Research and development

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Cycle of research and development

The phrase research and development (also R and D or, more often, R&D), according to the
Organization for Economic Co-operation and Development, refers to "creative work undertaken
on a systematic basis in order to increase the stock of knowledge, including knowledge of man,
culture and society, and the use of this stock of knowledge to devise new applications".[1]

Contents
[hide]

 1 Overview
 2 Pharmaceuticals
 3 Business
 4 R&D alliance
 5 See also
 6 Notes
 7 External links

[edit] Overview
New product design and development is more often than not a crucial factor in the survival of a
company. In an industry that is changing fast, firms must continually revise their design and
range of products. This is necessary due to continuous technology change and development as
well as other competitors and the changing preference of customers.

A system driven by marketing is one that puts the customer needs first, and only produces goods
that are known to sell. Market research is carried out, which establishes what is needed. If the
development is technology driven then it is a matter of selling what it is possible to make. The
product range is developed so that production processes are as efficient as possible and the
products are technically superior, hence possessing a natural advantage in the market place.

R&D has a special economic significance apart from its conventional association with scientific
and technological development. R&D investment generally reflects a government's or
organization's willingness to forgo current operations or profit to improve future performance or
returns, and its abilities to conduct research and development.

The top eight spenders in terms of percentage of GDP were Israel (4.53%), Sweden (3.73%),
Finland (3.45%) Japan (3.39%), South Korea (3.23%), Switzerland (2.9%), Iceland (2.78%) and
United States (2.62%).[2] The Commitment to Development Index ranks these countries,
rewarding them for research and development that support the creation and dissemination of
innovations of value to developing countries.

In general, R&D activities are conducted by specialized units or centers belonging to companies,
universities and state agencies. In the context of commerce, "research and development"
normally refers to future-oriented, longer-term activities in science or technology, using similar
techniques to scientific research without predetermined outcomes and with broad forecasts of
commercial yield.

Statistics on organizations devoted to "R&D" may express the state of an industry, the degree of
competition or the lure of progress. Some common measures include: budgets, numbers of
patents or on rates of peer-reviewed publications. Bank ratios are one of the best measures,
because they are continuously maintained, public and reflect risk.

In the U.S., a typical ratio of research and development for an industrial company is about 3.5%
of revenues. A high technology company such as a computer manufacturer might spend 7%.
Although Allergan (a biotech company) tops the spending table 43.4% investment, anything over
15% is remarkable and usually gains a reputation for being a high technology company.
Companies in this category include pharmaceutical companies such as Merck & Co. (14.1%) or
Novartis (15.1%), and engineering companies like Ericsson (24.9%).[3] Such companies are often
seen as poor credit risks because their spending ratios are so unusual.

Generally such firms prosper only in markets whose customers have extreme needs, such as
medicine, scientific instruments, safety-critical mechanisms (aircraft) or high technology military
armaments. The extreme needs justify the high risk of failure and consequently high gross
margins from 60% to 90% of revenues. That is, gross profits will be as much as 90% of the sales
cost, with manufacturing costing only 10% of the product price, because so many individual
projects yield no exploitable product. Most industrial companies get only 40% revenues.

On a technical level, high tech organizations explore ways to re-purpose and repackage advanced
technologies as a way of amortizing the high overhead. They often reuse advanced
manufacturing processes, expensive safety certifications, specialized embedded software,
computer-aided design software, electronic designs and mechanical subsystems.
Research has shown that firms with a persistent R&D strategy outperform those with an irregular
or no R&D investment programme.[4]

[edit] Pharmaceuticals
Research often refers to basic experimental research; development refers to the exploitation of
discoveries. Research involves the identification of possible chemical compounds or theoretical
mechanisms. In the United States, universities are the main provider of research level products.
In the United States, corporations buy licences from universities or hire scientists directly when
economically solid research level products emerge and the development phase of drug delivery is
almost entirely managed by private enterprise. Development is concerned with proof of concept,
safety testing, and determining ideal levels and delivery mechanisms. Development often occurs
in phases that are defined by drug safety regulators in the country of interest. In the United
States, the development phase can cost between $10 to $200 million and approximately one in
ten compounds identified by basic research pass all development phases and reach market.

[edit] Business
Research and development is nowadays of great importance in business as the level of
competition, production processes and methods are rapidly increasing. It is of special importance
in the field of marketing where companies keep an eagle eye on competitors and customers in
order to keep pace with modern trends and analyze the needs, demands and desires of their
customers.

