The R&D Concept: Research (R) and Development (D) and Their Use in Industry

Chapter 1.
The R&D Concept
or
Research (R) and Development (D)
and their use in Industry
NUS Lecture-2 1
Concepts
Technology and R&D
When dealing with the Management of

Technology and Innovation in Industry
or with the Management of Industrial R&D
D-ETM NUS Lecture-2 2

Topics
1.1 Technology
1.2 R&D
1.3 Invention & Innovation
1.4 Evolution of the management of industrial R&D
D-ETM NUS Lecture-2 Lecture 2 3

1.1.Technology
Technology in Industry can be defined as:
the industrial application of scientific and engineering knowledge
with “industrial” meaning:

as used and as seen in products/processes

In the products and processes of a company elements of science and
engineering are embedded.
therefore
The application of the specific science and specific engineering

for the company’s products/processes is called the company’s technology.

The book: “3rd Generation R&D” (Philip A. Roussel e.a., 1991):
Technology is the process that enables a company to say: “We know how
to apply science/engineering to…..” in a way that clarifies, what the
technology does for the business i.o. just, what the technology is
Example: automated teller machine (ATM) industry

(“3rd Gen R&D”, pg 13)

Automated Teller Machine (ATM) industry
Supplier plastic card – how to apply science & engg:
to select resins/plastic additives
Supplier plastic card – how to process plastics:
to make a stable card (no warp)
Component supplier – how to design to manufacture:
to make reliable paper-handling device
ATM supplier – how to provide the software:
to integrate the operating system into the customer transactions
network
ATM supplier – how to apply systems technology:
to physically integrate components in OS
ATM supplier – how to apply applications technology:
to let the customer use the OS
to know which technical features are critical
to know how to compare economics

Manufacturing and Technology
Manufacturing is defined as:
“mechanical, physical or chemical transformation of materials,

substances or components into new products”
Such a transformation takes place through the use of technology.
Technology applied to the manufactured product determines its:

Appearance
Usability
Quality
Price
The end product contains the technology used. It is not better (or worse) than the
used technology can offer. This shows the importance of the technology in the arena
of the competition.
World Class Technology in Industry
Four statements from the relationship above:
1. Technology in itself is a produce of the combination of equipment,
process and human mind
2. Technology is manifested in all products and processes
3. Manufacturing companies need technology by definition
4. Technology develops rapidly
“World Class Technology” relates to: the product can compete on the
world market through technological advantages: competitive advantage
through technology excellence.
A company is a “World Class Company” when its product represents a

considerable percentage of the world market of that product.
If a company wants to go global and wants to make impact, it must have
“World Class Technology”.

Competitive Impact of Technologies
Technologies can be split into (“3rd Generation R&D”) :
Pacing technologies – technologies which have the potential to change

the basis of competition.
Key technologies - technologies which are embodied in the specific

products and processes of a company, and which are the most critical to
competitive success, because they offer the opportunities for meaningful
process and product differentiation.
Base technologies - essential, but known to and practiced by all

competitors; these technologies are widespread and shared.

Relationship: Technology R&D
Pacing technologies require “fundamental R&D”

(large R, no or small D)
Key technologies require “radical R&D”

(large R, large D)
Base technologies require “incremental R&D”

(small R, large D)
The difference in competitive impact of the different technologies is

essential in the strategic management of technology in the company.
This will be discussed later.

1.2. R&D Definitions and R&D Spectrum
“Research” : • search for the unknown

(or: “scientific reach into the unknown”)
“Development” : • follow up of successful research
“Research” results as such are most often

not usable. They have to be developed in
the “Development” until they can be applied.
Together this is (Industrial) R&D.

