Research and Development





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Dynamic alignment of the vision, goals and strategies, as well as identifying the place and role of non-material assets in the process of value creation, its use in formulating and implementing the research and development strategy can have significant positive effects in terms of matching investment and results in this area of business.

 

Role of research and development in a business strategy The innovation capability is one of the most important factors of change. For the survival and prosperity of a modern enterprise, innovation is a necessity. R & D is one of the most important sources of innovation and a key lever in creating change in the company. As there is a cause of death in humans, the company is their inability to innovate. What the company needs to be the subject of detailed analysis and far-reaching decisions in this regard can be summarized in the following issues. First, how much to invest in research and development in order to come up with new products or processes. Second, how much has to be invested in order to improve existing products and processes. Thirdly, taking into account existing and potential knowledge and experience, is there a chance of success in research and development? In order to get answers, it is necessary to systematically monitor and identify: (1) areas that record rapid growth, (2) indicators of significant technological discoveries, and (3) areas that are stagnant or approaching the point of saturation (Janošević 1989, 67-71) . In this way, it is possible to direct R & D efforts into areas that have a strategic importance for the company, to areas in which they should only be in progress, as well as to areas in which they should not be engaged. The importance of investing in innovative activities is clearly seen in Figure 2, which provides a comparison of sales growth in innovative and non-innovative enterprises in different industries for the period 2006-2009. Sectors like providing legal services, software and IT development and building show the biggest difference in sales growth between innovators and those who are not. The energy production sector, on the other hand, shows the lowest difference, i.e. Investments in innovation are at least capitalized through sales growth. In analyzing the complex impact of different strategic resources on the growth and development of an enterprise, it is critical to determine the place and role of each. Although it is indisputable that for many companies, research and development is an important factor contributing to the creation of a competitive advantage, in formulating a growth strategy, it is necessary to consider the possibility of using other strategic resources. Namely, each company is a collection of unique resources and capabilities that provide the basis for achieving competitive advantage (Hitt, Ireland, Hoskisson 2003, 20-22). Enterprises gain, develop and expand their resources in time, and as they follow different development paths, they also have different resources. If the analysis shows that research and development plays an important role, it is far more effective to manage the research and development sector. The mortality history of Fortune 500 companies gives a good insight into the importance of research and development management (Ganguly 2000, 275-278). Similarly, empirical research shows that the size of investment in research and development is not a guarantee of its effectiveness and effectiveness. The application of the logic of the concept of a harmonized list provides a clearer consideration of the role of research and development in the process of formulating the strategy and a better connection between the stages of formulation and implementation of the strategy. For the success of research and development, the importance of good connectivity and communication of research and development with other business functions, especially with production and marketing, is of particular importance. It is useful to distinguish between three levels of connectivity: strong, medium and weak connections. In a weak connection, the flow of information is one-way and moves along the following path: research and development-production-marketing. In contrast to medium connectivity, where there is a feedback link, research and development-production and production-marketing, and not research and development-marketing, in the case of strong connectivity, one takes into account the constant balance of the interaction between all three functions. Due to the necessity of continuous adjustment to the newly created situation, the connection must be dynamic, not static. Competence in research and development is the connective tissue of various jobs and at the same time are the driving force for the development of new jobs. Since these competencies are “hidden” (like the root of a tree), they can not be easily imitated, so the secret of success is not in exceptional products, but in a unique set of abilities that enable the company to create exceptional products. Competence in research and development is the connective tissue of various jobs and at the same time are the driving force for the development of new jobs. Since these competencies are “hidden” (like the root of a tree), they can not be easily imitated, so the secret of success is not in exceptional products, but in a unique set of abilities that enable the company to create exceptional products. Competencies enable the company to diversify into new markets and re-use and reconfigure what works best. According to (Prahalad, Hamel 1990, 82-84), strategic management is a process of collective learning that is focused on developing and creating key competences. In order to emphasize the importance of collective learning in the enterprise, Prahalad and Hamel use the term core competence as something that best expresses the dynamic learning process that is working here. The core of competence is defined as the collective knowledge of the organization, in particular in terms of how to coordinate different production capabilities and integrate multiple flows of technology. Thanks to the core of competence, diversified companies can achieve greater synergy between strategic business units (SPJs). In this case, the company strategy does not only respect the desired portfolio of operations and SPJ, but also portfolio competencies. The ways of diversification can then be guided by competence, not just the attractiveness of the market. What looks like a highly diversified portfolio, may be essentially a small number of core competencies. The intention is to provide incentives for finding and developing competencies in an enterprise that will open new ways to achieving the chances and success of the market. In order for R & D to be integrated into the overall business activity of a company, research and development goals should be formulated from different perspectives and incorporated into a business strategy. The first step in this process is to look at the place and role of research and development in achieving alternative strategic options (Steele 1975, 53-63). Research and development plays a particularly important role in the implementation of technology leadership strategies. Technological leadership represents a strategic commitment in terms of being the first to introduce a technological change that supports a particular strategy and encompasses not only development, but also successful