Proprietary Publications

T122 - "Corporate R&D Spending: Art or Science?"

56th R&D 100 Awards Banquet & 4th Annual Technology Conference,
Orlando, Florida, USA
November 15, 2018 -- [44 Pages]
ISBN 978-1-937115-34-0

Description

The management science behind R&D spending decisions had been stagnant for decades. With the advent of big data and associated analytical capabilities a decade ago, progress is now being made.

There are high-level challenges. First, how does one overcome the long periods of time between initial investment and the realization of results? For fast-cycle companies, the elapsed time is at least five years, and it can range to a dozen years or more for more advanced technologies. Second, how does one define success? Revenues, profits, units sold, market share gain, customer satisfaction, technology leverage, return on investment or innovation, share price or market cap increase are all considerations.

There are also mid-level challenges. Can one underspend for a year or two without affecting the overall product portfolio? What are the effects of consistent underspending? Can one overspend to offset underspending periods, or to catch a competitor? At what point does spending start to yield decreasing returns? Is there such a thing as a "right amount" to spend?

There are operational challenges that may also have strategic implications. What is the best allocation of funds for a company with certain core competencies and technologies in relation to its current business strategy? What amount of funding should go to organic innovation, open innovation, joint ventures/alliances, or the in-licensing of existing IP? If there are choices, what should our decision criteria be? How should we allocate our funds across basic research, applied research, advanced development, product development, and product enhancement? What metrics should we use?

There are operational challenges that may also have strategic implications. What is the best allocation of funds for a company with certain core competencies and technologies in relation to its current business strategy? What amount of funding should go to organic innovation, open innovation, joint ventures/alliances, or the in-licensing of existing IP? If there are choices, what should our decision criteria be? How should we allocate our funds across basic research, applied research, advanced development, product development, and product enhancement? What metrics should we use?

Inclusive of government, academia, non-profit, and industry, almost 70% of all R&D funds are spent by for-profit corporations which will be the focus of this General Session.

Table of Contents for Technical Paper 122

Bibliographic references are provided for the numerous cases and examples we cite to enable all readers to further their investigation on the subjects of specific interest.

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