R&D Spectrum
Research Development Application Consultancy
Basic Strategic Applied Pre- Devt Adaptation/ Application

Research Research Research Devt customization Prototype
“Application” : • takes development results into actual use
“Consultancy” : • not really R&D; shown here only as it uses

the outcome of the whole process in the
spectrum
Remark: i.o. “application / consultancy” one may take “preproduction / production / service”.
I prefer the one as shown.
Research
Basic: - research for the sake of research
Strategic: - research in areas which are important for the sponsor
(or customer)
- normally with clear technical target in mind
Applied: - research aiming at a clear application, if successful
Development
Development: - goes until full proof of concept
- product: design & subassemblies
process: full proof of usability
- product and process specifications
Predevelopment: - decision on subassemblies and processes

Examples Research
Basic: - astronomy
- pure mathematics
Strategic: - interaction laser/material (meant for optical recording)

- absorption of H2 by metals)
(meant for batteries)
- 3D lithography
(meant for MEMS devices)
Applied: - pit size in magneto optical recording

experiments
- metal hydride capacity studies
- MEMS gyroscope

Examples Development
Predevelopment - material composition for magneto optic

recording according to spec
- time/temperature humidity behavior of metal hydrides
- evaluation several MEMS technologies
Development: - design of product/specs

- making modules
- making prototypes (not for manufacturing yet) to test
functionality
- responsible for design in the
manufacturing phase

Industrial Research
Industrial Research is “Research”, but with a specific goal: ultimate use of the
results in industrial products.
That implies that “Development” has to be done thereafter. I prefer therefore to

use the term “R&D” as the combination of Industrial Research and
Development. The term R&D should not be used in academic contexts.
Let us first look at the official terminology.

American Standard Definitions
By the Financial Accounting Standards Board of the American Institute of Certified Public
Accountants: (widely used and quoted)
Industrial Research
“planned research or critical investigation aimed at the discovery of new knowledge in the
hope that such knowledge will be useful in developing new or improved products or processes”
Development
“translation of research findings or other knowledge in a PLAN or DESIGN for a new or

significantly improved product or process”

“3rd Generation R&D” definitions (pg 14)
 “Research”: orderly approach to the revelation of new knowledge

about the universe (academic)
 “Industrial Research”: is as above, but with a specific goal (to lay the
foundation for the development of new products or processes)
 “Development”: applies and connects those principles to develop

products

“3rd Generation R&D”
distinguishes in 3 types of R&D
Incremental R&D:
small “R”, large “D”
(most common industrial R&D in all companies)
Radical R&D:
large “R”, often large “D”
(only in world-class companies)
Fundamental R&D:
large “R”, no “D”
(nowadays only at Universities or RIs)

Example from industry: the CD
Fundamental R&D:
invention: use of monochromic light to
represent analogue signals in digital form
Radical R&D:
development of medium to replicate such digital signals
Incremental R&D:
development of CD as product / development of
process for consumer market.

Academic Research and Industrial Research (comparison in
execution) Industry
Academia
Purpose Purpose
To advance knowledge of the physical To advance Company business against competition
world Choice of Topics
Choice of Topics Match between Company needs ad individual
Chaining based on experience experience
Predominant Expertise Predominant Expertise
Phenomena and techniques Products and processes of interest to the Company
Approach Approach
Completeness is important Timeliness often more important than completeness
Publication of Results Publication of Results
Usual If they are not of value to competitors
Highly Valued Highly Valued
Advance of subject Impact on the business
Intrinsic virtues of work

Academic Research and Industrial Research
(comparison in outcome)
Academic (university) research
Main aim of research is education
PhD research: candidate has to be trained in performing research to be able to do it on his own
MEng research: candidate has to be trained in performing research
Outcome of academic research:

1. MEngs/PhDs
2. Publications (articles, books, conference papers)
3. Patents if possible
Industrial research
Preceding development/meant to result in usable applications
Never basic research
Sometimes strategic research
Normal : applied research

Use of the term R&D
Generally speaking:
Term “R&D” mostly used in industry
Term “Research” mostly used in academia
Term “Development” only used in industry
Examples
Grain growth/ceramics
ceramic capacitors
Optical storage
CD, CD-ROM
MEMS
air bag sensors

Private vs. Public R&D
Private R&D: performed by private sector (companies)
Public R&D: performed by public sector
Private R&D: in foreign MNCs

