SAN F ERNANDO VAL LEY S TATE COLLEG E
P ROJ ECT TRAN SFER
I•
FROM RES EARCH TO DEV E LOPMENT
A TH ESIS S U BMI TTED TO
TH E FAC ULTY OF TH E SCHOOL OF BUS I N E SS AND ECONOM ICS
IN CAN D I DACY F O R TH E DEG REE OF
MAS TER OF SC I E N C E
P RO D UCTION AN D PERSON N E L
by
Aa ron Rose
--·
NORTH R I DG E , CALIFORN IA
June 1 967
APPROVED by t�esis committee
ACKN OWLEDG EMEN TS
F i rst, I wa n t to acknow l edge the patient forebearance of
m y w ife, B e tty, who has become fi rm l y convi nced that I
am never go ing to quit going to s choo l .
Second , I wan t to acknow l edge w i th thanks the h e lp g i ve n
me by thos e peop le i n the i ndustries s o l i c i ted for their time
and effort in answeri ng my ques tions . Much effort was put
forth by som e who I wo u ld l ike to ac know ledge i nd i vidua l l y
but in deferen ce to those who wished to rema in anon ymous ,
I am no t ca l li ng out any for spec i a l thanks .
iii
TA B LE OF CONTE NTS
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AC K NOWLEDG EM EN TS
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TA B LE OF CON TEN TS
iv
LIST OF TA B LES
vi
LI ST OF I LLU STRAT I O N S
vii
AB STRAC T
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I CHAP TER
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2
I N TRO DUCTI O N
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Sta tement o f th e P roblem
P ro b lem Eva l ua tion P la n
Defini tions
Res earch Today
P rocedure
II.
RESEARCH P ROG RAM EVA LUATI O N
Genera l Fac tors
Departme nt of Defense Research
Conc l us ions
Ill.
RE SEARCH P ROJ ECT EVA LUAT ION
Sta bi l i ty Fac tors
Growth Fac tors
Ma rketabi l i ty Factors
Posi tion Fac tors
Research & Deve lopment Fac tors
Engi neering Fac tors
P roduc tion Fa c tors
Summary
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3
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6
9
11
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21
22
29
34
40
46
50
53
56
57
TAB LE OF CO NTENTS - con tin ued
Page
IV.
RE SEARCH A N D DEVE LOPMENT I N THE
AEROSPAC E I N DUST RY
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58
Chara c teristics and P robl ems
Th e Requiremen ts Merry-Go-Round
Survey Res u I ts
Summary
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60
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92
RESEARCH AND DEV E LOPME N T I N T H E
C H EM I CA L I N DUSTRY . .
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v.
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Charac teris tics
Res u l ts of th e Survey
Summary
V I.
SUMMARY AN D CONC LUS IONS
APP EN D IX'
A.
Bo
c.
Q uestion Lis t
Lis t of Compan i es Sol ici ted
So l i c i tation Letter
B l B LI OGRAPH Y
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96
1 13
1 14
1 16
1 19
1 23
1 24
LIST OF TA BLES
Ta ble
39 Steps Toward P rofi ta b le New Products
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Page
26
LIST O F I LLU STRA T I O N S
Page
Figure
1.
2.
3.
N ew P roduct Life Cycle . . . . . . . .
A Typica l P roduct Deve lopmen t P rogram
F low Chart For New-Product Development
VII
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43
47
AB STRAC T
P ROJECT TRANS F ER FROM RE SEARC H TO DEV E LOPMEN T
by
Aaron Rose
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Mas ter of Scie nce in Bus i ness Adm i n istra tion
June 1967
A l though cons iderable has been wri tten concern ing the s e l ection of
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res earch prog rams or projects , the problem of transfer of a project from res earch
to deve lopment management has rece ived comparative ly l i ttle attention . One
finds genera l statements to th e effe ct that proj ect eva luation shou l d be carried
out th ro ughout the l ife of th e project .
Cri teria us ed for prog ram and project eval uation were carefu l l y revi ewed .
A q uestionna ire was prepared a nd c i rc ulated to both aerospace and chem ica l
corporations . Rep I ies from seven aerospa ce compa nies and four chem ica l
companies were re ceived and s ummarized . Criteria for pro j ec t se lec tion and
transfer are ess entia l l y the same as thos e found in the l i terature . Th e major
em phas is is on econom ic fac tors .
l
be attributed
1
tion than any other facto r .
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Differences between th e aerospace and chem i ca l indus try co u l d on l y
to
the fact tha t one - aerospace - i s
o
monopson y a n d th e other
! is more near l y pure competi tion . Pro j ect transfer is more a function of orga ni za'
1.
C HAPTER I
I NT RO D UC T I O N
Statement o f the Problem
I n sc i ence and engi neering, the transfe r of proj ects from resea rch to
devel o pment managemen t has become inc reasi ng l y i m po rtant. Rec en t l y, A i r
Fo rce Reg ulation 375 has requi red the se pa ration of resea rch a n d development.
i However, the re is re lati vely l i ttle information conce rning transfe r c rite ria i n
! contrast to a ve ry co nsidera b l e bod y of l i te rature conce rning proj ect se l ection .
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At the beg inni ng of th is stud y, it was assumed that such a project transfe r
takes place i n one fo rm or anoth e r and that th e c ri teria for the tra nsfer in the
! ch em i ca l and Aeros pace industries a re diffe rent . Th is postu late has been
exam ined by a review of practi ces in the two i ndustries and the resu l ts
presen ted .
The n ext cha pter discusses the probl em of establ ish ing a resea rch prog ram
as contrasted to individua l pro ject eva l uation which is conside red in Cha pter 3 .
I
Sel ection c riteria inc l ude such factors a s ra te -of -return, re l evan c y to present
products or techno logy, market penetration , etc . These c ri te ria can be ex pected
1to have rel evance to the transfe r process .
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2.
3�
One fi nds genera l statements in th e l iteratu re to th e effect tha t project
eva l ua tion shou l d be carried out th rough out th e I ife of the projec t . Th e tra nsfer
. step, i tse l f, is often considered to
be
se lf e v ident, is ig nored, or is assumed to
occ ur na tura l l y I ike ra in or th e weath er . Transfer prac tices in th e Aerospace
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and Chem ical industries a re examined in Ch ap ters 4 and 5.
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Prob lem Eva l uation Plan
The fi rs t step in th e eva l ua tion of the prob l em wi l l be a definition of
.
. . .
l th e de fanataons . The importance of research toda y
terms wat h some comment on
is discussed briefl y .
Resea rc h and deve l opment (R&D) as a descri pti ve term can now be
considered a singu lar word due to usage . Th is is founded on th e fac t th at th e
entire process i s a con tinuing one with th e transitions becom ing m ore and more
b l urred . I n order to bette r understand the transfer from research to deve l opment,
a carefu l study of th e basis and reasons for going into resea rch with th e concom i ta nt comm i tment to deve lopment is nec essary . Th is study is Cha pter 2 .
A detai led discuss i on of research project (as contrasted to program) se l ection
I ma kes up Ch apter 3 .
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I transfer process .
These sel ection criteria a re the means of unde rstandi ng the
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4.
Def i n i ti ons
These defini tions wi l l be used in th is paper .
Research
A critica l and exhaustive study of na tura l (physica l) phenomena to a rrive
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at conc l usions concern ing the behavior of nature or to revise accepted con­
c l usions based on new l y-discovered fa cts .
Deve l opment
Deta i l ed study and app l i cation of research conc l usions towa rd a spec ific
end use .
Chem ica l I ndustry
That segm en t of Amer ican industry concerned with the conversi on of
natura l or sem i -fin ish ed materia l s i nto sem i-fi n ish ed or consumer usable products
through chem ica l or ph ysi co-chem ica l changes .
Aerospace I ndustry
That segmen t of Amer ican i n dustry concerned with su pporting the Department of Defense or Nationa l Aeronautics and Space Agenc y th rough design,
deve l opment and p roducti on of products for such requi rements . Th is i n c l udes
subcontractors and presumes that the bu l k of such effort is government supported .
Comment
The defin i ti ons g iven a bove are th e a u th or•s and represen t the summa tion
5.
1 2 3
of defin itions ' ' of which three are specifical ly cited . The federal govern-
m ent th rough the National Science Foundation po l l s annua l l y research organizations concerning their ac tivities and pub lishes the resu lts . 4 As an introduction
to the questions and to obtain consistent answers, the fo l lowing definitions are
5
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g1ven:
a.
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Research is systematic , intensive study direc ted toward
fuller scientific knowledge of th e sub j ec t studied . Such
study covers bo th basic and app l ied researc h .
Basic research is research that is directed toward inc rease
of know ledge in scienc e . I t is research in which the
primary aim of the investigator is a fu l ler know l edge or
understanding of the subject under study, rather than a
practical app lication, as is the case with app l ied research.
Th e differen tiation of these two categories is diffic u l t . One in teresting
way to reso l ve th e difficu l ty is to refer to basic researc h as that work which is
1
F . Russe l l Bichowsky, I ndustrial Research , Brook l yn , N . Y . , Chemical
Publishing Co . , I nc . , 1 942 , p. 24.
2
Co Co F urnas, (ed.) Research in I ndustry, New York: D. Van Nostrand,
I nc . , 1 948 , p . 2 .
3
Leonard S . Si l k , The Research Revo l ution, New York: McGraw- Hil l
Book Co . , I nc . , 1 960, p . 1 4, 49 .
S . Nationa l Science Foundation , Federal Funds for Research , Devel opment and Other Scientific Activities, Fiscal Years 1963, 1964 and 1965, XI I I ,
Survey of Sciences Resources Series NSF 65- 1 3, Fe b . 1 965
4u.
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t b i d o 1 Po
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presented at a sc ientific society meeti ng in contrast to app l ied research which is
presented at an engineering soci ety meeting . Furnas 1 compares basic research
to th e conc eption and birth of an infant and app l ied research to ch i ldhood. In
c h i l dhood, defin itive characteri sties begin to appear . These characteristics
can be eva lua ted with a fa ir degree of certainty . Studying the characteristics
of a group of chem i ca l compounds is basic research; synthesizing a specific com- :
pound for a parti c u lar end use is app l ied research .
"b.
Devel opment is th e systematic use of scientific knowledge
directed toward the production of useful materials, devices,
systems, or methods, inc l uding design an d deve lopment of
prototypes and processes . I t exc l udes qua l ity contro l , routine
produc t testing, and production . 11
A num ber of the companies con tacted as part of th is study indicated tha t
these last definitions are now bei ng adopted for their own use. Th is is partic ularly true in th e aerospace ind ustry which dea ls primari ly with th e government .
I n addition, the use of these defini tions has led to standardization and mutua l
understanding .
Research Today
An obvious question is: " Wh y worry abou t the probl em of project manage-
ment transfer? 11 A brief review of research today provides an obvious answer .
2
Weiss points out that over the last 45 years, an nua l expend itures for research
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2
Furnas, loc . c it. , p . 7
Herbert K. Weiss, " Research and the Nationa l Econom y, 11 I ndustria l
Researc h , J u l y 1 965, pp . 50-56 .
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7.
and deve lopment in the Un ited States have i ncreased from 0. 1 % of gross na-
tiona l produc tion (G N P) i n 1 920 to over 3% in 1 964 . A l eve l i ng off at 3 . 75%
1
to 4% in 1 970 is estimated . The federal spending has increased from $ 1 . 0
bi l l ion in 1 956 to over $ 5 b i l l ion i n 1 964 (estimated). In the ph ysical sc i ences
alone the growth has been from. $900 mi l l ion to $ 1 , 300 mi l l ion for basic research
from 1 963 to 1 965 . The major federal con tri butors to these expenditures are the
National Aeronauti cs and Space Admin istration, Department of Hea lth, Educa-
tion and We lfare, Atom i c Energy Commission , Departm ent of Defense and th e
N ational Sc ience Foundation.
The cost of a sing l e proj ect with i n this to ta l wi l l vary from a few do l l ars
(h undreds) to a sum wh ich represents a significant percentage of the total. For
th e larger projec ts th e prob lems and cost of transfer to deve lopmen t i l l ustrate
how important the subject of project transfer has becomeo If transfer is expen-
sive, it becomes extreme l y im portant to m ake the transfer in an effic ient
manner; here, effi ciency refers : to perform ance, cost and managemen t .
2
Dr . Richard R. N e l son g ives other reasons for the importance of projects
transfer wh en h e points out that sc ience enri c hes our n ation i n a number of
ways inc lud ing: ( 1 ) improvem ent in human l ife, (2) improved abi l i ty of the
1
2
U. S. N ational Science Foundation, lot. cit., p . 9 .
Richard R. N e l son , "The Effect of R&D on the Economy, '' 1 7th Annua l
Conference on the Adm in istration of Research Proceedi ngs, " 1 964, p . 1 0 .
8.
eco nom y to meet needs, {3) tech nological ch anges, and {4) employme nt
•
. Q u anti tati ve e vi dence co nce rni ng th ese e ffects is scarce but qu ali tati ve
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! e vidence
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is o bvious to any o bserver.
