How 36 Companies Manage Their Central Research

Abstract

In September 1993, we undertook a survey of research and development management practices in order to gain factual information on current practices and offset the plenitude of opinion. The survey was conducted among 26 successful corporations in which longer-term technology needs were served by a central research organization (see Survey Sample, next page). At the outset, we recognized that management of applied research in industry is complex. It is fitted to the company's business, its se, organization, culture, and many other unique conditions. Consider, for example, the range of the involvement between central research and the business unit. At one extreme, there is no involvement at all; that is, central research only does research to start new ventures. At the other extreme, research only initiates a project after an existing business unit has committed to accept the research results. Another difference among central research organizations is their end product. One research organization provides a turnkey manufacturing process while another provides pure technology to the business unit for further development into a product. Our survey was designed to understand current practices without trying to discover a silver bullet for research management. Consistent with this approach, most of the information presented in this article is the result of organizing and reducing the data from the survey. Where possible, we attempted to correlate practices with performance. Where instances of numerical significance were found, they are noted. Such instances are important but rare--in most cases, only trends and rankings were possible. Central Research Organizations At the start of the survey, we thought in terms of a singular central research function. Later, it became clear that this simple model was not universal. Although there were sine central research organizations, many other organizational structures existed as well. Among them: * Autonomous central research in each division. * Single central research function, geographically dispersed. * Corporate central technology advisory group. No effort has been made in this survey to segregate or evaluate the different types of research organizations. However, the sine corporate research facility was a primary consideration for selecting candidates for the site visits. Financing Research The money that companies spend for R&D and the amount allocated to central research are measures of a corporation's commitment to R&D. This survey showed an average (mean) investment of 5.5 percent of sales for all company R&D, with a spread from 0.6 to 15 percent. The percentage of sales allocated to central research had a median value of 0.5 percent but ranged even more widely, from 0.1 to 4 percent. It is interesting to compare these results with those of the first annual Industrial research Institute R&D Survey (Research . Technology Management, Jan.-Feb. 1994, pp. 18-24). The IRI survey indicated a research intensity of 3.7 percent of sales while our survey indicated 5.5 percent. This difference is easily explained by our smaller sample of low-R&D-investment industries. In view of the wide range of investment in research, we looked for evidence of different performance for different investments. A plot of nine-year average sales growth against the central research investment as a percentage of sales showed virtually no correlation. However, when the nine-year growth is plotted against central research investment per employee, there is a positive correlation (Figure 1).(Figure 1 omitted) We also analyzed the allocation of central research investment to meet strategic objectives. Core research is done on the core technologies that extend over more than one product. Such technologies often are a source of competitive advantage. Defensive research is done to protect the future of an existing business. …