: in Local Enterprises (LEs)
very different - MNCs cover total R&D spectrum
- LEs cover small part of spectrum (see below)
Public R&D : in universities
in public research institutes (RIs)
in military organizations
- Relevant for this discussion is only public R&D in RIs (universities perform only
research and some consultancy, no development)
- RIs can be upstream (Max Planck) as well a more downstream (Fraunhofer)
Industrial R&D is performed in the private sector as well as in

public RIs (in public RI’s on behalf of Industry).
1.3. Inventions and Innovations
US Patent Law definition of “invention”:

“A new, useful process, machine, improvement, etc, that did not exist
previously and that is recognized as the product of some unique intuition or genius, as
distinguished from ordinary mechanical skill or craftsmanship.”
Elements:
Creation, new
Useful, improvement
Knowledge based
To say it differently:
Conception of a bright idea
Where “bright” implies knowledge and usefulness and “idea” implies that it is
not in use yet (and maybe never will).

Definition of “innovation”
“The managed use of new technology to offer an improved product or service that
customers want”
The product or service is “new” in that:

its cost is lower (process innovation), or
its attributes are improved, meaning new attributes
which never existed in the market (product innovation)
Innovations deal with improvements on existing products and processes, not with
totally new products (because these are seen mostly as “inventions”).
Chesbrough (2003) defines Innovation as “Invention implemented and taken to

market”.

(cont’d)
Invention – invention disclosure – patent

In most cases of inventions there is no market follow up (more than 95% of all patents are
never used).
Innovations by definition have a market follow up. Normally innovations are the result of
inventions (see below:“The Egg of Innovation”)
Remark: some grey areas; some semantics
Question: Is the change over from music on black vinyl discs to CDs an invention or an
innovation?

Invention vs. Innovation (Cooke and Mayes)
Example of the wheel:

Millions of years ago: wheel would be an invention
After the invention: need to devise how to utilize the wheel: stage of innovation
Other ideas had to be brought together to implement the wheel: stage of design
Wheel needed promotion to be developed further: stage of diffusion
Four components in the innovation process:

- invention
- innovation
- design
- diffusion

Innovations most often
Improve product in incremental steps
Do not make automatically the existing products “non-competitive”
In such a case one speaks about

“incremental or continuous innovation” or
“continuous improvement”
Inventions leading towards totally new products

Wipe out existing products, or
Bring even new functions to the society
In such a case one speaks about

“discontinuous innovation”; the effect on the technology may be disruptive,
but not necessarily (see also below)

Terminology in “Innovation”
In literature on “Innovation” many terms are used – not always very consistent.
We will use the following terms throughout this course in the following sense:
1. “Invention vs. innovation” as discussed before.
2. “Continuous vs. discontinuous innovation” to be discussed now.
3. “Sustaining vs. radical* and disruptive innovation” will be discussed by
Professor Hang.
4. “Open vs. closed innovation”, more a matter of R&D management. To be
defined now, but to be extensively discussed in Session 4.
*Remark:
The term “radical” is used already above in combination with R&D (“3rd
Generation R&D”) where it is being used in “Radical R&D”, to distinguish
from “Fundamental R&D” and “Incremental R&D”.

World Economic Pyramid
32
Continuous and Discontinuous Innovation
Continuous innovation complies with the standards of the existing markets, discontinuous
innovations implant them.
“Continuous innovation” - gives incremental improvements – : result of convergent

thinking. One uses here also the term “sustaining innovation”
( existing industry, development)
“Discontinuous innovation” - gives new products or drastic changes in existing products
- : result of divergent thinking. Discontinuous innovation can give rise to “radical” or
“disruptive innovations”
( new industry, research)
Examples, including impact on society

1. Wheel
2. Music
3. Tubes – IC’s

Continuous innovation can be seen as “thinking within the box”, whereas
discontinuous innovation clearly needs “thinking outside the box”.
Therefore discontinuous innovation will redefine the market by exposing new

possibilities (when successful), whereas continuous innovation occurs within
existing industry, within the boundaries of the known world.
Although discontinuous innovation always has drastic impact, it is not

necessarily disruptive to the industry*, which means that under specific
circumstances the industry can cope with it. In that event the term “radical
innovation” is used, contrary to “disruptive innovation” . As the terms
“sustaining” and “disruptive” are – to my mind – more relevant in relationship
with “technology”, I will use them only in that combination (next slide).
*discussed by Professor Hang