commercialization of technology, but also measuring the sustainability of technological leadership. Although technological leadership is frequently analyzed from a product or process technology perspective, it has a much wider context. Technological leadership is often seen as a way to achieve a generic differentiation strategy. The leadership position, however, can be achieved by the technologies involved in each of the value chain activities, so it is possible to use them both to reduce costs and to differentiate. Determining the role of research and development in an enterprise strategy can be analyzed from the point of view of: (1) the existing business, (2) expansion of an existing business, where expansion can be achieved by introducing related businesses or engaging in businesses that are outside of the existing portfolio, and (3) completely new business activities that result in the provision of new products or services. Therefore, R & D management focuses on issues related to supporting and defending current business activities, in contrast to engagement aimed at creating additional opportunities either by supporting the expansion of existing business or through diversification. Namely, the business portfolio of an enterprise consists of different jobs or products. In order to be able to manage such a complex business efficiently, different ways of using research and development must be known. A particular type of strategic decision-making is bringing research and development into the function of individual business portfolios, or a portfolio of competencies. A technology strategy is a broader concept than a research and development strategy because it does not only concern the acquisition of technology through activities within the company itself. The technology strategy determines the basic way in the acquisition and use of technology (Utunen 2003, 31-39). Ford (Ford 1988, 85) defines a technology strategy as one aspect of a company strategy that deals with the use, development and maintenance of the sum of the overall knowledge and capabilities of the company. Technology can be generated internally or externally to be purchased. The acquisition of technology through its own research and development results in the creation of its own basic knowledge and enables extensive training of specialists before starting production. Buying technology assumes little or no research and development, small technical and financial risks, and the ability to quickly start production. Another important dimension of the technology strategy is the use of. The dilemma is whether to invest in using your own technology or sell it to another company. Numerous difficulties follow the process of determining the value of the new technology. This is because the value of a new technology determines the products, processes, or services that represent its result, and the market can often be underdetermined. The amount and quality of available information on new technology can affect the probability of wrong decision making. Usually no secondary benefits of new technology are not certain. In addition, both the buyer and the seller want to maximize the benefits of technology transfer. Namely, the price should be given to the creator of the technology to provide adequate compensation, and to the buyer to achieve satisfactory profit and liquidity. In order for the R & D activity to contribute successfully to the achievement of strategic commitments and specific business objectives, it is necessary to know, evaluate and analyze a large number of factors and their interdependence (Figure 3). The most important factors that should be considered are: 1. Market characteristics, 2. Competitive business position, 3. State of technology. When considering different modalities of using research and development for strategic purposes, it is necessary to know the market characteristics of certain industrial branches. For example, in branches that produce consumer goods, where modest technological advancements are present and whose markets are strongly responsive to product differentiation and innovation in distribution and sales, work on technological improvements will concentrate mainly on searching for evolutionary improvements. Such tendencies enable the limited technical knowledge of most customers, thus mitigating the consequences of lagging behind in the implementation of significant technological innovations. In industries that are subject to rapid technological development and whose products are used by technically educated customers, the commitment to great innovation can prove to be beneficial. This will be spurred by frequent technological improvements by competitors, as well as the speed at which a successful innovator is gaining market share. It is necessary, then, without any hesitation, to take quicker steps with the improvements of others. In industries that produce mostly undifferentiated products by slow-moving technology, where it is possible to expect a reaction in the market due to price differences, the most promising route can be minimizing the overall cost of research and development. Issues in this field primarily relate to the relative value that is attributed to performance in relation to the price in a particular market. In other words, how much value does the customer give to performance differences, and also how much difference in performance can be obvious to him? If the performance differences for the customer are very important and can be accurately determined, it is clear that the acquired superiority of the product must be maintained. Also, it needs to be estimated how much the buyer is sensitive to the price. In products that are difficult to differentiate, small price differences are important, and the highest priority must have a predominance in this regard, which will often be achieved by lowering costs. If the products differ in style or characteristics, or if the purchase can be associated with an emotional moment, then the sensitivity to the price is probably lower. It is also significant if the R & D sector is managed to support the specific requirements set by individual product life cycle phases. For example, during the growth phase, emphasis is on improving product quality. Later, it is possible to reduce costs and develop technical service. When studying these issues, caution and studiousness in identifying the market are important. Skilled and imaginative segmentation can enable the company or its competitors to segment the market so that a niche niche is found on the market for a particular product. Segmentation can pass relatively unnoticed and not cause a greater reaction by competitors. In the management of research and development, it is also necessary to take into account the competitive position of a particular business. Know the main competitors, anticipate the strategies they will probably apply, including their possible reaction to the adopted strategy. If the company is the market leader, then the research and development strategy should support the orientation to maintain this position. If the enterprise is lagging behind, then the exit from this position is requested, or, if possible, the bad sides are reduced to a minimum. This latter is usually achieved by segmenting the market to find the “emptiness” in the market in which the company can have a leader position. Winning the leader market is a slow and expensive venture, unless the leader does anything or insufficiently. On the other hand, market share