for urban sprawl or Megalopolis.

Several chapters are devoted to descriptions of what people are now doing to bring about the greening of the cities. Many examples are given, mostly but not entirely from experience in the UK. The relevant chapter titles give a flavour of their contents: The Country comes to Town; a People’s Landscape; Small Worlds: Earthworks.

The book says some interesting things about the social psychology of the city. For example, if people are to claim the rival city as their own it needs to be ‘imageable’, it must have a character which the inhabitants can feel and identify with. The design of the new city should contain demarcations, paths, edges, landmarks - features that tell you instantly where you are, that differentiate one district from another, but still preserve the wholeness of the city. Greenways (wild areas and pathways, urban farms) and blueways (waterways, lakes, streams) make excellent markers that both separate and connect.

The book ends with a widening of the scene away to take in the third world. The separation of the developed from the third world mirrors the separation of the developed city from its countryside. The author rejects the sa-called ‘growth-pole’ model of third- world development in which those countries merely replay the process through which the West has reached its present situation. This urbanised, centralist model will have disas- trous environmental and political consequences for the third world. The alternative way, analogous to the greening of the cities, is a decentralised, bottom-up, grassroots development that applies the environmentalist ethic and learns from the disasters suffered by western civilization. But to impose this route on the third world while the developed world continues in its old top-down urbanist way is


Book Reviews

hypocritical and self-defeating. There is an extensive bibliography and a

useful index. The surprising thing to me is that although

these splendid attempts at urban renewal at grassroots are going on in our midst and, according to the author, going well, we, the public, need a book like this to draw our attention to them. The news media tell us daily little about urban reconstruction and much more about the terrible manifestations of urban decay. The worse the news the better the copy?

However, the message of this book is one of hope. The cities are beginning to green, in a small way and locally, but sufficiently so to justify that hope.

For this reason alone this book can be recommended to technological forecasters, long-range planners and the like, particularly as containing something hopeful to put into ‘optimistic’ scenarios, The possible future it outlines foreshadows new relationships between town and country, new perceptions of the good life, new centres of power and new forms of culture, which will demand new responses from the industrial base. The impact will be felt mostly by industries concerned with energy, food production and the use of primary resources.

The structure of the book does not follow the usual academic format. Mr. Nicholson- Lord is a journalist not an academic. He liberally mixes fact, illustration, comment and opinion; he brings in a little drama by introducing a new topic with a telling anecdote or example. While this makes it more exciting reading for most of us it i? liable to irritate academics. I hope that they will nevertheless read the book and so learn something, especially as it is an excellent example of a cross-disciplinary synthesis for which the author deserves both congratula- tion and readers.

SIDNEY EPTON

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Management of Research. Development and Design in Industcv, T. McLeod, Gower Press, 1988, hardback €28.50.

This book, covering 339 pages, aims to set out the general principles that should govern

RbDManagemerit 19, 1, 1989

the management of research, development and design in industry, and finally focusses on four industries: radar, paper, silicon micro electronics and tobacco in which the writer has experience. There is a useful bibliography, and a short list of references, as well as the usual index. These are well prepared.

While the themes for the different chapters are logically and rationally presented, the content of the chapters seems to be addressed to different levels of management. This makes the book a thoughtful, but uneven reference source. I expected to read about management objectives, policy and methods, and was distracted by a section on Com- puters: the essentials, which opens with a suggestion that “readers familiar with the subject should skip the chapter.” There follow chapters on computer aids to mechanical and civil engineering design, to electronic design, and to management, which are at best of primer level. In the case of mechanical and civil engineering design the chapter is not supported elsewhere in the book by discussion of the particular needs of such industries.

It is useful to have guidelines to the cost of employing scientists. It may be helpful to have a statement that the largest laboratory should not employ more than 200 scientists, but this rule is not substantiated. If it arises from the perceptions of organisations that are set down, one is led to wonder whether a number of laboratories covering different aspects of R&D might meet the author’s objections to one large establishment. The questions that should be considered when deciding location are not explored. While a laboratory concentrating on the development of software could be established almost anywhere, why did Silicon Valley arise? Should a laboratory concentrating on design and development research in engineering be located on the premises where production is to be implemented?