Duri ng th e last two ye ars, more and more attentio n h as bee n paid to
the re l ati ve ro l es of the Federal Go ve rnme nt and the pri vate sector i n basic
1
th e total, applied rese arch 24 % and basic research 10%. The Federal Go vern1m e nt fi nanced about 65 % o f the total . Co ncern o ver these statistics i s evide nced
1 2 3 4
!everywh e re. ' ' ' Consideratio n of these factors co nstitutes a se parate
su bject and is i ncluded h e re o nly to em ph asi ze the importance of rese arch and
! deve lo pment considerations. Th e su bject h as bee n o f sufficient i nterest to
1
5
w arrant a s peci al bi bl iograph y.
1
11Pro ject Hi nd sigh t to Iso l ate Gai ns of DO D's Fund ame ntal Rese arch , 11
Avi atio n Week, Oct. 18, 1 965, p. 47.
2
" H ouse Grou p W ants NSF to Coordi nate N atio n's Scie nce Resources, 11
Chemical and E ng i ne eri ng N ews, Janu ary 17, 1 966, p. 4 1
3
11Se nate Studies Im pact of F edera l R&D F u nds, 11 Chemical and E ng i neeri ng i
N ews, June -1 4, 1965, pp. 22 -2 3.
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11Re pu bl icans Q uestion Rese arch P roportion, 11 A vi atio n Week, M arch 2 9,
965, p. 78 .
5
11Sel ected Bi bliograph y of R& D and I ts I m pact on th e Eco nomy, 11 O ffice
o f S peci al Studies, N atio nal Scie nce Fou nd ation, N S F 58-18, Wash i ngto n, D.C .,
! M ay 1958 .
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9,
Procedu re
An i n i tia l attempt was made
to
con tact a few com pan ies of whom the
a u thor had some spec ia l know l edge wi th the idea of extended i nte rview i ng of
ke y personne l . Th is was unsuc cessful for a num ber of reason s large l y connected
w i th time, trave l and personne l avai l a bi l i t y . Next a l i st o f ques tions was
prepared (Appendix A) wh ich was mai l ed to a sma l l g roup (seven) of com pan ies .
I n i tia l repl i es were either 11 no 11 or were very sketch y .
Next, th i rty- two com pan ies (Appendix B) from the one h undred-fifty
1
largest l isted in Fortune magaz ine were chosen . A letter (Appendix C) w i th
th e question l i st previous l y prepared was ma iled to th ese compa nies . Th e
response was gratifying (59%) . Of th e answers recei ved, seven acknow ledged
my request but did not answer th e questions; of these seven, one answe r was
'
nasty and the rema ining six were divided between not answeri ng beca use of the
p roprieta ry nature of the information tha t wo u l d be i n th eir answer and not
' answe ring beca use too much time wou l d be requ i red fo r a good answer . Four
chem ical compa nies and seven aerospace co mpan ies rep I ied . Th e re p l ies
i
i nc l uded one in terview , one di cta ted tape, repri n ts of artie les on re lated subject� ,
a suggestion to refer to th e H a rvard Business Review, and severa l l ength y
l etters w i th deta i l ed answers . There were some requests tha t th e data so urces
1
11 The 500 Largest U . S . I ndustr i a l Corpo rations, .. Fo rtune, J u l y 1 965,
pp . 149- 168 .
1 0.
not be identified . For th is reason no specific so urce wi I I be i n di cated but a l l
rep l i es are i n c l uded .
I n the next cha pter, resea rch program ana l ysis is discussed. Research
pro j ect eva l ua tion wi l l be disc ussed in Chapter 3 as a prel ude to considering
the transfer from research to deve lopmen t . Th e criterion for p roj ect se lection
are often the same as those for transfe r . Fo l lowing th is in Chapter 4 and 5,
the two industry groups wi I I be considered separate l y and th en compared .
C HAPTER I I
RESEARCH PROG RAM E VALUAT I O N
Corporations, and particu larly directors of research , have long been
interested in the problems of choosing research projects . Their tria l s and tribu-
la tions have been we l l chronic led and serve as an exc e l l ent basis fo r understand-
ing subsequen t steps in the l ife cyc le of a project - from idea to de l ivered product.
Two aspects of this problem must be considered . First and most importa n t
is defin ition o f the entire research program; second, is th e choice of the individua l
. projects . The entire research program wi I I be considered in this chapter .
!
Genera l Fac tors
The c riteria for tota l research program eva l uation. has been best desc ribed
I by Hi l l and G ranger 1 who list eighteen fundamenta l princip les which can be
I
l used for such an eva l uation:
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1.
2.
Is th ere a comprehensive long-range research p lan which is
a ligned with co rporate goa l s?
Is th e long-range research p lan bac ked up with tangib le, specific,
and periodica l ly upda ted programs to meet the research objectives?
1
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wil liam E. Hi l l and Charles H . G ranger, 11Managemen t Obj ectives and
Bases for Eva l uation , 11 Chapter 2, Handbook of I ndustria l Research Managem ent,
Carl Heye l (ed.) , Reinho l d Publishing Corp . , New York, 1 959, pp . 58-60.
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12,
3)
Wha t percentage of corporate earn ings is derived from new products
deve loped by resea rch w i th i n the last fi ve (or ten) years?
4)
To what extent were the corporate products , and subsequent improvements, fi rst in troduced by th is company rather than by competi tors?
5)
Wha t does ma rket research show as to th e qua l i ty standa rds of our
products for the app l i cations at wh ich they are directed?
6)
To wh at extent are th e sources of new products based upo n interna l
research {versus l icenses , purchase of patients, etc . ) ?
7)
Wha t has been happen ing to th is company's share of the ma rket?
8)
How does our ratio of pa ten t grants co mpare with competition ?
9)
1 0)
1 1)
To wha t extent has research been instrum enta l in cost-reduction
programs? I n increases of productivi ty?
How do our research expen di tures , in propo rtion to our size,
compare with those of indiv i dua l com peti tors ?
How do indiv idual competito rs score on criteria 3) th rough 1 0) ?
1 2)
Wha t i s th e qua l ity and extent of th e advan ce produc t p l an n ing
progra m ?
1 3)
Are th e externa l g roups with wh ich resea rch dea l s effec tive l y
served?
1 4)
I s th ere a stamp of innova tion and creativity w i th i n the organiza­
tion ?
1 5)
Are th e key peop l e wi th in the organ ization possessed of strong
motivations, such as deg ree and sustenance of dri ve?
1 6)
Are effective tech niques in use to get the most va l ue from th e
who l e research organization ?
1 7)
I s there a depth of personne l beh i nd the key positions and an
organized personne l deve lopment progra m ?
1 8)
Does manageme nt have persona l confidence in th e individua l who
is heading the research activities?
1
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13.
Wh en Mr. Roger Wi l l i ams recei ved th e Perk i n Med al of the Society o f
Ch em .1c aI I n d ustry, h e rnade a pertment pomt concern mg rese arc h . l H e s tate d
·
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th at there are sti l l on l y two essenti al operat i ng functions: m anufacturi ng and
distri bution . E veryth i ng e lse, rese arch not excepted , exi sts to support those
functions . The app l i c abi l i ty o f th is a dec ade l ater w i l l be considered h ere .
2
I Wi l l i am Swager of Batte l l e descri bes the re l ati ve ro les o f m an agement and
rese arch; rese arch m an agemen t visual izes and i nterprets tech n i c al deve l opments;
th is is forw arded to top m an agement who uti I ize techn ical i n form ation to
crystal l ize busi ness go als . I n turn , th ese c l ear business go als aid rese arch
m an agement i n c l ari fyi ng rese arch obj ecti ves w h i ch are con ti n u al l y i n terpreted
for th e rese arch st aff. Those who e val uate research prog rams must recognize
rese arch personnel as 11 th ings" oriented rath er th an 1 1people 11 oriented . C. P .
Snow 3 h as i l l ustrated th is question at length i n a series o f books such as
11Sc ience and Go vernment'�
1
Roger Wi l l i ams, "Rese arch From A M an agemen t Viewpoint, 11 Ch em i c al
Process ing, Aug ust 1955, pp . 45-46.
2
Wi l l i am L . Sw ager, " Underst and i ng M an agement's Ro l e i n Research ,"
Batte l l e Tech n i c al Re view, J anuary 1960, p� 7
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3c. P . S now, " Science and Governmen t, 11 H arvard Un i versity Press ,
C am bridge, M ass ., 1961, p . 27 .
14.
1
Dr . James B . Q u i nn of Da rtmouth Col l ege has ou t l i n ed corporate
responsibi l i ties for integ ration of research i n to long ra nge p l an s :
1)
Determ ine what managem ent wants to do and wha t resedrch it mu st
carry out to accom p l ish th ese goa l s .
2)
3)
Forecast how various eco nom ic, techno log i ca l , and so ciolog i ca l
fac tors wi I I affect management goa Is .
Deve lop a genera l strateg ic p l an th at wi l l m i n i m i ze major tec hno logica l th rea ts to th e compa ny and wi l l increase to the ful lest i ts
techno log ica l opportun ities .
4)
Determ i ne how large the tota l research p rogram sho u l d be and how
the individua l research projects sh ou l d be ranked on the ba sis of
5)
the i r contri bution to th e company' s goa l s .
Ba l ance the support g i ven to each important segment of research
on d deve lopme nt .
A l l of th ese authors emphasize the requi rement of esta b l i sh i ng long ra nge
goa l s . Th is i s an area (i . e . resean�h p l a nn i ng) wh ere many managem en ts do not
recogn ize th eir ob l igations; the goa l s may be so narrow in defini tion th at
va l ua b l e work is ignored or so broad and genera l as to bear no re l ation to
corporate goa l .
1
James B . Quinn, 11The Cha l l enge of Effect i ve P l a nn i ng for Research , "
and Eng i neering N ews, January 9, 1 96 1 , pp . 78-84 .
I Chemica l
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15,
1
Dr . E . D . Reeves who was with ESSO for many years discussed a
compa ny who cou l d h ave spen t on l y $50, 000 instead of $3 m i l l ion on a research
prog ram .
The $3 m i l l ion was spen t over a two yea r period to determ i ne technica l
feasi bi l i ty . Th is compa ny then spent an addi tiona l $50, 000 o n l y to dec i de no t
to embark into th e new busi ness area represented by th is program . Th e sma l l er
expendi ture at th e ve ry beg inn ing wo u ld have been suff i cient . Four reasons for
th e dec ision were advanced : ( 1 ) the marketing orga nization was not qual ified ,
(2) th e new produc t wo uld make the company a di rec t competitor wi th i ts
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c ustomers , ( 3) i ts present products were suc cessfu l and g rowth seemed continuous,
(4) cost of marketing the new prod ucts wou l d make profi ts marg ina l at best .
I n th is case, there had been no rev iew of resea rch and corporate goa l s as an
entity; th e dec ision was made as a resu l t of a number of conversa tions between
I
I
research , marketing and ma nufa cturing w i thout tota l coo rd i nat ion .
Errors in overa l l research programs ma y be:
2
1.
Bui l d up a research organization far larger than needed .
2.
Restri ct th e research organiza tion to th e poi n t where i t can not
poss ible generate the amo unt of te chno l ogy i ts opera tion req ui res .
3.
F i nd th at, beca use of poor commun ica tions with resea rc h ,
importan t probl ems are no t rece i vi ng proper em ph asis .
4.
D i scover that it does not have the technica l competen ce to
successfu l l y market new products deve loped by research .
\dward
Duer. Reeves, " I ndustria l Researc h , 11 Chem i ca l and Eng ineering
News , October 25, 1 965, pp . 92-97 .
2
1 bid . , p . 92�
16.
as:
1
Dr. Reeves has ca l led resea rc h a business and l isted its responsibi l i ties
1.
2.
3.
4.
5.
Know j ust what techno logy its com pany needs,
Create th e needed techno logy,
Do everyth i ng possible to help th e company use tech nol ogy
effec tive ly,
Carry on its interna l operations effic ient ly, and
Be an effective member of the management team .
2
As is often th e case, Vic e Adm . Rickover has commented suc c inctly:
In my op inion too m uch money is spen t on research and deve lopment .
I persona l l y fee l we could get more and go further in a l l fie lcls of
government research and developm ent by cutting out some of th e
proj ec ts and concentrating people on a sma l l er number. It takes
time to spend money . But spending money does not by itse lf guarantee
prog ress . Furth ermore, you soon get to the po int where you h ave
c reated vested interests in research and development . You soon have
a large number of groups who keep on work ing in research and deve lop­
ment because i t has become their l ive l ihood .
Department of Defense Research
Since the Depa rtment of Defense ( DO D) looms so large in researc h and
1 deve lopment (R& D}, a look at their program prob l ems is a nec essary part of
!th is stud y . A l tho ugh much h a s been· wri tten , th e best summary i s by
1
E . Duer Reeves, "Research is a Business, " Nationa l Industria l Research
Conference, Ch icago , I l l . , Apri l 24, 1 957
2
!
Hyman G . Ric kover, "Commen t" House of Representatives, June 25,
1 959 as reported in Chemical and Engi neering N ews, August 3, 1 959, p . 3 .
17.
T . K. G l en n on , J r .
