Paper Name A balanced scorecard approach for R&D- evidence from a case study

Author Barbara Bigliardi, Alberto Ivo Dormio

Article Citation Barbara Bigliardi, Alberto Ivo Dormio, (2010) "A balanced scorecard approach for
R&D: evidence from a case study", Facilities, Vol. 28 Issue: 5/6, pp.278-289

Design/methodology/approach A research methodology that is a combination of literature analysis, Delphi technique

and case study-based research was adopted. Specifically, starting from the analysis of the literature about performance
measurement and metrics in general, and applied to R&D environment in particular, the relevant indicators (both
financial and non-financial) suitable to be used for the R&D activities were identified. These indicators were then
submitted to a panel of experts, which, following the Delphi technique, determined the final list of indicators and the
final BSC model. Finally, in order to validate the BSC model obtained, it was tested on a company operating in the
automotive industry.

It has always been difficult to make connections between R&D investments and results, that is to give an answer to
questions like How to commensurate the R&D efforts with results?, How to increase R&D efficiency?, Which results
are expected by an ongoing R&D project?. The problems arise because three factors are of major importance: no
definitive means to measure R&D results; long period of time between initial investment and final results; difficulty to
foresee the results (Osawa and Yamasaki, 2005).

According to Thomas and McMillan (2001) three main categories of performance measures (PM) are identifiable for
R&D: economics, bibliometrics, and strategy. Economics measures are often indices recombining data items from
corporate financial statements or other public economics databases. They have the advantage of linking R&D
effectiveness to overall business operations results: Deng et al. (1999) confirmed the ability of technology indicators to
predict stock returns and market-to-book ratios. However, economics measures are subjected to environmental
turbulences. Furthermore, the impact of R&D on economics measures often has a time-lag of more than two-to-three
years. Short-term economic measures can be biased and unable to reflect the influence of corporate R&D strategy if
empirical data are cross sectional and limited within a short time period. Bibliometrics measures use patents or scientific
publication data to investigate the quality of a firms technology portfolio and its R&D efficiency (Thomas and McMillan,
2001). Strategy measures are related to corporate strategic goals and sales growth is a widely used proxy, even if it is
often misleading that it does not necessarily generate profits. If profit generation is the ultimate goal for the corporate
R&D function, we would rather use economics measures to substitute strategy measures. Bibliometrics and economics
measures are particularly relevant to the corporate R&D managers

In contrast, in the last decades an increasing interest in broader-based techniques is noticed, such as the Intellectual
Capital model, that focuses on the drivers of innovation within firms (Mouritsen, 1998). Many authors have concluded
that, due to the complexity of the concept to be measured (i.e. R&D activities), multiple integrated measurements of
output need to be utilised (Tipping et al., 1995; Utunen, 2003; Werner and Souder, 1997) in order to obtain both a
quantitative and qualitative measurement and, in the mean time, more information on the effectiveness of the R&D
activities measured (Werner and Souder, 1997). Garcia-Valderrama et al. (2008a), recently identified the three types of
integrated measurements that are most frequently utilised when dealing with R&D: the technological value pyramid,
benchmarking and the balanced scorecard.

Kerssens-van Drongelen and Cook (1997) have been the first that highlighted the link among the five main output
measurements utilised in literature and in practice (namely, cost, quality, time, innovatory capacity and contribution to
profits), and the four perspectives of the BSC

Donnelly (2000) observed that about 40 per cent of new products do not achieve the returns desired, and stressed that
this may be due to the inadequacy of the performance measurement techniques usually adopted, that does not fit well
with the companys strategy. Also Pearson et al. (2000) suggested the use of a BSC for the measurement of R&D
performance, in alternative to the traditional financial techniques. Li and Dalton (2003) described the implementation of
the BSC in the company Pharmacia and introduced a fifth dimension Learning and innovation. Bremser and Barsky
(2004) stressed the inadequacy of the traditional measures for those companies where the cycle of innovation is more
important than the cycle of operations. The same authors highlighted the following benefits that a company may obtain
from the use of a BSC:

. the simplicity to translate a companys strategy into operational terms;

. the alignment of the organisation structure with the strategy;

. the transformation of the strategy into a continual process;

. the implementation of a process for learning and adapting the firms strategy;

. the creation of a leadership for change in the strategic management system.