can be quickly lost in favor of companies that implement the strategy of increasing market share. A particular danger is related to the fact that products go through different phases in their lifetime, that competitors develop alternative approaches to meet certain needs, and that, therefore, market share preference, which is not ensured in the long run or over time, becomes insufficient attractive. This may be the reason for the company to decide to expand its business activity by introducing new products into a production program that can with different products present different market and technological (non) connectivity. The business that already has a strong position in the current markets is in a better position to demand an additional challenge in the neighboring areas. On the other hand, it would not be good for the business that is currently struggling to survive and faces a sharp competitive pressure to look for additional challenges. It is quite clear that it should be able to identify attractive related markets or new products that require related technologies that a business might endeavor to exploit. If such chances can not be identified, or if those efforts are disabled due to the lack of a suitable technological base, then there is no real strategic alternative. In order to evaluate the competitive position of a particular business, it is necessary to analyze in detail a large number of factors, in particular: what is the penetration achieved on the market, how strong distribution channels are in which product lines are the product and / or cost of the product line, the position relative to the other the main competitors in the market, how competitive the situation is dynamic – are the main competitors well-known and relatively predictable entities or is the market in turmoil and whether new competitors appear? It is very uncertain and may be a competing situation when it is attacked on a non-marketable market. However, the fluidity of this situation can be an attractive new opportunity for the rapid breakthrough of the newcomer, which is far more attractive than the efforts to gain new customers in the already formed market where there is a stable competitive structure. In close connection with this, of course, is the issue of technological power and the strategy of research and development of competitors. If a company faces strong competitors in markets that are sensitive to product performance, technology must allow for emphasis on product performance. In the event that competition emphasizes adequate technical performance that highlights low costs and quick response, the company should evaluate the relative benefits of competing against competition based on costs compared to looking for superior products whose price the buyer will not consider attractive. In analyzing the state of technology, it starts primarily from the phase in its life cycle and the possibility of its further improvement. Knowing the life cycle of technology allows the management team to locate products based on specific technology on the wrong life cycle (development, application, application growth, maturity and degradation). The more technology is closer to the stage of maturity, the less chances of achieving competitive advantage. On the contrary, for a company that has established a strong competitive position using technology that is looking at long-term prospects, proposals for exploring alternative approaches are unlikely to be attractive. After the emergence of new technology, a new area of ​​opportunity is created, but as time goes by, much of the knowledge that can be used is becoming more and more used. Since technological change can not last forever in any field, technological progress becomes more expensive as we are closer to the stage of maturity and degradation. At this point, there is often a discontinuity of technology. The fact that certain limits can be made in improving certain technology management should be used to create or adopt new technology, because how technology matures business should be less and less under its influence. It is not surprising that branches with a long tradition have difficulty finding innovations based on their own existing technology. Significant dangers are also that old technology can be improved even after the emergence and introduction of superior technology. On a number of examples, it has been shown that companies have been trying to engage heavily on old technologies, even when sales have already begun to fall because of the competitive pressure of new technology. It is known that the smallest and most reliable cathode ray tubes are developed after the introduction of the transistor. Also, giants in the field of mechanical calculators did not make a successful transition to the production of electronic calculators, while the manufacturers of mechanical typewriters did not become successful manufacturers of electronic typewriters. In addition, companies that have achieved success in the past by introducing new technology can not permanently build their competitive advantage. Different techniques of technological forecasting are used to examine the likely technological changes and their impact on the company’s operations. Initial deficiencies and the price of new technology hide the danger of its limited application. It is not enough to collect information from the existing market, as non-traditional competitors and businesses can be sources of technology that is significantly threatened. That is, technological threats begin with the birth of some technological innovation outside this industry. It would be wrong to wait for the decline in the significance of old technology to create the need to assess the threats. In the process of analyzing the state of technology, it is also necessary to determine the performance of competing technologies, that is, whether they are leading or lagging behind in their application. The most difficult aspect of the problem is the assessment of the relative advantages of alternative technologies in the future and their location in the appropriate life-cycle curve. In order to make this comparison, it is necessary to anticipate future demand characteristics and at the same time anticipate future trends in the development of each competing technology, and then evaluate which competitor’s advantage can most likely be achieved in the future. In the development of new technology, the emphasis may be on the effect of substitution in the creation of products that meet completely new needs, which provide new services. In the first case, the function implemented by the new technology remains essentially the same, only the physical process by which the function is shaped changes significantly, or the physical shape of the product radically changes, although the same needs and requirements are met. Since there are already products that meet a particular need or function, the new technology achieves its superiority at lower costs or through greater added value, such as performance improvement, size reduction, increased reliability and comfort. The emergence of new technology outside the business to which the company belongs is a serious threat. The second subgroup of work on new technology includes research and development activities that allow for a completely new product function, or which drastically alter human abilities, so that it creates differences in species rather than degree. Namely, there is a creation of a new business or even a new branch.