1
who defi nes the obj ective o f m i l i tary R&D as prov i d i ng
the Un i ted States with a c ap abi l i ty to procure we apons wh ich are needed or
m ay be needed to support the needs o f n ation al securi ty. More spec i fi c al l y,
the o bj ecti ves o f m i l i t ary R&D c an be viewed as:
1.
To c arry o n the deve lopmen t of we apons s ystems required to meet
the current m i l i t ar y needs of our armed fo rces,
2.
To expand the tech no log i c al al tern ati ves av ai l abl e to meet
future needs of n ation al securi ty,
3.
To provide (along w i th non -m i l i tar y research) a basis fo r
understandi ng the i mp l i c ations of tech no logi cal acti vi ties of
our enemi es,
4.
To prov ide tech no logi c al inputs to th e p l an n i ng process of the
mi l i tary servi ces .
The DOD program to meet these o bjecti ves is d i vi ded into six c atego ries :
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1.
Rese arch
2.
Exp lorator y Deve lopment
3.
Adv anc ed Deve lopment
4.
Engi neer ing Deve lopment
5.
Man agement an d Support
6.
Operation al S ystem Deve lopme n t .
The si ze of e ach project grows as i t moves from c ategory to c ategory. The
! movemen t of projects through these categories is wh at th is paper is al l about .
1
1
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Thom as K. G l enn on, Jr . , " Po l i c i es for Mi l i tar y Rese arch and Deve l opment, " P -3253, Th e Rand Corporation, Novem ber 1 965 .
1 8.
Th e fo l low ing desc ription of ea ch of these ca tego ries serves as a revi ew of the
en ti re process from R& D to produc tion . A l though DO D pra c ti c es are desc ri bed ,
the categories are pertinent to i ndustrial resea rch and, in fa ct, a re used by
DO D contra c tors . Here R&D is fi tted in to th e broad spe ctrum of industria I
practi ce .
Mr . G l ennon po ints out th at the advanced development activi ties
represent a bridg ing of th e gap between the techno log y efforts of th e exp loratory
deve lopm ent an d the systems orien ted efforts of Ca teg ories 4 and 5; tha t is,
eng inee r i ng deve lopment and managemen t and support .
It is th e first p lace
in the evo l u tion of a sys tem from i ts tech no log ica l orig in to its fin a l form where
the needs of th e m i l itary are forma l l y and rea l istica l l y brough t togeth er wi th
ava i lable and po tentia l tech no log i ca l capa b i l i ties . Th is procedure sounds q u i te
nea t and appropriate . Tech no log i ca l possi bi l i ties that were uncovered during
I
th e research ph ase are expl o red furth er in explora tory deve l opmen t . The
exp loratory resea rch resu l ts and fu ture m i l i ta ry needs are th e bas is for exploita­
tion of spec ific tec hno logies in advan ced deve lopmen t . At ea ch step t h e costs
of th e project increase but presuma b l y th e qua l i ty of th e information on which
th e project dec isions a re made improves and th e risk of techn i ca l error dec reases .
Unfo rtunate l y the orderly process tha t one visua l izes from th is description
frequent l y fa i ls to appear .· F irst, an unantic ipated m i l i tary th rea t may a rise
and a system may be rushed into deve lopme nt w i thout a l l of its technolog i es
1
having been proven . The present Vie tnam s i tua tion has ca used m uch of th is
sort of th i ng to happen . Further, Mr . G l ennon po in ted out th at the prog ram
1 9.
referred to as the X- 1 5 with obj ectives appropriate to research or exp loratory
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development may cost so much that it is placed in advanced deve lopment wh ere
I con tro l from high er h eadquarters can more easi l y be exercised.
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A program may
enter into system deve lopment but unan ticipated techno logica l prob lems force
additiona l basic experimen ta l work to be carried out in order to arrive at a
so l ution . In ony case, he does fee l that the system is sound ond serves as a
broad outl ine with i n wh i ch th e prob l em of transfer can be hand led re l atively
easi ly.
Three subcategories wi th i n advanced deve lopm ent have been evo l ved .
These ore ( 1 ) programs which represent the exp loitation of promising techno logy,
(2) experimenta l systems,
(3)
subsystem or component technica l deve lopment.
Mr. G lennao says that there are those who fee l that an orderl y progression
.
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of tech no logy through exp loratory and advanced deve lopment stages to incorpora- :
! tion in systems is inappropriate and i neffective .
I
It i s arg ued that th e efforts to
deve lop techno logy require focus equa l to !hot impased by th e need to produce
)I a system.
In the orderly prog ression to a system, only those areas are focused on i n
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wh ich a consensus exists that sign ificant breakth roughs are possible and requiTed .
Thus no effort is wasted on tech nology for its own sake. Those who are opposed
to th is idea of techno logy for its own sake would e l im i nate some forma l advanced
!deve lopmen t projects and some expl oratory deve lopment work i n favor of ea rl y
I
! system deve lopment .
I
was the B-70 .
Th e last major program in wh ich th is system was fo l lowed
20 .
I n m i l i tary R& D1 there has been estab l ished a contra c t defi n i tion ph ase
wh ich takes p lace before a major eng ineering or operationa l system deve lopment
project can be ini tiated . Th e prereq uisi tes for the contrac t defin i tion phase
a re:
.
1
2.
primari l y eng ineering rather th an experimenta l effort is
req u ired1 and the tech no logy needed is sufficiently in
hand;
the mission and performan ce en ve lopes a re def ined;
3.
th e be'S t te ch n i ca l approaches have been se l ected;
4.
a thorough trade-off ana l ysis has bee n made;
5.
the cost effectiven ess of th e proposed i tem has been
determ i ned to be favorab l e i n re lationsh i p to the cost
effectiveness of competing items on a DO D wide basis;
6.
cost and schedu l e estima tes are cred i b l e and acceptable .
Th is s im p l e statement of these prereq uisi tes leads one to be l ieve th at th e
DOD system is clear and we l l defined . However, th ere are many prob lems
1
invo l ved in the app l i c a tion of th e system . The dom inan t characte ristic of th e
m i l i tary R&D environmen t i s uncertainty .
There i s uncerta i n ty as to th e future detai l objectives of our m i l i ta ry
forc es, and there is uncerta i nty as to the fu ture effectiveness of these
forces1 and th ere is uncerta i nty as to the a l ternative means ava i lable
for ach ieving these objectives .
Al l of these uncerta i n ties are exte rna l; in addition th ere are obvious l y interna l
un certa i n ties .
1GJenncin, loc. cit.
·
2. 1 '
Mr . G l ennon a l so disc usses th e a l l oca tion of resources among types of
R& D efforts . Th is has been covered to some extent in the statis tica l information
presented ea r l i er . H e a lso d iscusses the impact of DO D organ ization on R& D
effort and g ives some gu ide l ines for structuring m i l i tary research organ iza tions .
A l l of th is is pertinent to understand i ng aerospace R & D .
Con c l us ion
Th e overvi ew of tota l research programs presented in th i s chapter
shows tha t research must be integrated wi th other company activi ties .
I n parti cu l ar, th e program eva l uation cri teria must be re l ated to corpora te
goa l s . A summary of Departme n t of Defense research and deve lopment
ca tegories was g i ven as a basis for understanding aerospace R& D . The
criteria for transfer from one DO D ca tegory to another is the same as those
used by industry .
I n the fo l l ow i ng chapter, ind ividua l research project eva l uation is
descri bed .
CHA PTER I l l
RESEARCH PROJECT EVAL UATI O N
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i
Pertinent to th e transfer p rob lem is deta i l ed eva luation of individual
1
pro j ects . John S . Ha rris of the Monsanto Company says th at the basic pro b l em
in research pro j ect sel ection is to arrive at the sm a I I est n umber of cri teria that
wi l l inc l ude a l l aspects of importance to comm erc i a l iza tion of a new product .
I n th is chapter, a detai led review and summary of a l l poss i b le cri teria is presented .,
I
The criteria for selection which can a l so be used for tra nsfer are very n umerous;
j th is subject represents one of the largest sing le subjects discussed i n the
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' l i tera tu re .
One particu lar breakdow n of se l ection criteria was chosen as a basis for
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2
the presentation and a l l others a re discussed with i n that context .
Research programs are be ing more ca refu l l y scruti nized every day . The
I problem of such scruti ny has been descri bed in an arti c l e i n th e Wa l l Street
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iJourna l about th ree years ago .
1
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Th e a rtiC l e indi cated th at the n um ber of
---.--�----...--,..--
1 John
S . Harris, " New Product Profi l e Cha rt, " Chem ica l and Eng ineering
I
! News , Apri 1 7, 1 96 1 , p . 1 1 0- 1 1 9 .
I
2
r . T. Mi l ler, "Th i rty- N ine Steps Toward Profita b le New P roducts, ''
Chemica l Processing, October 1 957, p . 32-36, 262-264 .
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3
Norman C . Mi l ler, J r . , " Labora tory Pressu re , " The Wa l l Street Journa l ,
! Apri l 5, 1 963, p . 1 .
22 .
!
23.
marketable new products com i ng out of the laboratory have not been proportiona l
to ri ses i n research costs . Th e Joh ns-Manvi l ie Corporation spends a bout
$11, 000, 000 a year for research . I n 1962 they appo i nted a fi nanc i a l con troller
for the Centra I Researc h La boratory at Manvi l l e, New Jersey. Th is off i c i a l and
i h i s twe lve man staff was g i ven the responsi bi l i ty of estimating proba b le prof its
I
I of each proj ect before large sums of money were comm i tted and then to keep a
c l ose check as the pro jects prog ressed . They feel that th e pol icy has resu l ted
i n the eli m i nation of severa l projects with marg i na l profi t potentia l . Prior to the
I appo i n tment of thi s financia l control l er, on l y spot checks were made by th e
I h eadquarters con tro l l ers staff .
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Oth er companies w i th the same type of control
are Owens- I ll i nois G l ass Company of To l edo and the Be ll and Howe l l Company.
The estimated cost of mai n ta i n i ng .a research man in both e qui pment and
'salary was g i ven as $34, 000. a year.
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That n um ber has i n creased sharpl y since
1963. Th e proced ure used by Beckman was descri bed.
Both marketing and
deve lopm ent offi cia Is have to agree on the need for a new product and th en
approval is gran ted on l y for a low cost 11exp loratory proj ect . 11 If the idea
i survives that sc ruti n y,
a comp l ex 11fi nan c ia l appra isa11 1 is made wh i ch covers
I expected deve lopment and manufacturing costs and sa les vo l ume , se l ling price,
1 competition and a variety of oth er da ta .
Then th e compan y ca l c u l a tes wh eth er
the product is likely to yield i ts goal of an annua l 40% pretaxed profit on
24.
At varying po i n ts a l ong th e devel opment path add i tiona l appra isa ls a re made .
, As can be expected , th e research scientist have been unhappy with the c l ose
cost contro l .
Specific techn i q ues for judg i ng new prod uc t possi bi l i ties fo r th e start of
.
i new pro jects varies from the two laws and th ree pr i n c i p l es of Rog er L . Mart i l l
i
1
2
th rough the 39 steps of Mr . T . T . Mi l ler of W . R . G race and Co . to the
eighty-nine factors used by a l a rge ae rospace company and descri bed in the
next chapter .
Mr . Merri l l 's two laws a re: ( 1 ) uncertainties in new pro jects decrease
i nvesting in first phase studies of new produ ct idea s . These studies cost re lative l y
l ittle, th e' time to be cri tica l i s later when costs start to moun t . (2) Eva l ua te
new product projects forma l l y at freq uent i n terva l s , be as q uanti ta tive as
possible , insist on better answers on future costs and product po ten ti a l as projects
!prog ress . (3) Term i nate new product projec ts tha t don ' t offer reasonab l e
I
econom ic po tentia l . Past expendi tures are of no importance . I t is future cost
and poten tia l return that are cri ti ca l .
1
Roger L . Merri l l , " Proven Guides Boost Odds fo r New Product R&D
·Success, " I ron Age , January 20, 1 966, p . 35 .
I
2
T . T . Mi l l er , "Th i rty- N ine S teps Towa rd Prof i table New Products, 11
!Chem i ca l Processing , October 1 957, pgs . 32 - 36, 262 - 264 .
I
25 .
Mr. Mi l ler1s th i rty-nine steps are g iven in Tab l e 1. These steps are
div ided i n to seven areas wh ich wi l l serve as a bas is for the fo l low ing discussion
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on project eva l uation .
The first g roup of stab i l ity factors dea l prima ri l y w i th marke ting type
problems . Market research and deve lopmen t personne l have be en most pro l ific
in wri ting arti c l es to desc ri be the problems in th is area . Understand ing th e
ma rketi ng problems can best be done by reference to the new product I ife
cyc l e shown i n F ig ure 1 .
1
Th is p l ot was prepared by Booz , A l len and Ham i l ton and serves to
emphasize their poi n t that new product stra tegy sh ou l d be p lanned a round the
1
I
profi t c u rve not the sa l es curve . I n other words, new prod ucts must be deve l oped
I
at th e time when profi ts are a t a max imum in o rder to keep the sa l es cu rve from
bend i ng over sh arp l y a t som e l a ter time . I t is interesting to note th e pro b l ems
uncovered in th e Booz , A l l en and Hami l ton su rve y discussed in th is reference .
i Nea r l y 85% of th e companies surveyed have pro b l ems re lating to the organizat ion
!