Unfortunately, research and development are very difficult to manage, since the defining feature
of research is that the researchers do not know in advance exactly how to accomplish the desired
result. As a result, higher R&D spending does not guarantee "more creativity, higher profit or a
greater market share".[5]

[edit] R&D alliance

An R&D alliance is a mutually beneficial formal relationship formed between two or more
parties to pursue a set of agreed upon goals while remaining independent organisations, where
acquiring new knowledge is a goal by itself. The different parties agree to combine their
knowledge to create new innovative products. Thanks to funding from government
organizations, like the European Union's Seventh Framework Programme (FP7), and modern
advances in technology, R&D alliances have now become more efficient. Research and
development is nowadays of great importance in business as the level of competition, production
processes and methods are rapidly increasing. It is of special importance in the field of marketing
where companies keep an eagle eye on competitors and customers in order to keep pace with
modern trends and analyze the needs, demands and desires of their customers.
[edit] Definitions
R&D management can be defined as where the tasks of innovation management (i.e., creating
and commercializing inventions) meet the tasks of technology management (i.e., external and
internal creation and retention of technological know-how).[3] It covers activities such as basic
research, fundamental research, technology development, advanced development, concept
development, new product development, process development, prototyping, R&D portfolio
management, technology transfer, etc., but generally is not considered to include technology
licensing, innovation management, IP management, corporate venturing, incubation, etc. as those
are sufficiently independent activities that can be carried out without the presence of a R&D
function in a firm.[4]

[edit] Management models

Few dedicated management models for R&D exist. Among the more popularized ones are Third
generation R&D management[5], the Development funnel[6], the Stage-Gate model or Phase-
Gate model product development[7], and Technology integration[8]. All these models are
concerned with improving R&D performance and result productivity, managing R&D as a
process, and providing the R&D function with an environment in which the inherent
technological and market uncertainties can be managed.
Technology Management
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Technology Management is set of management disciplines that allows organizations to manage

its technological fundamentals to create competitive advantage. Typical concepts used

In business and engineering, new product development (NPD) is the term used to describe the
complete process of bringing a new product or service to market. There are two parallel paths
involved in the NPD process: one involves the idea generation, product design and detail
engineering; the other involves market research and marketing analysis. Companies typically see
new product development as the first stage in generating and commercializing new products
within the overall strategic process of product life cycle management used to maintain or grow
their market share.

Contents
[hide]

 1 The process
 2 Fuzzy Front End
 3 NPD organizations
 4 NPD strategies
 5 Related fields
 6 See also
 7 References

[edit] The process

1. Idea Generation is often called the "fuzzy front end" of the NPD process
o Ideas for new products can be obtained from basic research using a SWOT
analysis (Strengths, Weaknesses, Opportunities & Threats), Market and consumer
trends, company's R&D department, competitors, focus groups, employees,
salespeople, corporate spies, trade shows, or Ethnographic discovery methods
(searching for user patterns and habits) may also be used to get an insight into
new product lines or product features.
o Idea Generation or Brainstorming of new product, service, or store concepts - idea
generation techniques can begin when you have done your OPPORTUNITY
ANALYSIS to support your ideas in the Idea Screening Phase (shown in the
next development step).
2. Idea Screening
o The object is to eliminate unsound concepts prior to devoting resources to them.
o The screeners should ask several questions:
 Will the customer in the target market benefit from the product?
 What is the size and growth forecasts of the market segment/target
market?
 What is the current or expected competitive pressure for the product idea?
 What are the industry sales and market trends the product idea is based
on?
 Is it technically feasible to manufacture the product?
 Will the product be profitable when manufactured and delivered to the
customer at the target price?
3. Concept Development and Testing
o Develop the marketing and engineering details
 Investigate intellectual property issues and search patent data bases
 Who is the target market and who is the decision maker in the purchasing
process?
 What product features must the product incorporate?
 What benefits will the product provide?
 How will consumers react to the product?
 How will the product be produced most cost effectively?
 Prove feasibility through virtual computer aided rendering, and rapid
prototyping
 What will it cost to produce it?
o Testing the Concept by asking a sample of prospective customers what they think
of the idea. Usually via Choice Modelling.
4. Business Analysis
o Estimate likely selling price based upon competition and customer feedback
o Estimate sales volume based upon size of market and such tools as the Fourt-
Woodlock equation
o Estimate profitability and breakeven point
5. Beta Testing and Market Testing
o Produce a physical prototype or mock-up
o Test the product (and its packaging) in typical usage situations
o Conduct focus group customer interviews or introduce at trade show
o Make adjustments where necessary
o Produce an initial run of the product and sell it in a test market area to determine
customer acceptance
6. Technical Implementation
o New program initiation
o Finalize Quality management system
o Resource estimation
o Requirement publication
o Publish technical communications such as data sheets
o Engineering operations planning
 o Department scheduling
o Supplier collaboration
o Logistics plan
o Resource plan publication
o Program review and monitoring
o Contingencies - what-if planning
7. Commercialization (often considered post-NPD)
o Launch the product
o Produce and place advertisements and other promotions
o Fill the distribution pipeline with product
o Critical path analysis is most useful at this stage
8. New Product Pricing
o Impact of new product on the entire product portfolio
o Value Analysis (internal & external)
o Competition and alternative competitive technologies
o Differing value segments (price, value, and need)
o Product Costs (fixed & variable)
o Forecast of unit volumes, revenue, and profit