The chapter on finance, budgets and staffing form the core of the book. It would have been useful to illustrate the practice of research costing methods with some practical examples. One thinks of the position of Rolls- Royce at the end of the 1960s, when the company, though engaged in major defence research contracts, was overwhelmed by the

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mounting cost of development research. It is hardly adequate to summarise that “in research, development and design alike technical performance is the first priority, correct timing comes second and costs third.” In the example I quote, the tail was wagging the dog, and the dog and its handlers were starving.

The chapter covering patenting does not take sufficient account of the commercial value of these activities. The failure of E.M.I. to provide appropriate protection for the invention of body scanners led to their near eclipse. On the other hand, what the author calls “the largest collection of incomprehen- sible and useless documents in existence”, referring to the duty of patent writers to cover the widest possible aspects of an invention, has enabled Pilkington to exploit Float Glass design and development with enormous success for many years. These examples may indicate an area of imperfect competition and the limitation of scientific co-operation, but for Pilkington it determined ultimate success. While the author is right to question the structure of patent laws, paradoxically their abolition might reduce the money now spent on research and development, rather than setting free “a

great body of highly skilled and well trained people to do useful work”.

One of the aims of a company must be to add value to its products, but this concept is not discussed in the chapter on cost effectiveness in research, development and design. Though an opening is prepared when the author writes: “An R&D policy which aims only at maintaining an existing product line is a blueprint for disaster. The price of remaining in business is an expenditure that will result in an expansion at least as fast as that achieved by the rest of the industry”. The steel industry has taken more than 10 years to recover from such a restricted and insular view.

I would have liked to read argument on the benefits of secondment to commercial departments (not just progress chasers), and the advantages of giving a senior scientist responsibility for a commercial project. A chapter on Staff Development is desirable in a book of this kind.

There is much to commend in the book, but if the author sought to produce a bible for industry, his next edition will have to be longer.

R. S . AITKEN

R&DManagement 19.1, 1989

R&D Management Vol. 19No 1 January 1989

Contents IN THIS ISSUE 1

Technologically evolving industrial equipment fabricators: their foreign involvement George Tesar and Raja Velu 3

lndustrywide technical product standards N. Mohan Reddy, Stanton G. Cort and David R. Lambert

Managing an in-house R & D service department N. J. Grainge and A. W. Pearson

Strategic evaluation and selection of R&D projects Nicolas Danila

NOTES AND COMMENTS R&D Project Selection Strategy: an empirical study in Spain Anne1 Martinez Sanchez 63

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A systematic technique for new product idea generation: the external brain Jacob Bar

CONFERENCE REPORT The state of the ar t in R&D Management

BOOK REVIEWS Managing New Product Innovation Wm. E. Souder. Reviewed by A. W. Pearson

Managing Product Design Mark Oakley. Reviewed by R. Rue

Technology Generation in Latin American Manufacturing Industries Jorge M. Katz. Reviewed by K. E. Jermy

Management for Engineers D. L. Johnston. Reviewed by Ron Cacioppe

Technological Innovation: Strategies for a New Partnership Denis 0. Gray. Reviewed by B. C. Twiss

The Colours of Your Mind Jerry Rhodes and Sue Thame. Reviewed by D. J. Skyrme

New Office Information Technology: Human and Managerial Implications Richard J. Long. Reviewed by Hilary Roberts

In the Wake of the Future: Swedish perspectives on the problems of structural change De Geer, Hans. Reviewed by Tom Lupton

Managing Organisational Change: Human Factors and Automation Fred Fallik. Reviewed by J. Martin Corbett

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The Greening of the Cities D. Nicholson-Lord. Reviewed by Sidney Epton 91

R&D Project Selection Strategy: an empirical study in Spain

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