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of the new prod ucts effort . Of th is tota l , 37% of the compan i es pinpointed the
problem as one of orga nization structure . Defini tion of responsibi l i ti es wa s th e
pro b l em in 20% wh ereas size of the orga n ization was of top concern i n on l y 3%
I of the
I
companies . Pro bl ems other than organ izationa l were personne l qual ifica...
tions and l ack of new ideas and creati vity . Other prob lems i n vo l ve i nadeq uate
1
11 New Products Can Be Ma naged, 11 Chem ica l and Eng i n eerin g News,
Decem ber 5, 1 960, p . 42 - 45 .
I.
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26 .
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TA BLE 1
39 STEPS TOWA RD PROF I TA BLE NEW PRO DUCTS
Stabi l i ty Factors
1.
2.
3.
4.
5.
6.
Durabi I ity of market .
Breadth of market .
Possibi l i ty of ca pti ve market .
Diffic u l ty of copying .
Stabi l i ty in depress ions .
Stabi l i ty in wartime .
I Growth Factors
7.
8.
9.
10.
11.
Un ique character of product or process .
Demand-supp l y ra tio .
Rate of tech no l og i ca l change .
Export possi b i l it ies .
Uti I ization of managemen t personn el .
I Ma rketabi l ity Factors
I
1 2 . Re lationsh ip to ex isting markets .
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1 3.
14.
15.
16.
17.
18.
19.
Company's reputa tion in a I I i ed fie I ds .
Re lation to probable competi tion .
Abi l i ty to meet serv ice requiremen ts .
Re l ati onsh ip to custom er 's products .
Large vo l ume w i th i ndi vidua l c ustomers .
Few variations or styles requ i red .
Freedom from seasona I fl uctuations .
I
I Posi tion Factors
.20 .
21 .
22 .
23 .
24 .
Time requi red to become establ i sh ed .
Va l ue added by in- company processi ng .
Exc l usive or favored purchasing pos ition .
Improved purchasi ng posi tion .
I n tern a l avai labi l i ty of raw ma ter ia ls .
27 .
TA BL E 1 - Con t in ued
Research and Deve lopment Factors
25.
26 .
27 .
28 .
Uti l ization of ex isting know ledg e .
Re la tionsh ip to future activi ties .
Uti l ization of existi ng lab or p i l ot ac tivities .
Avai labi l i ty of resea rch personnel .
Eng i neer ing Factors
29 .
30 .
31 .
Re l iabi l i ty of proc ess know-how .
Uti I ization of standard ized equ i pmen t .
Ava i l abi l i ty of eng ineering personn e l .
Production Factors
32 .
33 .
34 .
35 .
36 .
37 .
38 .
39 .
Uti I ization of id le equ ipment .
Uti l ization of surp l us uti l i ty capac ities .
Uti I iza tion and upgrad ing of by-products .
Uti I ization of fam i I iar processes .
Ava i l abi l i ty of produc tion personne l .
F reedom from haza rdous con d itions .
F reedom from diffi c u l t ma intenance � eeds .
F reedom from waste d isposa l probl ems .
28.
NEW PRODUCT UFE CYCLE
SALES VOLUME
ADDITIONAL NEW
..,
INTRODUCTION
GROWTH
MAJORITY
--
PRODUCT NEEDED
---
SATURATION
......
.......
DECLINE
Figure 1
Reference:
../
,
......
Chemical and Engineering News, Dec . 5, 1960, p. 42
2 9.
business analysis of new product ideas . Onl y a few compan ies reported problems
1 concerned wi th product deve lopment in th e laboratory .
A s l igh tly l arger number
,I reported probl ems concerned with market testing and about the sam e number with
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prob lems of commerc ial ization . I t is quic k l y apparent that appropriate atten tion
g i ven to th e th irty-nine steps of Tabl e I wou l d h e l p to al leviate th ese problems .
The very sizeab l e l ist of refe rences on project eva l uation was separated
i n to the six head i ngs inc luded under th e th irty-nine steps . Many authors who
purported to cover th e enti re subject actua l l y covered on ly a few of th e re l evant
factors . The fo l lowing discussion covers each of th e six factors i n more deta i I .
A l though. th e l ist is length y, al l pertinent fac tors are incl uded in order to provide
a firm foundation for judging transfer c riteria . It also serves to emphasize th e
"
superfic ial treatment often gi ven to projec t eval uation .
1
Stabi l i ty Factors
•
2.
3.
4.
5.
6.
Durabi l ity of market.
Breadth of market.
Possibi l ity of captive market .
Difficulty of copyi ng .
Stabi I i ty in depressions .
Stab i l ity in wartime .
30 .
These factors re l ate to th e broad ro l e of research and deve lopment and i ts
1
re lationship to th e tota l market. M r . Wi l l iam L . Swager states th at the ro l e
o f research and deve lopment i n the Uni ted States is two-fo l d :
1.
Enhance the possibi l i ti es of ma inta in ing the profitabi l ity of
p resent p roduct l ine, and
2.
Provide an opportunity for new sources of prof i t .
Th e most far-reach ing a n d p rofo und research resu l ts are steri l e in lab­
ora tory notebooks a nd reports . Unti l a company's marketing men can
see ways to exp loit th e resul ts, un ti l th e production departm ent can
devise means for i ncorporating them, unti l the financ ial commi ttee
can muster funds and j ustify the investment invo lved, th ey remain
s teri le . It is on l y after industrial management has transl ated th e
res u l ts into usefu l and marketable p roducts and processes that a
company rea l izes a profit from research . I n the l ast ana lysis th e
benefits to society from a particular sc ientific effort are not rea l i zed
in the resea rch lab . They are rea l i zed when th e company undertaking
tha t research makes a profit .
Th is is another way of emphasizing th e importance of the sta bi l ity fac tors
in determi ning th e rel a tionship of research and deve lopment to the market and
th e effect on the company in depressions and in war ti me .
I n the category of stabi l i ty fac tors, th e importance of long - ra nge goa l s
2
i s emphasi zed . Dr . Rasswe i l er has stated th at sel ecting a nd defining obj ec tives
is one of the best ways of contro l l ing research without destroying i ndi vidua l
initia tive. A good research organization is made of aggressive imagi native
1
wi l laim L . Swager, " P lanned Research and Deve lopment, " Systems
and Procedures, May 1 959 .
2
C i ifford F . Rasswei ler, "Se l ecting Research Obj ectives, 11 I ndustria l
I Laboratori es, J une 1 957, pp . 44-48
,
31.
people w i th a grea t dea l of individua l i n i tiative and a strong resentment to
d i ctation . A d i rector must not i nh i b i t i nd i v idua l th i nki ng and individua l
i n i tiative . He goes on to po int out that setti ng wo rthwh i le objectives and
exp lain ing why they are worthwh i l e is one of the grea test a ids to laboratory
mora le and h e l ps to increase productivity of th e R&D organ i zation .
Dr .
Rasswei l er desc r i bes a one-pag e ma rket and sa les ana l ysis wh i c h requ ires
approval up through th e management c yc le before go i ng ahead with the proje c t .
Th e fo l lowing h eadings appear on th is si n g l e sh eet� ( 1) object i ve, ( 2) fields
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of sa le i nvo l ved, ( 3) compet i ti ve products affecting the company 's busi ness or
progress, (4) compet i t i ve se l ling prices, (5) advan tageous properties of
compe ti tive products, ( 6) m i n i m um product object ive, (7) desi red qua l i ty for
I
I max imum sal es value, (8) advantages of the company's prod uct to be reta i ned ,
I
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I
I
J
I
( 9) an tic ipated soles vol ume , ( 10) spec ialized sol es effort . Al l of th ese h ove
perti nence to the six stabi l i ty facto rs l isted .
One of the most releva nt articles and one of the most complete publish ed
1
I i n recent years is that by David N . Ki efet wh i ch has pertinence to al l of the
1
factors be i ng discussed . He discusses th e changes that h ove been tak ing p l ace
and ore con ti nui ng to toke p l ace in in dustria l research . There is a w idespread
change i n th e ph i losophy of management of research . We ore now h earing
ques tions such as: 11How much sho u l d we spend for R& D? 11 1 1 0n what shou ld
1
David N . Kiefer, ''Wi nds of Change i n I n dustria l Research , " Chem i cal
and Engineeri ng News, Ma rch 23, 1964, p . 88 109.
-
32 .
we spend i t?"
toDo
we know if we are getting our money1s worth?11 Th ere is
some ind ica tion tha t there is a taperi ng off in the rate of in crease in ou t l a ys for
industr ial research . A number of the compa nies referred to by Mr . K iefer have
indica ted th at they have changed the i r ways of han d l i ng resea rch expend i tures ­
large l y in th e direction of tigh ter con tro l . He quotes Dr . Donald F . Mastick
of Stauffer Chem ica l Compa ny who says: 11 Th e o l d days of organic synthesis ­
when a l a bora tory cou ld be satisfied with ju st turning out large numbers of new
compounds - deve loped some i n teresting chemistry . Those days are gon e , you
can1 t spend you r time ex pl oring new rea ctions just because th ey are interesting
or just because they are re lat ing to th e chem istry you are using now. 11
As do many of th e a� thors on th is subjec t, Mr. Kiefe r presents a check
l ist for R&D pro j ec ts . The head ings are: ( 1 ) F inanc i a l - w i th eleven i tems
inc lud ing su ch th ings as return on sa l es, return on fixed ca pita l , f ixed cap i ta l
' investment pa y-out time, etc . (2) Research and Deve lopment - with nine
fac tors inc lud ing chance of tech n i c a l success, manpower needed, compet i ti ve
technica l ac tivi ty, etc . (3) Product ion - i n c luding fac tors such as processed
fam i l iarity, equ i pmen t avai labi l i ty, waste d i sposa l as a poten tia l , etc, up to
a to to I of el even . (4) Marketing - th i s has twenty factors or more th an an y
oth er heading and inc ludes the su bject a lready broug h t up of market pe rmanence,
market sta bi l i ty, promotiona l requ i remen ts, export poten tia l , etc . I t is readi l y
apparent th a t mark eting is extreme l y importan t in ma k ing any choice on R& D
pro jects . (5) Corpo ra te Posi tion - wi th six fac tors su ch as requ ired corporate
33.
.Aga in
size , affect on purchasing other materia Is, affect on presen t custom ers .
these are market re lated fac tors as we l l as corporate fac tors .
He summarizes seven form u las used for d i recting
� &D proj ects .
These .a re:
( 1 ) F red O l sen ' s I ndex of Return , (2) Ca r l Pacifico 's Project Num ber, (3)
Sol oman Disman 's Form u l a , (4) Gordon K . Tea l 's I ndex of Research Effecti veness , (5) Sidney Sobe lman 's I nvestmen t Worth Mode l , (6) The Hosko l d Transformation ,
(7) Presen t Va l ue of A Pro j ect .
1
Fred O lsen 's I ndex of Re turn dates ba ck to 1 948 . Th is index sets
a rbi trary va l ues on savings and sa l es from research . The va l ue of process
' sav ings for one yea r or 3% of th e sa l es va l ue of new products each year for
five years or 2% of th e sa les va l ue of im proved products ea ch yea r for two years
is used as a basis for co l c u l a ting an index of return . Th is was th e fi rst of such
th i ngs to be sta ted and many, man y others h ave been postu lated si nce that tim e .
As indicated ear l ier, th e usua l eva luation i s not com p l ete i n th e sense of
tak ing into accoun t a l l of th e factors . A cri tica l exam p l e is that of th e AMOCO
!
Chem i ca l s Corpo ra tion in Ch i cago � Th i s compa n y looks at such i tem s as market,
product, process, econom ic factors , and ge nera l f i t . Heavy emphas is i s put on
econom ic eva l uations .
1
F red O l sen , "An I ndex of Return on Research , " Chem i ca l Eng ineering ,
February 1 949, p . 296 - 297 .
2
H . C . Thorne , J r . , W . W . Twadd l e , and E . R . Grah l , " How to Eva l uate
Chem i ca l Projects, "Petro l eum Refiner, March 1 96 1 , p . 1 7 1 - 1 77 .
•
34.
I n summary it can be stated that th e stabi l i ty fa ctors are usua l l y ignored
.
in th e eva l uation of research pro j ects . Th ey may be i n th e back of th e resea rch
I
I.
director1 s mi nd but se ldom do they find a p lace i n th e form a l .eva luation proc edure )
or in th e check sh eets used by management in eva l uating research projects .
.
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Growth Facto rs
7.
Unique character of product or process .
8.
Demand- supp ly ratio
9.
Rate of tech no logica l change .
o
10.
Export possibi l i ties .
11.
Uti l ization of managem en t personnel .
Some aspects of th is he ading of growth factors have been covered elsewhere in the paper; for examp l e, the prob l em of how much to spend on resea rch .