These steps may be iterated as needed. Some steps may be eliminated. To reduce the time that
the NPD process takes, many companies are completing several steps at the same time (referred
to as concurrent engineering or time to market). Most industry leaders see new product
development as a proactive process where resources are allocated to identify market changes and
seize upon new product opportunities before they occur (in contrast to a reactive strategy in
which nothing is done until problems occur or the competitor introduces an innovation). Many
industry leaders see new product development as an ongoing process (referred to as continuous
development) in which the entire organization is always looking for opportunities.

For the more innovative products indicated on the diagram above, great amounts of uncertainty
and change may exist, which makes it difficult or impossible to plan the complete project before
starting it. In this case, a more flexible approach may be advisable.

Because the NPD process typically requires both engineering and marketing expertise, cross-
functional teams are a common way of organizing projects. The team is responsible for all
aspects of the project, from initial idea generation to final commercialization, and they usually
report to senior management (often to a vice president or Program Manager). In those industries
where products are technically complex, development research is typically expensive, and
product life cycles are relatively short, strategic alliances among several organizations helps to
spread the costs, provide access to a wider skill set, and speeds the overall process.

Also, notice that because engineering and marketing expertise are usually both critical to the
process, choosing an appropriate blend of the two is important. Observe (for example, by looking
at the See also or References sections below) that this article is slanted more toward the
marketing side. For more of an engineering slant, see the Ulrich and Eppinger, Ullman
references below.[1][2]
People respond to new products in different ways. The adoption of a new technology can be
analyzed using a variety of diffusion theories such as the Diffusion of innovations theory.

A new product pricing process is important to reduce risk and increase confidence in the pricing
and marketing decisions to be made. Bernstein and Macias describe an integrated process that
breaks down the complex task of new product pricing into manageable elements

Ex of r & d as a business

For Chihuahuan Desert Research Institute, see Chihuahuan Desert Research Institute.

The Central Drug Research Institute (CDRI) is one of the first laboratories to be established in
India right after its independence. CDRI is among the thirty nine laboratories that are functioning
under the aegis of the council of scientific and Industrial Research CSIR of India. CDRI was
formally inaugurated on 17th Feb 1951 by the then Prime Minister of India, Jawahar Lal Nehru.

Central Drug Research Institute

Established 1951

Type Autonomous

Director Dr. Tushar Kanti Chakraborty

Location Lucknow, Lucknow, IND

Campus Urban

Website http://www.cdriindia.org/

CDRI is considered to be a pioneer research organization in the field of biomedical research

where all the infrastructure and expertise are available to develop a drug right from its concept to
market. The very latest techniques and methodologies are employed for developing drugs,
diagnostics and vaccines.

CDRI is a multidisciplinary research laboratory, employing scientific personnel from various

areas of biomedical sciences. For administrative and scientific purposes the Institute's manpower
has been grouped into 17 R & D divisions and few divisions providing technical and scientific
support. The following divisions of CDRI are involved in Research and Development.

 Biochemistry
 Botany
 Clinical and Experimental Medicine
 Drug Target Discovery and Development
 Endocrinology
 Fermentation Technology
 Medicinal and Process Chemistry
 Microbiology
 Parasitology
 Pharmaceutics
 Pharmacokinetics and Metabolism
 Pharmacology
 Toxicology