Personal remarks on “technology” vs. “innovation”
There seems some confusion in literature on the terminology with regard to “technology” vs.
“innovation”. Christensen calls in his 2nd book “innovation”, what he called in his 1st one
“technology”.
My personal preference is to distinguish between “continuous innovation” and “discontinuous

innovation”, and between “sustaining technology” and “disruptive technology”. My reason to
use “technology” related to “disruptive”, is, that it is – in most cases - not just a one-time, one-
product change, but a new technology used for a new class of products.
The term “radical” can be used in combination both with “technology” and with “innovation”.
I prefer here “innovation” as we still talk about a change in the product, fitting in the same
market. Literature shows both.

Disruptive Innovation / Disruptive Technology
A Disruptive Innovation resulting in Disruptive Technology resulting in Disruptive

Product(s) is called “disruptive” as it undermines the established company.
Although it is indeed technology which creates the disruptive product, it is the latter one
which makes the established company fail.
This is a very important subject in the present day’s companies.

This will be / has been discussed by Professor Hang.
Later – when we discuss strategic management of R&D – I will come

Back to the different approaches when managing “The Disruptive”.

TERMINOLOGIES (summary)
TECHNOLOGY INNOVATION MARKET/PRODUCT
discontinuous new, high end market

or (same product range)
radical innovation
sustaining
technology continuous continuous or incremental
or improvement
incremental innovation (same product range)
discontinuous innovation new, low end market

disruptive or (maybe same, maybe
technology (disruptive innovation) new product range)

Open and Closed Innovation
Chesbrough builds his ideas of modern Industrial R&D on the “Open” and “Closed
Innovation” paradigms. Presently a shift towards “open” is vital for international
companies to survive.
In simple terms “Closed Innovation” can be defined as innovation within the

company, using only own ideas, own RSEs.
“Open Innovation” uses external ideas, external R&D as well as internal ones. It
goes even further to use also as well external as internal paths to market.
We will illustrate the ideas with the next 3 figures out of his book, but will discuss
the subject further in Session 4. Typical example of the “closed Innovation”
paradigm is seen in the “Egg of Innovation” which is only from the early 90s.

“The Egg of Innovation” (typical for 20years ago)
EXTERNAL ENVIRONMENT
INNOVATION INTERNAL ENVIRONMENT
Project Evaluation Project

Idea proposal Systems Project Management:
Creativity Project •Analysis •R&D
champion Innovation
•Strategic •Design
considerations •Production
•Marketing
R&D gd ep t
de pt k etin
Mar
The Company
Scientific Knowledge
and technological of market
knowledge needs
D-ETM “Managing Technological Innovation”
NUS Lecture-2 42
Brian Twiss, Longman Group UK, 1992
1.4. Evolution of management of Industrial
R&D over the last 50 years
Short overview of 1st to 4th Generation R&D
NUS Lecture-2 43
Four Generations of R&D
Terminology refers to Industrial R&D

Major differences: management
Gray areas / smooth border lines
Even now not all Industrial R&D is in the 4th Generation; depends on the
specific company’s approach.
Books: Third Generation R&D (Roussel, Saad, Erickson) first published in

1991
: Fourth Generation R&D (Miller, Morris) first published in 1999

1st Generation R&D
1950s, 1960s.
fatalistic: lucky when catching a fish
no General Management involvement, no long-term strategic
framework
R&D: line item in Company’s budget
R&D Management decides on Company’s future technologies,
intuitive management
no measuring of results
still great discoveries made! (serendipity)

no real difference with Academic Research.