As far as the R&D unit is concerned, the R&D manager emphasized two main concept: what really means R&D for
Company A and the peculiarities of R&D activities. As for the former, he highlighted that the role of R&D is to generate
innovation, that has to be distinguished from the concept of idea and creativity. The idea is the result of the human
creativity, the innovation is the idea that, during the innovation process, materializes becoming an invention, and, as a
final step, generates a profit.

R&D manager as well all R&D personnel, agree that deploying the corporate BSC in the functions and departments of
R&D may help to achieve the integration of technological planning with the strategy of the corporation. The learning and
growth and the innovation perspectives are the most important ones, as a confirmation of what emerge from the
literature review: in fact, they will help to meet companys strategic objectives related to the satisfaction of customers
and stakeholders (Li and Dalton, 2003).

The results from the case study shows that the economic perspective has to be preserved, because it represents the
tangible indicators of corporate wealth, but companies need to monitor critical parameters of their business strategy,
such as quality, time, customer satisfaction and employees motivation, which can allow for a broad and accurate view of
company performance and reflect the financial conditions and the growth prospects obviously than economic results
can do. As stressed in previous studies, the innovation and growth and learning perspectives resulted to be the most
important when dealing with R&D activity.
Paper Name A Balanced Scorecard framework for R&D
Author Teresa Garca Valderrama, Eva Mulero Mendigorri, Daniel Revuelta Bordoy
Article Citation A Balanced Scorecard framework for R&D", European Journal of Innovation Management,
Vol. 11 Issue: 2, pp.241-281

The pursuit of innovation also involves a series of scientific, technological, organisational, financial and commercial activities.
Research and development (R&D) is only one such activity and may be involved at various stages in the innovation process, not only
as the original source of novel ideas, but also as a solution to problems as they are identified.

The implementation of strategies requires integrated systems of measurement that capture changes in both financial and non-financial
returns. The basis of such systems of measurement should be the alignment of the organisations main processes (R&D, production,
marketing and other traditional functional areas) with the corporate strategy; and the factors considered critical in achieving the returns
should be utilised as parameters for the measurement of these returns. Traditionally, R&D activities have not formed part of corporate
strategies, and this has been one of the biggest difficulties in the choice of instruments of measurement of the returns from this type of
activity. Today, R&D is a key strategic topic for many if not most companies, and should therefore be aligned with the corporate
strategy and associated management procedures (Pearson et al. , 2000).

Translation of company strategies in the financial perspective. The translation of strategies in the financial perspective is
aligned with the improvement of the companys situation in the interests of shareholders. Strategies designed to increase market share
or to increase productivity should be related to the strategic objective of improving the financial situation of the company.
Translation of the company strategy according to the customers perspective. In this case, the object should be to identify the
segments of the market, select those market segments the company aims to satisfy, and identify proposed value to deliver to the
segments selected. Customer satisfaction will lead to a higher rate of customer retention and/or the widening of the market, among
other objectives. In turn, this will foreseeably generate better financial results for the company.
Translation of the company strategy in the perspective of internal processes. It is in this perspective that we have worked
most in the development of the BSC for R&D, the topic of this article. The proposed value to be offered to customers takes material
form in the particular attributes and benefits that the supplier company provides, through its products and services, to create
satisfaction and loyalty in its customers in the selected market segments. The proposed value is the key concept for understanding how
measurements are managed within the groups of indicators of customer satisfaction, increased retention and market share. The
satisfaction of both the shareholders and the customers are the consequence or result of the strategy of the company. The company as
an organisation executes its strategy through processes that constitute its internal value chain, with special importance being attached
to the initial activities of the value chain: R&D activities.
Translation of the company strategy in the perspective of growth and learning. The companys success in the execution of its
strategy will be based on the capacity of its organisation to learn, adapt and grow. This capacity also resides in the resources of the
organisation allocated to R&D activities, particularly the personnel.