I
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Research managers do not agree on the guide l i nes for the budget nor do th ey
a I ways agree w iih management on ih is subjec t . Foe tors iha t have been used as
a basis lor research budgets are sa les, profi ts, proj ects in !he sense of their li t
I into th e tota l corporate picture,
manpower, competi tion, etc . One of th e
aerospace companies described in the fo l lowing chapter uses a com bination of
1 top-down ,
bottom-up p l anning where th e fina l resea rch p rogram carri ed out is
! a b l ending of ideas suggested by the resea rch peop l e themse l ves an d pro jects
dicta ted by management for any one of a number of reasons . Th e sa les yardsti ck is of particu lar in terest in looking at growth factors . H ere an arbitrary
35 .
1
pe rcentage of sa les is put into research a nd deve l opmen t . As K i efer states,
it's an easy way to gear R&D spendi ng to ava i l a b l e funds or to impose a ce i l ing
on outlays for research and deve lopment .
The chem i ca l industry, for examp l e ,
has spent about 3 . 5% of i ts sa les revenues on resea rch and deve lopment in
rec ent years .
If a company is g row ing rapid l y , i t wi l l be p utting an obviousl y
g reate r amount every year i n to research and deve lopment, and i t is probab l y
questionable tha t th ese rapid ly grow ing budgets can be spent wise l y or fruitfu l l y .
Ma ny managers say th at th i s is a poor criterion to use for decid ing the research
and deve lopment budget, but i t obvious l y becomes a useful tool for smooth ing
out f l uctuations and for comparison purposes .
A research appraisa l procedure wh i ch is tied i n to growth has been deve l oped by D r . Pa ul W . Bachman o f Coppers, and descri bed i n Chemica l and
Eng i neering N ews .
2
The princ ip l e upon wh i ch the app ra isa l system is based
' is that th e effe ctiveness of research can be apprai sed in five years . Prof its
' a re ba la nced aga i nst th e l ia b i l i ties i n the form of the cost of research . I t is
obvious th at th e profi ts can continue afte r five years, but th e con cep t of th e
me thod is th a t th e costs of th e research shou l d be paid back or ba l anced over a
1
2
David N . K i efer, lot . c i t . , p . 9 1 .
" Charts Te l l Research Story, 11 Chem ica l and Eng i neeri ng News,
Decem ber 1 4, 1 959, p . 40-4 1 .
36 .
five-year period .
I
The ru les for establ i sh ing i ncome are:
I n come for the first five yea rs of comm erc ia l l ife of researc h-deve loped
products should comprise the asset side of th e ba lance sheet .
After five years, no cred its can be c l a imed by research .
The first yea r of commerc ial l ife may be taken as tha t year in whi ch
commerc ia I ope rat i ons started in the f i rst ha lf of th e yea r .
Si nce research charges are a n item of expense, cred i ts a re taken
before ded uction of i n come tax .
Disc uss ion support ing the credits c l ai med is to be g iven in the first
yea r for which such cred its are p l a nned .
Th e amounts of cred its c l a imed is to be establ ished by the accoun ting
section .
After the cred it ta b les have been drawn up, the research d i rec tor re lates
the credi ts of each group to the cost of each g roup's research spend ing . The
percen tage obtained by di vid ing cred i ts-moving by cost- moving is ca l l ed the
1
percent re turn on research expenditures and is graphed over a five-year period .
An ascend ing ratio of percent return on research expend i tures means that the
research program is obviousl y paying i ts way .
1
Howard F . Rase of the Uni vers ity of Texas ta l ks a bo ut the so cio-economic
prob lem of sel ecting new products . H e recogn izes th at i n th is area th ere a re
prob l ems of va l ue j udg ment; however, he desc r i bes a procedure of g i ving
arbitra ry num ber ra tings to four headi ngs or factors in order to arrive at
1
a
va l ue
Howard F . Rase, 11 Redict Prod uc t Poten tia l Th is Wa y, " H ydroca rbon
Process ing and Petro l eum Refiner, Ma y 1 962 , i!_ , No . 5, p . 206-209 .
37 .
ana l ysis . These fac tors are: ( 1) biologi ca l , ( 2) econom ic, ( 3) aesthetic,
(4) non- repe t i t i ve . W i th a max i m um va l ue of 25 assigned in each category,
a product ca n receive as man y as 100 po ints . I n s ome h ypotheti ca l cases wh ich
h e desc ri bed , va l ues varied from 0 to 60 po i nts . The product rec e i v i ng a zero
was a weedk i l ler whi ch , i n the bio logica l area , was g i ven a negative va l ue,
since i ts h igh l y toxi c nature cou ld endanger l i ves . I ts econom i c va l ue was
zero, s i n ce the cost of pu l l i ng weeds by hand was on l y very s l igh t l y more than
the cost of th e weed k i l l e r .
appare l that rated 60.
Th is was i n contras t to pol yes te r f i ber wea r i ng
I t was g i ven a maxi m um va l ue of 25 in the economic
area si nce such a materia l mea nt freedom from natura l sources and a mo re
consisten t price structure, as we l l as cheaper mai n tenance . These four factors
are extreme l y i mportant in j udg i ng the growth of a potenti a l prod uct as re l a ted
to an R&D program .
One of the best descr i ptions of profi tabi l i ty meas ures has been gi ven by
1
James B. Weaver of Atlas Industries . Prof i ta bi l i ty and growth go h a nd in hand .
He descri bes the eva l uation of cap i ta l investment as passing th rough three stages :
1.
One m ust deci de what fac tors or future i nfl uen ces wi I I essen tia l l y
determi ne each capi ta l i r\vestment1s profitabi l i ty . Th e n um ber
of i mportant fac tors is greater than usual l y be l ieved .
2.
One m ust obtain forecasts of these fac tors over th e expected l ife
of the produc t or equ i pment . I n many cases, forecasts m ust be
1
James B . Weaver, 1 1 Prof i ta bi l i ty Measures,
News, September 25, 1961, p. 94- 104.
11
Chemical and E ng i n eering
38 .
made of the si tuation, not on l y where th e compa ny undertakes
the investme n t, but a l so if th e investment is not made . Th e
new i n vestment should on l y be credited with the di ffe rence in
prof it .
3.
A method must be a t hand fo r combining these forecasts into a
sing le understandab l e measure of profitabi l i ty .
I n h is artic l e , h e d isc ussed th is th i rd phase i n very considerable deta i l .
Spec ifica l l y, he describes return on orig ina l i nvestment, return on average
i nvestm ent, payout time, pa yout time inc l udi ng i n terest, present worth , and
i n terest rate of return . I recommend th is descri ption to th e se rious student or
person charged with th e responsi bi l ity of eva l uati n g resea rch i n vestments .
1
Another review arti c l e i s th at by Arth ur J . We inberger of American
Cyanamid Company who d isc usses the probl em of eva lua ting research and
deve lopment pro jects in a series of six artic l es . H e recomme nds a review a t
five po i n ts: ( 1 ) sc reen ing sugges tions for new produ cts, (2) pro j ect selection ,
(3) se lecting a l terna tives, (4) revi ew of projec ts, (5) before transfer to man ufacturing . H is comments regard ing th is l ast review point are interesting and
are ex treme l y perti nent to the subject of th i s paper .
Though th is stage is la te for review to eva l uate th e project as research
and deve l op ment, it may be the po int at wh ich purch ased know-how
wi l l become ava i l a b l e , and serves as a last chance for research and
deve lopment management to exa mine the pro je ct i nterna l l y before i t
i s turned over to others . Resu l ts o f a n economic ana l ysis made a t th is
time can be compa red with ear l i er ones and he l p to sharpen fu ture
pre l i m i nary eva l uation s .
1
A.
J . Wei nberge r, " Economic Eva l uation of R&D Projects, " Chemica l
Engi neeri ng, October 28 , 1 963 th rough Apri l 27, 1 964 .
39 .
1
Arth ur We inberger sta tes that one must look a t th e eve n tua l se l l ing
price of th e prod uct be ing considered . He draws an exc l usion ch art, giving
pric ing informa tion, in order to understand the p- ice problem wh ere production
q uanti ties are p lotted against price . An obvious po int that is often over looked
is that few materia l s wi l l se l l above a pa rti c u l a r vo l ume un l ess th eir price i s
be low a certa i n va l ue; one ca nnot expect to se l l huge q uantities of an
expensive product .
Another good rev iew a rti c le was presented in Chemical We ek,
2
where
a ch eck l ist of some 57 fa ctors is g i ven . I t is poi n ted out th at th e to ta l market
and industry must be l ooked at in mak ing any dec isions on a new product . If
the growth in th e market has slowed cons idera b l y, it is obvious ly questiona ble
as to wh ether or not a new prod uct in tha t particu lar market wou l d ever pay off . ;
There are many sources of market info rma tio n and a l l of these sho u l d be consui ted .
3
T . T . M i l l er has descri bed his 39 steps i n another a rtic le . H e here
descri bes th e growth factors as fo l lows:
1
A . J . Wei nberge r, loc . c i t . , January 20, 1 964, p . 1 42 .
2
11Can You Rate Your Research ? " Chemica l Week , 84 No . 22 ,
May 1 959, p . 37-47 .
3
r . T . M i l ler, 11 Projecting the Profi tabi l i ty of N ew Prod uc ts, 11
Chem i ca l Eng inee ring Prog ress , June 1 958 , p . 57-59 .
40 .
1.
Un ique character of prod uct or process . A product th at
can fi I I an important unsa tisfied need or tha t can rapid l y ­
and without in te rfe rence - rep l ace a h ig her pri ced materia l
shou l d rate very good for th is factor .
2.
Demand-supp l y ra tio . A l though th e prod uct may no t be unique,
if th ere is room for a new supp l ier because th e demand i s
expec ted to o utgrow th e supp ly, i t sh ould rate very good so
far as th i s fa ctor is con cerned .
3.
Rate of tech no log i ca l change . If there is a wa ve of cha nge
loom ing upon which th is new prod uct can ride, it draws a
ra ting of very good . On the other hand, a product wh ich is
me re l y expected to grow commensurate l y w i th th e growth of
popul a t ion and the standards of l i ving wou l d get a ra ting of
average in th i s factor . A product th at is fast losing ground
tech no log i ca l l y wo u l d rate very poor .
4.
5.
Export possibi I ities . If the sa l es g rowth of the new product
can be marked l y acce l erated by adding export sa l es to
domestic sa l es, i t deserves a rating of very good .
Uti I ization of management personn e l . A new prod uct wo u l d
rate very good on th i s fa ctor i f i t offered a n oppo rtunity to
promote potentia l managem e nt ta lent into en larged respon­
s i bi l i t ies , yet did not undu l y deprive ex isting prod ucts of
the i r essentia l management and did not und u l y tax top ma nage­
men t's ti me and effort . "
Ma rketab i l i ty Factors
12.
Re lationsh ip to existing markets .
13.
Com pany's reputation i n a l l i ed fie l ds .
14.
Re lation to probab l e competi tion .
15.
Abi l ity to meet service requ i rements .
41.
1 6.
Re la tionsh ip to c ustomer 1s products .
17.
Large vol ume w i th i nd i vi dua l c ustomers .
18.
Few variations or styles req u i red.
1 9.
F reedom from seasona I fl uctua tions .
Marke ting factors are those most often ignored by techn ica l
peop l e .
The assumption i s that a bette r mo use trap w i I I automa tica l l y find those peop l e
wan ting to ca tch m i ce. In recen t years , these factors have been g i ven more
a ttentio n .
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One of the best descri ptions has been presen ted by John S . Harris of
: the Monsanto Company . Various factors are rated from m i nus 2 to p l us 2. The
I h eadi ngs are compara b l e to those of Mi l l er wh ere such th ings are considered as
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finan c ia l aspects, production and engi neering aspects, research and deve l opment
aspects, ma rketing, and produ ct aspects. Th e appropri ate b l ocks are shaded for
the parti cu lar rat ing for any one i tem; for example, if one g i ves a rating to
I
: estimated annual sa l es of p l us 1 , a sing l e b lock to the rig h t of th e zero wou l d
be shaded . I f i t has a rati ng of p l us 2, both blocks to the right of the zero'
i would be shaded . On the other hand, if a rating i s g i ven of minus 2, th e
I
' a ppropri a te n umber of b l ocks to the l eft wou l d be shaded . Th us , by l ook i ng
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at the resu l ts of th is eva l uation, on e can q u i c k l y gather the feasibi l i ty of the
new product by determ i nation of the n umber of blocks to the rig h t of th e z e ro
1
John S . Harris, 11 New Produc t Profi l e Chart, 11 Chem ica l and Eng ineer- ·
i ng N ews, Apri l 1 7 , 1 961 , p. 1 1 0- 1 1 9; corrections May 1, 1 961 , p . 8 2-83.
--
42 .
that are shaded . A finer gradation cou l d be used if an addi tiona l ra ting, that is,
I
p l us 3 or m inus 3 and the l i ke , were to be used . However, the s i m p l e four
fa ctor or four- le vel rati ng is good enough fo r an in itia l eva l uation . M r . Harris
put h i s fi nger on a key poi n t that is brough t out by th is pa pe r .