Use of a co-ordinated list for the formulation of research and development strategy

The R & D strategy determines the basic way of performing these activities. The research and development strategy should be in line with the general strategy, generic strategies for the level of business and the strategy of individual business functions. The research and development strategy is one aspect of the technology strategy, and there are already a few words in the previous presentation. Formulating a research and development strategy requires equal attention and analytical approach as well as the formulation of a company strategy. This is especially for the reason that the research and development strategy should provide support for strategic determinations and the coherence of different business functions. Consequently, continuous evaluation and analysis of the impact of a large number of factors, and in particular chances and threats from the environment, competitive position and technological capabilities, is a constant task. By analyzing the various factors that are relevant to the strategy decision selection, the adequacy of the existing strategy will be reviewed, different support measures will be identified, and various forms of alternative strategies will be evaluated and evaluated. Formulating and implementing successful research and development strategies requires the combined use of a number of resources that are rare, valuable, hard to copy and are not suitable for replacement. The synergy effect is of particular importance in the process of formulating and implementing the research and development strategy. Synergy based on research and development is stimulating to enter new activities, it is much more difficult to imitate and leads to higher profitability. Specific R & D strategies are the basis for deciding how much to allocate for these activities, how to balance the research and development program, how to use existing ones and to obtain new resources, and what criteria to evaluate R & D projects. The R & D strategy is being realized through its research and development program and the process of selection of research and development projects. The R & D program is a set of currently active and accepted projects in this field that have a delayed start. The primary purpose of compiling the program is to determine the required amount of investment in the R & D sector and to balance the research and development program from a standpoint of different dimensions. No Formulating a company’s research and development strategy using a co-ordinated list 209 there are precise and universal rules for determining the necessary investment in research and development. At the same time, one needs to bear in mind that there is a “critical mass” of investments below which research and development programs are almost completely ineffective. In addition to the amount of investment, it is also important to determine the structure of the program because the R & D program is not a simple sum of its parts. The structure determines the participation of individual types of projects in the program. The need for balancing the program is of a strategic nature. By balancing the research and development program, the desired portfolio of projects is supported to support strategic determinations. Therefore, the requirement for successful management by research and development is to understand the significance of program balancing from a variety of dimensions, in particular regarding the relationship between: yield and risk (commercial potential and technical difficulties); offensive versus defensive research; short-term, mid-term and long-term projects; projects of different levels of risk; research vs. development; fundamental to the applied research; product versus the process; individual scientific areas; engagement of individual project teams; projects that work in the company and outside the company.

 

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