Some general statements on 1st Generation showing
the “failure of confidence”
Business: “R&D does not understand business”
answer R&D: “targeting stifles motivation”
Business: “researchers are uncontrollable”
answer R&D: “administration smothers creativity”
Business: “results are just around the corner”
answer R&D: “breakthroughs cannot be forecast”
Comparison with courtroom:

business (or GM) is prosecutor
R&D is advocate
however: no judge
2nd Generation R&D
end 1960s, 1970s, (Western MNCs)

1970s, 1980s (Japanese MNCs)
transition state between intuitive and purposeful management
“external customer” (Business) vs. “internal customer” (R&D management)
Project Management / bureaucracy
funding per project by Business
Business cannot buy outside / risk sharing, however, no real partnership
measuring results via ROI

3rd Generation R&D
1980s, 1990s (Western MNCs)

1990s (Japanese MNCs)
Partnership between General Management and R&D Management
R&D (mainly) internal Company
balanced R&D budgets for short, middle and long term needs of the Business
management by objectives / preference for low-risk high-reward projects /
mainly continuous innovation
cost of R&D becoming too high for the Company

4th Generation R&D
end 1990s, 2000s (some MNCs)

continuous / discontinuous innovation
open innovation / external Company
R&D internal Company very selective
top Research Institutes worldwide
limited number positions corporate management (4)
managing knowledge on a worldwide basis (CKO)
managing innovation on a worldwide basis (CINO)
importance info-technology
innovation (patents) business

Personal Comments on “4th Generation R&D”
This will be discussed by Professor Hang.
It should be seen as the logical step in the development of management.

This does not mean that all companies are this 4th Generation; many
have accepted parts of it, many others are still operating in the 3rd
Generation.

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Chapter 1.

The R&D Concept

When dealing with the Management of

D-ETM NUS Lecture-2 2

D-ETM NUS Lecture-2 Lecture 2 3

Technology in Industry can be defined as:

the industrial application of scientific and engineering knowledge

with “industrial” meaning:

D-ETM NUS Lecture-2 4

The application of the specific science and specific engineering

D-ETM NUS Lecture-2 5

Example: automated teller machine (ATM) industry

D-ETM NUS Lecture-2 6

D-ETM NUS Lecture-2 7

Manufacturing is defined as:

“mechanical, physical or chemical transformation of materials,

Technology applied to the manufactured product determines its:

A company is a “World Class Company” when its product represents a

D-ETM NUS Lecture-2 9

Technologies can be split into (“3rd Generation R&D”) :

Pacing technologies – technologies which have the potential to change

Key technologies - technologies which are embodied in the specific

Base technologies - essential, but known to and practiced by all

D-ETM NUS Lecture-2 10

Pacing technologies require “fundamental R&D”

Key technologies require “radical R&D”

Base technologies require “incremental R&D”

The difference in competitive impact of the different technologies is

D-ETM NUS Lecture-2 11

“Research” : • search for the unknown

“Development” : • follow up of successful research

“Research” results as such are most often

Together this is (Industrial) R&D.

Research Development Application Consultancy

Basic Strategic Applied Pre- Devt Adaptation/ Application

“Application” : • takes development results into actual use

“Consultancy” : • not really R&D; shown here only as it uses

Applied: - research aiming at a clear application, if successful

Predevelopment: - decision on subassemblies and processes

D-ETM NUS Lecture-2 14

Strategic: - interaction laser/material (meant for optical recording)

Applied: - pit size in magneto optical recording

D-ETM NUS Lecture-2 15

Predevelopment - material composition for magneto optic

Development: - design of product/specs

D-ETM NUS Lecture-2 16

That implies that “Development” has to be done thereafter. I prefer therefore to

Let us first look at the official terminology.

D-ETM NUS Lecture-2 17

“translation of research findings or other knowledge in a PLAN or DESIGN for a new or

D-ETM NUS Lecture-2 18

 “Research”: orderly approach to the revelation of new knowledge

 “Development”: applies and connects those principles to develop

D-ETM NUS Lecture-2 19

D-ETM NUS Lecture-2 20

D-ETM NUS Lecture-2 21

D-ETM NUS Lecture-2 22