Many check- l i s ts and artic l es have been publ ished o n i m portan t
aspects of a new product over th e last 20 years, and we have drawn
free l y on these . The basi c problem is to arrive at the sma l l est
n um ber of criteria tha t w i l l i nc l ude a l l aspects of i mportan ce to
successfu l comm erc ia l ization of a new product . These criteria
should be mutua l l y ex c l usive -- that is, no more tha n one sho u l d
descri be the same basi c considerati on .
I t sh ould be obvious from a l l the quotations in th is paper tha t choos i ng such
criteria is wel l n i gh i m poss i b l e . Understanding thi s pro b l em, however, is
1
!
important in eva l ua ting new proj ects . The R & D cyc l e as re l ated to marketa b i l i ty
factors has been descri bed in a staff arti c l e i n Chem ica l Week � Th e cyc l e is
show n as Fig ure 2 . The important ro le p layed by ma rketabi l i t y fac tors i s h i gh-
II
l ig h ted by th is chart .
2
Dr . Quinn of Dartmouth 1 s Sch oo l of Busi ness Adm i n i stra tion has
descri bed a fi ve-step proc edure to i n tegra te sc ientific research i nto th e overa l l
p l ans of a compan y . Marketabi l i ty i s i mportant i n these fi ve steps . Of part i c u l ar
1
2
11Push for New Prod uc ts, 1 1 Chem ica l Week, Fe bruary 3, 1 962 , p . 29-34 .
11 Keep Research Programs In Ba lance, 1 1 Ch emica l and Eng i nee ring N ews,
September 26, 1 960, p . 36-37 .
1
I
43.
A TYP I CA L PROD UCT DEV ELO PMENT PROGRA M
P R O D U CT EVA LUAT I O N:
R EF I N EM ENT
COST
EST I MATES
DRAW I N G S
F I E L D EVA LUAT I O N
D EV E LO P M E N T
R E. LA T I V E
COSTS
MO D I F I CA T I O N S
P R O TO T Y P E D E S I G N
A N O CON STRU CT I O N
A C C E L E R A T E D T E S T I NG
A C C E L E RA T E D T E S T I N G
A N D F I E L D EVA LUAT I O N
P R E - P R O DU CT I O N
PROTOTY P E S
D E V E LO P M E NT
24
1 2
T I M E - MONTHS
F ig ure 2
44 .
in terest is th e th i rd step where the company has to lay out i ts strateg y i n
order to get the most out of tech no logica l opportuni ties wh i le keepi ng th e
risk as low as possi ble . Si nce the co mpany's resources are l i m i ted, it ca nnot
counter a l l r isks , nor can it take advantage of a l l opportun i ti es . The probl em
therefore is to dete rm ine wh ere the company wi l l foc us most of its work where i t can do no more than j ust stay aware of scientific progress and wha t
fie l ds i t w i l l ignore . These questions can best be answered by looking at the
marketabi I i ty factors .
The pro b l em of mesh i ng R & D and marketi ng has been disc ussed in a series
of artic les in Ch em ica l E ng i neering Prog ress .
1 ' 2 ' 3 ' 4 ' 5' 6
Mr . Sch enk po ints
out th at once commerc ia l feasi b i l ity is determ ined , marketi ng has to play a
very strong ro l e . I f marketing becomes invo l ved much ear l ier in the tota l
cyc l e , it is possi b l e to save time, money, and frustration . H e fee ls that
1
Bruce M . Ba re, 1 1 Direc tion of R&D Via Ma rketing , '"Chern i c a l Er�gineer­
ing Progress , October 1 965, page 26- 30 .
2
James W . Brad ley, " Mesh ing R&D and Marketing , 11 Chem i ca l Engi neer­
ing Progress, October 1 965, p : 1 5 .
3
J . K . Craver, "Can We Do Without The I n novator? 11 Che mica l
Eng ineering Progress, October 1 965, p . 24-26 .
4
Wi I I i am E . Kenne l , ''R&D Needs , 1 1 Chem ical E ng i neeri ng Progress ,
October 1 965, p . 20-24 .
5
George Sc henk , "Marketi ng Ca l l s Th e Shots, 11 Chem ica l Eng ineering
Progress, October 1 965, p . 1 6-20 .
6
R . W . Sch u l er, " Are Yo u I n A F ur- L ined Foxho l e ? 11 Chem i c a l Eng i neer­
mg , O ctober 1 965 , p . 30-33 .
--
45 .
ma rketing shou ld have authority in product p lanning, prod uct deve lopment,
prod uction schedu l ing , and i nventory cen tro I as wel l as in the usua l areas of
sa 1es distri bution and servic ing of the product . H e quotes a recent Nationa l
I ndustria l Conference Board Study wh i ch stated that three out of ten ma jor new
prod ucts marketed in the past five years, fa i l ed in some important aspect, and
one of th e th ree was consi dered so disappointing that it was withdrawn from
the market . Reaso ns g i ven for those fai l ures were , in decreas ing order of
importance, i nadequa te market ana lysis, product defe cts, h igher costs than
anti c i pated , poor timi ng , compe t i tion , and in suffi cient ma rke ting effort . I t
i s obvious tha t a number of these factors do i nvo l ve th e ma rketing function .
M r . Kenne l a lso emphasizes the importa nce of marketing to resea rch and dev­
e lopment . H e fee ls tha t companies sho u l d have opera tiona l g u ides which show
th e re l ationsh ip between marketing and R & D so th at the marl< eting i nput can be
put into th e research and deve lopment function . With th e usua I d istribution of
effort in the research departments be ing spread between new ideas on deve lop­
ing ideas to commerc ia l rea l i ty and i mprovement and ex pansion of existing
products, 85 to 90% of the resea rch money is being devo ted to prod ucts wh ich
cannot be com p l eted successfu l l y without marketing inputs . Mr . Bare of
Arth ur D . Litt l e di sc usses th e need for a marketing p l an to g uide research .
The e l eme nts of th e marketi ng plan are covered by the factors a lready
d isc ussed .
46 .
M i l l er's fa ctors of Tab l e 1 a re stra igh tforwa rd and easi l y understanda b l e .
An important one that sho u l d be emphasized is N o . 1 6 , " re l a ti onsh i p to the
c ustom er's prod ucts . " Company managemen t shou l d be carefu l in mak i ng a
dec ision to go i n to a product which th eir customers make , or if i t were a
different type of product that tended to take a busi ness awa y from th em or
detract from the ir busi ness profi tabi l i t y . Attempts at ve rtica l integ ra tion
have had serious econom ic effect on a number of i nd ustria l con cerns .
Posi t ion Factors
20 .
Time required to become establ ished .
21 .
Va lue added by in-company processing .
22 .
Exc l usive or favored purchasing position .
23 .
I mproved purchasi ng pos i t ion .
24 .
I nterna l ava i l a bi l i ty of raw ma teria l s .
The first posi tion fa ctor has to do with th e time requi red to be come
1
esta b l ished . A l bert Rockwood of Batte l l e M emoria l I n stitute shows a p l ot
wh i ch g i ves an idea of the time requi red fo r a typica l product deve l opment
progra m . Th is is shown as F igure 3 wh ere time is p lotted against rel a ti ve costs .
Var ious aerospace programs h ave been desc r i bed wh i ch requ ire from 1 8 mo nths
for certa i n l i m i ted war programs up to as long as ten years before a system
becomes fu l l y opera tiona l .
1
A l bert M . Rockwood , 11 P iann ing a P rod uct Deve lopment Prog ram, "
Batte l l e Techn ica l Review , Sep tember 1 957 , 4 pp .
·
I D£A:
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M.'RK£TING CONSI DERATIONS
D DECIS ION
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ACTION AREAS
....
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it is in business .
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Translation of
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tives into technical
g�tal., pl01ning ond
hudglting technical
-·
Cr�tolliz.ation of
new-product icllo.s,
Preliminary screen­
ing of new•product
idtm, followed by
selec.tion of ideos
dlep of source
t-­ rega� for further study;
(e.g., A!I•arch
prugrarns, maricet
neec:h, outaidl idlos)
Porollel initial
� =�i:,��i;::�h
planning and budget­
ing.
'"''die• of production,
of propo.-d new
producrs.
r
Twin technical
� :!� ::�,t:t,;· � planting,
attractive and cOt'l-
siste nt witt, butiNn
objectivee.
F igure 3
t re
I nte medi ate c en ing of new-product
ideas; se le c tion of
mGrltet developm&nt
activitie'; pilot
test
morketing.
of the new product's
� progreu, incl�o�ding
(o.,t inu;ng checks
tJeci\ions to proceed
or
ltop.
48 .
There a re two aspe cts to pos i tion factors . F i rst is the pos it ion of
resea rch and deve lopment in th e co rporate organization and p l ans, and
second l y, the effect of research and deve lopment on the corporation 's posi tion
in ind ustry and with regard to i ts produc ts . Wi l l i am E . 1 1 Butch " H anford of
O l i n Math ieson at a Na tiona l I ndustria l Research Conference in Ch i cago
1
is quoted as stating that a management deci sion to proceed with deve lopment
work and fina l cap i ta l i zation of the research effort req ui res a g reat dea l of
foresight and fo rti tude . I n most i nstances, the eas iest th ing fo r a managemen t
to do is to simp l y keep thei r operations runn ing a l ong at an even kee l ; however,,
and obvious l y, such a program wo u ld be an unprofita b l e one for any industria l
firm to fo l l ow . He fee ls strong l y that th e research i ndivi dual has a prof i t
motive and understands tha t a company i s in the resea rch and deve lopmen t
bus iness i n order to make a profi t . Some aerospace com pan i es use resea rch
as a means of mak ing a profit d i rec tly, wh i l e others use research to enhance
th e i r genera l profi tabi l ity . The l a ter position i s th at usua l l y fo und i n th e
chemi ca l i ndustry .
2
Dr . Ch arles H . Moore discusses one of the posi tion factor problems of
basic versus app l i ed research . H e states:
1
" Business Warms Up To Research , '' Chem ica l and Eng i nee ring News, 34
No . 2 1 , Ma y 1 956, p . 25l6-25 1 8 .
2
Dr . Char les H . Moo re, "The Bas 1 c Approa ch To Product Deve lopment, 1 1
I ndustria l Research I l l , No . 2 , Apr i l -May 1 964 , p . 2 1 -26 .
I
49 .
Current deve lopment effo rts of man y com pan ies are th warted
beca use the ir managements do not understand th e bas ic resea rch
approa ch and therefore are afra i d of i t . Such fea r is groun d less;
i t comes from confusing th e bas ic research approa ch w i th basic
research investigations .
The la tter can be i mpractica l i f no t directed towa rd some prod uct
goa l ; th e former a lways is practica l . The basi c research approach
mere l y is th e app l ic ation of modern sc ien ti fic know l edge to
systematize out looks and efforts .
Here aga i n we see the ne cess ity for a def i n ition and a lso for a
statem ent of goa l s . Dr . Moore fee ls that th e fo l lowi ng are the most
importa nt fa ctors in a research prog ra m and effe ct strong l y the posi tion of
the co rpora tion co ncerned . ( 1 ) l a bo ratory con tro ls, (2) deve lopmen t
cut-off point, (3) compreh ensi ve attack, (4) market resea rch , (5) creativi ty .
Al l these a re factors pointed out by other authors quoted in th is pape r .
Factor 22 i n Ta ble 1 , the excl usive o r favori te pu rch asing posi tion,
can be defined as th e abso rption of the enti re output of a scarce a nd
partic u l a r l y advan tageous raw or intermed iate materia l that is produced by
h igh l y re l ia b l e contra c t source . If such absorption can be cb n e by th e
corporation, i ts posi tion is more secure than if a competitor has access to
some materia l . Th is point is often obscured in a check l ist by sim p l y having
a head i ng ca l l ed 1 1 Raw Materia l s . 11
50 .
Research and Deve lopme n t Fac tors
25 .
Uti l iza tion of existing know l edge .
26 .
Re l a tionsh i p to future activi ties .
27 .
Uti l ization of ex i s t i ng lab or pi l ot activ i t ies .
28 .
Ava i l a bi l i ty of research person n e l .
These factors have to do w i th th e capa bi I i ty of the R&D organ ization and
:i ts rol e i n the corporate organ ization .
That dec i s ion w i l l affect the status of the R&D organ i za-
on R&D was di scussed .
'
I
:tion a n d,
Ea r l ier, the amo un t of mon ey to be spent
I
I
i
i n tu rn, is i mportant in look ing a t research and deve l opme n t fac tors .
M r . We i n berger
1
has d isc ussed s e l e cting app l i ed research pro j ects .
pf h i s po i n ts is that the program sho u l d avo i d econom i c vac u ums .
One
I n oth er words ,
the research di recto r shou l d be certa i n tha t th e product or process be i ng deve loped
wi I I be usefu l to soc iety and to th e compan y .
I
I
someti mes v i o l a ted as a ru l e .
I
Th i s may sound obvious but i t i s
Research is too expens i ve to be do ne h aphazard l y .
He fee ls tha t th ere are th ree bas i c questions to be answered i n consideri ng an
app l ied research project:
(1)
Is the pro j e ct appropri ate to the compa ny?