The three types of integrated measurements most frequently utilised in the study of the efficacy of R&D activities are: the
Technological Value Pyramid (Tipping et al. , 1995), Benchmarking (Bean et al. , 2000; Krause and Liu, 1993; Tipping et al. ,
1995; Werner and Souder, 1997; Sharif, 2002) and the Balanced Scorecard (Kerssens-van Drongelen and Bilderbeek, 1999;
Kerssens-van Drongelen and Cook, 1997; Li and Dalton, 2003; Neufeld et al. , 2001).

In this respect, Bremser and Barsky (2004) argue that companies that employ large amounts of resources in R&D can benefit from the
key concepts of the BSC, fundamentally for its basic principles, focused on the achievement of strategies. In particular, these authors
identify the following advantages from its utilisation:
the company translates its strategy into operational terms using Balanced Scorecards and strategic maps;
the BSC aligns the organisation structure with the strategy, by cascading from the highest-level scorecard to strategic business units,
to support departments and to external partners;
it makes strategy everyones job, by allowing initiatives for creating strategic awareness and for using personal scorecards with related
incentives;
it makes strategy a continual process by linking budgets to strategy, implementing a process for learning and adapting the firms
strategy; and it mobilises leadership for change in the strategic management system.

Bremser and Barsky (2004) consider that, in the implementation of strategy, the employment of non-financial measurements related
directly or indirectly to the R&D plays an extremely important role, both at the level of internal processes and at the corporate level. In
companies with long cycles of product design and development, the cycle of innovation is more important than the operating cycle.
The process of innovation usually requires a longer period of time for value creation, in which new markets and new customers see
their expectations met; R&D activities are critical in the implementation of these expectations (Bremser and Barsky, 2004).

The pioneering proposal put forward by Kerssens-van Drongelen and Cook (1997) is based on the argument that all the
output measurements utilised in the literature and in practice can be placed under one or several of the following five high
level parameters: cost (efficiency), quality, time, innovatory capacity and contribution to profits, and that these high level
parameters can, in turn, be aligned with the four perspectives proposed by Kaplan and Norton (1992, 1993, 1996).

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Dimension of financial results: increased financial profitability and profits. The

Financial Results dimension would bear a close relationship to the final results of the
R&D activity; such results should, if positive, be reflected in the increase of the profits
figures, or in an improvement of the companys financial profitability. It is, however,
very difficult to prove that the good financial results achieved by the more innovative
companies are certainly or even probably the consequence of an effective policy for
R&D, and that this policy has generated the outputs and successes expected from the
R&D activity. Nevertheless, we have included in our scale two indicators related to the
financial results that the company obtains from applying the results of these activities,
both from the perspective of customers and from the perspective of innovation
(Armistead, 1981; Odagiri, 1983; Morbey, 1988; Odagiri and Iwata, 1986; Brenner and
Rushton, 1989; Morbey and Reithner, 1990; Curtis and Ellis, 1998; OECD y Eurostat,
1997, 2005; Lee et al., 1996; Abdel-kader and Dugdale, 1998; Patterson, 1998; Wakelin,
2001; Del monte and Papagni, 2003).
3.1.1.2 Dimension of customers: Improved positioning against competitors; increased
customer satisfaction; increased market share. No doubts exist on these aspects: with
relation to the potential marketing benefits deriving from R&D activities, both the
literature analysed and the experts consulted point to increased revenue from increased
sales, to the increase of market shares, and to greater customer satisfaction, as the best
indicators, from the perspective of customers (OECD y Eurostat, 1997, 2005; Lee et al. ,
1996; Abdel-Kader and Dugdalet, 1998; Canibano et al. , 1999).
3.1.1.3 Dimension of innovation. The reason for the inclusion of this extra
perspective is the need to separate clearly the commercial and financial results of the
company from the value it adds to its customers and shareholders in terms of
innovation. It is important in this respect to bear in mind that R&D activities only
constitute one part of the process of company innovation, and that with the inclusion of
this new perspective, companies would be able to determine the efficiency of all their
innovation activity, and to relate this to the resources and capacities of the persons
most directly involved in this activity, to the foreseeable consequences for its
processes, and to the degree of innovation really achieved.

How to define vision of R&D?