Wha t commerc i a l potent i a l wou l d the project have ?
I
] chances of success
!
i n the R&D effort? 11
(3) Wha t a re th e tec h n i ca l
I t i s read i l y apparent tha t these question s
are d i rec t l y re l a ted to i tems 25 th rough 28 of Tab l e 1 .
1
(2)
An i mportan t po i n t is
A . J . Wei n be rge r, " H ow To S e l ect App l i ed Research P roj ects ,
Petro l e um Refiner, Ap r i l 1 962 , p . 1 75- 1 78 .
11
I
1
I
51.
brought out i n h i s discussion of h is first question. Corpora te objectives a re
sometimes de l i berate l y kept vague i n orde r not to d iscourage efforts by research
and deve lopment departments or others . If th is is th e case , then research and
deve l opment management sho u ld set th ei r own detai l ed objectives in order to
keep the prog ram with i n bo unds and usefu l to th e corporation.
If th e research
program is to be used as a means of d i versification, th e resea rch managem ent
shou ld be certa i n that the corpora tion is in a pos i tion to cap ita l i ze on any new
ideas th at are deve loped. Is th e sa les organization large enough , for examp l e ,
to take advantage of a new product?
In repo rt ing on a confere nce he l d at Purd ue Un iversi ty, in Ch em i ca l and
.
.
E ng meenng N ews 1,
Dr. Edgar Pessemier is quoted as stated tha t deta i ls a re
essen tia l for j udg i ng R&D proposa ls. H e fee l s that the de ta i l information cannot
come from the sc ienti sts a l one , or even from eng i neers and sc ientists togethe r .
Marketing peop l e must be brough t i n to the j udging process i n order to appropri- ,
ate l y shape po l i cy. H e fi nds that the pro b lems i nvo lved in j udg i ng an industria l
research program are pa ra l l e l to the prob lems fa c i ng a sa l es manager. Th is
j udgment has to do w i th how we l l the f i e l d i s understood, both tech n i ca l l y and
1
from an econom i c standpo i n t . As fa r a s a ! l ocat i ng resources t o a program is
concerned , whether i t be sa les or research , management cannot tak e effecti ve
action w i thout mak ing some esti mate of the resu l ts of that action .
l;
,De ta i l s Essen ria l For J udg i ng R&D P roposa ls, " Chem i ca l and Eng i neeri ng
N ews, Jan uary 17 , 1966, p. 3.
52 .
1
Mr . Luke of the Spencer Chemi ca l Company fee l s that a successf u l
resea rch program h i nges o n five fac tors: ( 1 ) company po l i cy, (2) techn ica l
success, (3) economic success, (4) manpower ava i l a b l e , (5) a ba lan ced
research prog ram . Aga in we see th e re la tionsh i p of these fa ctors to th e
research and deve lopment factors of Mr . M i l l e r .
Am eri can Cyanamid gets add i tiona l perspec tive on the i r research program
by using ou ts ide consu l tan ts .
2
They used a five-man team of outs ide
scien tists who revi ewed th e tota l program . Other companies wh o have simi l a r
p rograms are Westinghouse and Convai r . I n doi ng th is, one must be careful to
choose co nsul tan ts w i th a broad range of expe rience who do not have
a
spec ific interest insofa r as the company program is concerned .
3
Ra l ph Boyer of Cooper- Bessemer Corpora tion recommends th e use of
outsi de research insti tutions such as Ba tte l l e for research and deve lopment
prog rams, as we l l as to obta i n some perspective on these p rograms .
1
0 . V . Luke, 1 1 Wh ich Project Gets Resea rch Money ? 11 Petroleum
Refiner 27 No . 1 1 , Novem ber 1 958 , p . 20 1 -203 .
.
2
11 Look ing Ou ts ide For Research Prospec tive, 11 Chem ica l Week ,
September 5, 1 959, p . 9 1 -94 .
3
Ra l ph L . Boyer, 1 1 Some ABC 's About R& D, 11 Batte l l e Memori a l I nsti tute,
6 pages .
53 .
Engi nee ri ng Factors
29 .
Re l iabi l i ty of p rocess know-how .
30 .
Uti I ization of sta ndard ized equi pmen t .
31 .
Ava i l a bi l i ty of eng ineering personnel .
Th ese factors re late to th e capabi l i ty of doing the resea rch and deve lopment work , partic ularl y in regard to process know-how , equ i pment know- how,
and the avai labi l i ty of personne l .
One major oi I com pan y recommends separate appra isa l of research
projects .
1
Th e advan tages of th is separation are fo urfo ld:
Better appra i sa l shou l d be obta i ned beca use the work is concentrated
in the hands of a few people, th e appra isers become fam i l ia r w i th a l l
research pro jects . As a resu l t, appraisa l s are made by people with
broader backgrounds . A broad ba ckg round is an importa nt advan tage,
especia l l y when compe ting a l terna tives are being exp lored at the
same ti me .
The chances of com ing up w i th new ideas are enhanced . Se I dem are
new ideas sudden inspirations; rath er, they resu l t from ru bbi ng o l d
i deas together unti I a f lame i s genera ted . The broader th e backg round ,
the greater th e chance that a f lame w i l l be k i nd led .
Removing the pressures of cu rrent work affords an opportuni ty for
crysta l gazing with a view to ferreting out new so l utions to present
problems, and fo r predicting what probl ems are l i ke l y to arise in
the future . Such acti vities sho u l d l essen th e need fo r expensive crash
programs .
1
R . J . H engstebeck and W . W . Sanders, 11 Appra ising Projects for
Research , " Ch em i c a l and Eng i neeri ng N ews 36, No . 22, Aug ust 1 958,
p . 84-88 .
54 .
Spec ia l ists are readi l y avai labl e as consu l tants to the exploratory and
p i l o t p l ant groups whenever questions invo l vi ng design or econom ics
arise . Such an arrangement sh ould he l p to chann e l th e experi menta l
work a long the most profitable paths .
1
Some time ago , Wa ldo H . K l iever of M i nneapo l is-H oneywe l l po inted
out the problem of choosing the amount of con tro l to be exerc ised over research
programs . Such co n tro l effec ts th e resources used or avai lab l e which , in turn ,
are rea l l y th e eng ineering factors being di sc ussed . He fee ls that i n th e long
run, a tigh t l y co n trol led program tends to sk i m on l y th e cream of scien ti fic
know l edge and resu l ts in research g row i ng stagnan t . However, for certa i n
individua l pro jects a n d for l i m i ted ti mes, tig h t l y contro l l ed projects m a y be
requi red . Th e contro l of resou rces to be used in a research project wo u l d be
s i m i lar to that type of co ntro l used w i th desi g n pro jects or engineeri ng
proj ec ts . The c loser a program moves toward a product, the mo re con tro l is
necessary . H e fee l s that th e choi ce of projects can be answered th rough four
factors: ( 1 ) importance of th e pro je c t to th e busi ness, (2) ava i l a bi l i ty of
foci l i ti es and of peop l e capab l e of doing the wo rk, (3) risk invo l ved , and
(4) probabi I i ty of success . The second of these two factors i s obvious l y the
eng inee ring factors of Tab l e 1 . Oth er authors who emphasize th ese facets of
1
Wa ldo H . K l i eve r, 1 1 Design cf Research Pro jects and Prog ram s,
I ndustri a l la bo ra tories, October 1 952 , p . 5- 1 4 .
11
55 .
1
2
making research and deve lopmen t dec isions a re O ' Meara an d D . B . H ertz
wh o disc uss th e orga nizationa l prob l ems of resea rch as we l l . Two eng i neers
3
from the Du Pon t Company discuss th e h e l p g i ven by eng ineers to research .
Th ey l ist four fac tors wh ich are a necess ity in an y research program .
1.
Assist in prog ramm ing of research and deve lopment to obtain
a l l th e informa tion needed for p lan t design as soon. as poss i b l e .
2.
A i d in visua l iz ing p lant faci l ities .
3.
Prepare cost estimates .
4.
Ass ist in design ing and sca l i ng powerp lant or semi -works un i ts .
To someone know l edgea b l e about research an d research managemen t, a l l of
the eng ineeri ng factors wou ld seem to be axiomatic . I t wou ld be h ard to
vi sua l ize a research program without cons idering these factors . I t is iust these
types of th ings th at sometimes get over looked in eva luation of research projects .
1
F ran cis E . O ' Meara', ·: '' H ow To Eva l uate Eng ineering Research Proposa ls, 1 1
I ndustria l Researc h , October 1 959, p . 5-6 .
2
D . B . H ertz , 11 Eng ineeri ng Resea rch , " Chem ica l Eng ineeri ng , January
1 947, p . 1 1 8- 1 23 .
3
w . S . G i lfoi l and L . E . Rasm ussen, 11Engineering Assi stance to Research
and Deve lopment," I ndustria l and Engi neering Chem istry 50,
- No . 9, September 1 958, p . 62A-63A .
56 .
Prod uction Factors
1�
32 .
Uti I ization of id le eq uipmen t .
33 .
Uti l iza tion of surp l us uti l i ty capac i ti es .
34 .
Uti I iza tion and upg rading of by-products .
35 .
Uti l ization of fam i l ia r processes .
36 .
Ava i labi l i ty of prod uction personne l .
32' .
Freedom from hazardous cond i tions .
38 .
Freedom from d iffic u l t ma intenance needs .
39 .
Freedom from waste d isposa l problems .
These eight fac tors are i n somewha t th e same category as th e engi neering
factors . I t is d ifficu l t to imagine over look ing a n y of th ese fa ctors i n a
resea rch program . H owever, the l i tera ture concern ing these is somewhat
scarcer than is true of most of th e others .
Th ey are covered by inference in
many tech nica I journals in discussions of products and processes . Se l dom are
they inc l uded exc ept as check l ist i tems in artic les on research and deve lop­
men t . One importan t factor in th is regard is made by T . T . Mi l l er 1 in
po i n ting out th at an error in estimati ng th e pri ce or the sa les vo l ume of a
proposed new product can be much more cost l y than a wrong guess on the
cost of the p lant . Even a we l l desig ned p l ant cannot make money if th e sa l es
vo l ume fa i l s to materia l ize . A new product's fa i l ure cannot be bl amed on
1r.
T . M i l l er, loc . ci t . , p . 60 .
57 .
research a l one . Process engi neering, pi lot p l an t work , production estimat­
ing, and marketing research may a l l be a t fa u l t in causing a product to fa i l .
Summary
I n th is chapter, eva l uation of i ndividual resea rch projects h as been
di scussed . Th e l i terature i n th is area i s very vo l um i nous . Th e l i terature
concern ing the eva l uation of spec ifi c pro j ects tended to be more narrow .
On l y a few authors covered th e tota l scope of pro j ect eva luation . Most of
the authors wou l d discuss techn ica l poi n ts, econom ic poi n ts, or soc io­
econom ic poi n ts without regard to th eir in teract ion with other broa d eva l ua­
tion problems . I t was q u i te apparent that a con tinuing eva l uation of
proj ects from the i r i nception th rough research to deve l opment must be carried
out in order to arrive at a successfu I product or process . The resu I ts of such
an eva l ua tio· n · can be used by managem ent to determ ine when to proceed
w i th a research prog ram .
I
CH APTER I V
RESEARCH A N D DEVE LOPME N T I N THE AEROSPACE I N DUSTRY
Characteristics and Prob lems
Cons iderab l e con cern has been expressed recent l y over th e research and
1 2 3 4 5 6 7
.
deve lopment (R&D) efforts of the defense or aerospace mdustry . ' ' ' ' ' '
Th e House Space Comm i ttee exam i ned i n some deta i l th e geograph ica l
distr ibution of federa I research money . Th ey co ncerned themse l ves w i th
1
Kathe rine Joh nsen , " DO D To Overha u l I n terna l R&D Po l ic ies, "
Aviation Week , Sep tember 27, 1 965, p . 28 .
2
George C . Wi lson , " DO D Asked To Reassess Research Po l i c y, "
Aviation Week, J une 28, 1 965, p . 75 .
3
1 1 Space Research : A F ree Ride For Ch emi ca l I ndustry ? " Chem i ca l
Eng i nee ring , Ma y 1 3, 1 963, p . 1 00 .
4
11 Defense Spending Trend Breeds Discord , '' Chemical and Eng i neeri ng
News, December S, 1 960, pp . 27-29 .
s .. Federa l
R&D May Yie l d Fewer Products, " Chemi ca l and Eng ineeri ng
News, Aug ust 9, 1 965, pp . 32- 33 .
6
Jonathan Spi vak , " Resea rch Rev i ew, " Wa l l Street Journa l , May 5,
1 964 .
7
" Stop, " Newsweek , Oc tober 2 1 , 1 963, pp . 1 02- 1 03 .
58 .
5 9.
changing th e di stri bution to encourage wi der developm ent of science a nd
j " brain" �enters.
Another problem is "housekeepi ng " costs ! Th ere has been a
J running batt le between un iversities and federa l agencies over overh ead costs;
to what exten t should such insti tutions be reimbursed for indirec t costs? The
I
question of choosing between areas of research to be supported with federa l
funds was discussed with , obvious ly, no answer.