This complete paper is full of questions, may be helpful in preparing final questionnaire
Paper Name Applying the balanced scorecard for better performance of intellectual capital
Author Sanjoy Bose, Keith Thomas
Article Citation Applying the balanced scorecard for better performance of intellectual capital", Journal of
Intellectual Capital, Vol. 8 Issue: 4, pp.653-665
Today a companys survival depend on its ability to wield technology as a strategic
lever and to define its technological strategy, particularly within technology-based
enterprises. It is common knowledge that a technological strategy is a plan of action
that focuses on three key dimensions: the selection of the technologies for investment,
the introduction times of these technologies and the policies used to acquire them. This
paper will concentrate mainly on the models and the methods used to support
management in their choice of a suitable R&D project/technologies portfolio.

With the rapid development of the global economy, intellectual capital (IC), which can
represent the principal assets of many corporations, has become a critical driver for a
businesss sustainability (Bontis, 2001). The emphasis on intellectual capital highlights
an essential difference between companies operating in the old and the new
economies, where the primary market value in the past was in physical assets, while
value in the new economy is created and held primarily from the application of
knowledge and the firms intellectual capital.

Firms enjoy the prospects of significant profits commensurate with a huge increase in
market size the global market place. Yet, an environment replete with opportunity,
possibilities and potential also attracts multiple international competitors, each hoping
to secure some part of this global market. Thus, the reality is that firms are facing a
dramatically new and intense competitive environment.

The effect of this traditional focus on accounting statements and measures

of performance such as return-on-asset (ROA) and return-on-investment (ROI) is to
disguise structural cracks in strategy and vision that can jeopardise both a firms
long-term survival and shareholder wealth creation. The reason is that in a
hyper-competitive global environment, success depends not so much on short-term
performance measures, but on investments in intellectual capital to cover knowledge
gaps that can impede future competitiveness. Swissair and Wang Computers are two
notable examples of firms that met their demise because of a failure to address
knowledge gaps in face of the growing demands of competition in the knowledge
economy (Klein, 1998).

The process of translating strategy into action associated with the BSC involves
turning the companys strategic vision into clear and understandable objectives based
on the above perspectives. Some companies have moved beyond this early vision for
the scorecard, to discover its value as a cornerstone of a new strategic management
system with the potential to deliver a firms strategic objectives (Anthony and
Govindarajan, 1998). In this regard, Olve et al. (1999) suggest that there are four
processes involved in establishing this new strategic management system. These are:
(1) translating the vision, which helps managers to build a consensus around the
companys strategy and express it in terms that can guide action at the local
level;
(2) communication and linking, which lets managers communicate their strategy
up and down the organization and link it to unit and individual goals;
(3) business planning, which enables companies to integrate their business and
financial plans; and
(4) feedback and learning, which gives companies the capacity for strategic
learning, which consists of gathering feedback, testing the hypothesis on which
strategy was based, and making the necessary adjustments.

In closing, major changes often take a long time to effect, especially in large
organisations. Many forces, such as the departure of key people and change agents,
and the costs of maintenance can stall the process of change when still far short of the
finish line, which in any case is hard to determine. The BSC is thus arguably never
really complete. Rather, because the business environment is dynamic and constantly
evolving, an organisations scorecard needs to be constantly reconceptualised to reflect
developments outside the framework.
Paper Name Utilizing the balanced scorecard for R&D performance measurement
Author Wayne G. Bremser and Noah P. Barsky
Article Citation

Stage 1 Idea Evaluation

Gate 1 Decision to Develop Business Plan
Stage 2 Develop the Preliminary Business Plan
Gate 2 Decision to Develop Detailed Plan,
Investigate, and Develop
Stage 3 Detail Planning, Investigation, and
Development
Gate 3 Viable to Test and Validate?
Stage 4 Testing and Validation
Gate 4 Final approval for Production and Launch
Stage 5 Product Production and Launch
Gate 5 Decision to Continue Production
Stage 6 Product Support and Program Review
1. R&D Spending as percentage of sales
2. New products approved/released
3. Number of approved projects ongoing
4. Total active projects supported
5. Total patents filed/pending/awarded
6. Current percentage of sales of new products
7. Percentage of budget resources dedicated to R&D
8. Change in R&D headcount
9. Percentage of resources dedicated to sustaining
existing products
10. Average development cost per product
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