NASA (Nationa l Aerona utics and Space Admi n istration) has been
I
invo l ved since its inception with "fa l lout"; i . e . , the use of federa l fi nanced
I
I
I
research resul ts for betteri ng l i ving standards. Dr. Richard Rosenbloom of
1
Harvard stated that usefu l comm erc ial app l i cations wi l l con tinue lo emerge
i from techno logy deve loped in m i l itary and space research programs, but the
radi c a l change i n such technolog y may make i t m uch harder to trans late these
I resu l ts into industria l products .
I
Another probl em of concern is the di stri bution of funds between research
and development . I n 1 961 , 0.4% of th e tota l DO D expendi ture was used for
basic research; 5 % of the R&D funds were used for these purposes . Critics
( l arg e l y bas ic research practi tioners) fee l that th ere is too l i ttle emphasis on
new and improved sc ientific a venues of work . The arg umen t is one that has
been h eard for many years - the f low of new i deas is drying up !
1
"Fede ra l R&D May Yi e l d Fewer Produc ts, " Chem ica l arid Eng ineeri ng
N ews, August 9, 1 965, pp . 32-33
60.
Th is brief i n troduction serves to poi n t up some of th e ch aracte ristics
and probl ems of the aerospace industry . Before going ah ead to d iscuss the survey
res u l ts, one other subject sho u l d be covered to round out one 1s understanding of
some spec ia l characteristics of th i s i nd ustry .
The Requ i rements Merry-Go- Round
1
Dr . Ramey of the AEC h as been th e most voca l con cern ing th is prob lem .
I t has been the subject of severa l of his speeches . He s tates :
The problem is the g row i ng tenden c y to ho l d bac k th e deve loper1s
program unti l a spec ific m ission or req u i rement is forma l l y establ ished
by a user (such as th e Defense Department or NASA) , despite the
fact that the user very often is not in a pos i t ion to establ ish such a
req u i rement un less th e program is perm i tted to move forward to the
poi n t of demonstra ting i ts va l ue . O n th e one hand, w e are to l d
w e must h ave a forma l req u i rement before we can proceed w i th
the deve lopmen t of a device, and on the other hand, we have
diffi c u l ty find i ng a req u i rement unti l we h ave demonstrated a
deve loped devi ce .
Dr . Ramey ind icates that the name 1 1 Requi remen ts Merry-Go- Round
comes from Cong ressma n Price� Th i s system had i ts beg inn ing in produc tion
, of off-th e-sh e l f hardware i tems under fixed price contracts . Th us th e m i l i tary
h ad to esta b l i sh a requirement fo r a gun or a tank, wh ich was expressed i n
1
Jam es T . Ramey, "The Requi remen ts Merry- Go- Round i n Government
Research and Deve lopment, 1 1 Address to N in th I nsti tute on Researc h Adm i n istra­
tion, American Universi ty, Wash i ngton, D . C . , Apri l 20, 1964 .
2
Congressman Me l vin Price, " Th e U . S . N uc l ea r Space Program - A
Critique and A H ope, " Address to the Atom i c I ndustri a l Forum, Ch icago,
I l l ino is, November 6, 1961, p. 5 .
61 .
t
terms of prod uction for many uni ts , and which i nvo l ved re lative l y l i tt l e
deve lopmen t . Th is concept has been exten ded fa r beyond its re lative l y
restric ted beg i nn ings and has extens ive l y affected R&D i n the aerospace
i ndustry . The sc ien tist is brought i n to th e to ta l budgeting syste m , corporate
funds are spen t o n l y on work rel ating to a requi rement, the deve lopment time
span is seri ous l y foreshortened , etc . Understand i ng th is prob l em is important
in eva l ua ting the answers g iven b y representatives of the aerospace industry .
Surve y Resu l ts
Some cons ideration was g i ven to th e arrangemen t of th e ques tions; how­
ever, severa l we re d iffic u l t to catego rize and were p laced at the end . I n
genera l , th e con cept of proceed i ng from research to deve l opment was used .
Th e answers and comments wi l l be g i ven for each question; the arrangem ent
wi l l fo l low th a t in th e l ist except th at question 1 5 wi l l be answered f i rst .
15.
How do yo u defi ne research and deve lopm ent?
Th is was discussed by th e auth or in the i n troduction . Most of th e
defin i tions are in genera l agreem en t us ing ei ther NSF or DOD def i n itions .
Tw ice the po i n t was made tha t there is no sharp l i ne of dema rca tion .
In one
case , for manageria I and operating organiza tion pu rposes , a I I researc h effort
is identified as tech nica l research unti l a competition is imm inent . At that
po int, if the competi tio n is won or if th ere appears to be other evidence tha t
sa les w i l l resu l t, c ustom er- or company-funded deve lopment (as opposed to
62 .
resea rch) starts . One answer made a di sti nction between new scien tific k nowl edge and o ld knowl edge tha t has become engineering . Th is distinction is
often a matter of deg ree . Ano ther definition of research was advancing th e
state-of-the-art; for th is company, deve lopme nt is a spec ific app l i ca tion of
techn ic a l resu l ts to a m i l i tary system , p iece of hardwa re , or produc t . An
i n teresting po int was made tha t if cook book techniques or th e Edison ion
{cut-and-try, fidd l e-and-fi le} techn iques were used , it cou l d on l y be deve l o pment and not research .
I n comparing th e answers to th is question, th e re l ationsh ip of orga nizetion to the answers to a l l the q uestions become appa rent . One compa n y h ad
no corporate resea rch orga n iza tion; a l l of th e R& D was done in div isions that
1
had prof it-and- loss responsibi l i ty . The two man corporate organ iza tion had a
coord inating and staff respons ibi l i ty to the presiden t . Th e questions were
a nswered by a corporate research organ ization in anoth er company wh ere
some research is a l so done wi th in th e di visions; tha t company a l so has a
resea rch organ iza tion whose work supports on l y m i l i tary-oriented di vis ions .
Wh erever poss i b l e , the effe ct or organ iza tional d ifferences on the answers
w i I I be noted .
1.
H ow does your c ompany se l ec t research pro jects?
If th ere is a defi n i te procedure , please ou tline that proced ure .
a.
A need res u l ting from a market surve y.
b.
I n terna l l y generated technica l or market i deas .
63 .
c.
To meet co mpe ti tion .
d.
Serend ipity (happenstance) .
e.
Other .
H ere aga in, size and orga nizationa l structure had an a pparen t effe c t
on th e answer . I n o ne case, wh ere projects are chosen annua l ly, the
divis iona I research d irector is requi red to ide n tify th e needs and ideas in
go ing prog rams together with new business id eas with th eir associated research .
These are th en me lded with divis iona l market surveys and rev iewed by a group
consisting of a l l divisiona l di rec tors of research as we l l as corporate representa­
tion . Th is revi ew serves to bring in a broad market picture, ensures agreement
w i th corporate objectives, ch ecks to avoid unnecessary dupl ication and a I lows
a crossfl ow of ideas . Whether th ere i s crossf low at lower l eve ls was not made
c l ear .
Anoth er compa ny of comparable s ize ( l arge) se l ects research pri mari l y
on the basis of its establ ished product l i nes . Sub po in ts a , b, and c were
ind icated as be ing re levan t . Eva luation and rev iew of research effort is
conducted at both operating and corporate l eve l s . Reports wh ich may be
either month l y or quarterl y are used in mak ing decisions con cern ing co ntinu ing
a t the a l ready esta b l ish ed rate, acc e l eration, dece l eration, or cance l l ation .
A th i rd company has a Corpora te Research Center and a lso each division
has a research organ ization . To und ersta nd th is compan y , which sha l l be
64 .
iden tifi ed as Company H , certa i n aspects of the organiza tion are described:
th ere are groups with in th e corpora ti on who
1.
Prov ide informa tion inputs to the Resea rc h Center .
2.
Faci l i tate the transfer of new techno log ies, concepts, devic es,
p roc esses, or produc ts from th e Researc h Cen ter to a d i v i sion .
3.
Perform the deve lopmen t work necessary to produce a f i na l
product .
The ma jor cha rte r of the Research Center is to do resea rc h; therefore, devel op­
ment and design is a re lative l y sma l l pa rt o f the i r efforts . A co rpo rate New
Products Depa rtment is charged with seek ing out poten t ia I new p roduc ts or
markets and determin ing the methods fo r e n tering a new market or deve loping
or ma rke ting a new product, part i c u l a r l y where the new prod uct fa l ls outside
the esta b l i shed i n terests of th e opera ti ng di vi sions . Thus th e Research Center,
the New Products Departm ent, and the opera ting d i visions of Compan y H work
together to define techno l og i es and products of i nterest to th e corpo ra tion .
I nputs from operat ing d ivisions , market surveys, scientific personne l
and tec h n i ca l or market ideas are used by the Research Center i n fo rmu lating
th eir research prog ram . There is a forma l p l ann i ng function set up to def i ne
th e programs .
65 .
A very large aerospace corpora tion has indica ted that the y do not have
a genera l proced ure but do have a genera l po l icy or genera l mode of a ttack
in se lec ting research projects . Th is corporat ion uses two genera l in puts, first
the var ious doc umen ts which come from th e Department of Defense or NASA
serve as a market survey . Secon d l y , th e research peo p l e and the eng i neers
who actua l l y do th e work recognize techno log ies or incipient needs as bei ng
beyon d the scope of present con tract work . A combination of top-down and
bottom- up p l ann ing is used . Top-down p lann ing is based on a set of bus i ness
objecti ves wh ich each operati ng division sets fo rth i tse l f for a five to ten
year period and then these objec ti ves a re translated into tec hno l og i ca I needs .
Corporate headquarters revi ews th is for co mp l eteness and for "fit" i n to th e
tota l corporate effort, they a ttempt to e l i m inate overlap and also to assign
projects wh ere th ere a re holes between th e opera ting di vi sions . Th e bottom­
up process works conc urrently and is as descri bed above where the researcher
or th e eng ineer ou t l i nes wh at he fee ls he shou l d be doing over the next two
or th ree yea rs . Th is is genera l l y an extension of research now underway but
sometimes a s ide path or someth i ng he has read about or seen tha t someone
e l se is work ing on may be the subject wh i ch he fee l s wou ld be of i n teres t to
h is particu lar d i vision . The tota l p l an n i ng process is a ma tc h i ng of th e top- .
down and the bottom-up procedures in order to arrive a t an agreed-on
prog ram . Th i s company, of course, hopes th at th e two outli nes wi l l mesh
66 .
together wh en th ey are first put togeth er, but usua l l y there is a l so a lot of
conversa tion and rei teration in the tota l p l an n ing cyc l e . The end prod uct of
th is step is a set of objecti ves and a l i st of spec ific proj ects which match the
objecti ves . Ano ther l a rge company that is invo l ved not onl y in aerospace
but a lso in co nsumer1s prod ucts indi cates th at a se l ection of R& D programs
varies considera b l y between th e various l a rge gro ups such as e l ectron ics,
m i l i tary equi pment, comme rc ia l equipment, etc . Th e di vision managers wh o
a re two levels be low the corporate and represen t the prof i t and loss ce nters
have the respons i bi l ity for th e se l ec tion and rev iew and eva l uation of R& D
p rog rams . Research projects are carried out under h is j urisdiction . Th e
c ri teria used for th e se l ection of a pro j ect wou l d co me under th e fo l low i ng
head ings:
A.
Market and Competi tion
B.
Tech no l ogy
C.
Organization F it
D.
F inan c ia l
E.
Prod uc tion
F.
Lega l
Under each of th ese headi ngs there are a n umber of suggested q uestions wh ich
have been furn ish ed by a very sma l l corporate research staff to th e division
managers . Th e manager m ust assure h i mse l f that these q uestions ca n be
II
67.
answered be fore g i v i ng a fi nal approv al to a particu l ar pro ject. Some of the
questio ns are o bvious, others are not so much so . These wi I I be discussed i n
1
I
somewh at more detai l i n the next secti o n o f th is paper.
I
1
Th e Ch airm an o f the Bo ard of Li tto n I ndustries states that th e way to
I
i
; recre ate th e " d ark ages11 wou l d be to sto p all research activity of any ki nd;
th at is, to stop re ach i ng for new k nowledge or better w ays o f doi ng th i ngs.
I
H e also stated th at rese arch is o nl y profi tabl e in bus i ness whe n it h as an
I identity to or is rel ated to the corporate m ai n e ffort or whe n it can show th at
[
I
I
i
th e corporate m ai n effort can be di verted profitabl y i nto a new fie ld. There­
fore aI I their rese arch is chose n with this i n m i nd .
Anoth er com pany wh i ch states th at the bu lk of the i r com pany's spo nsored
acti vity is appl ied rese arch with less th an 10% goi ng i nto develo pm e nt, h as
. a very co ncise statement to descri be how rese arch proj ects are selected:
I
" Rese arch pro j ecIs are mostl y i ntem aI I y g e nerated tech nicaI ideas wh ich are
i i n tum frequently stimul ated
!
I
1
I
by a need ide nti fied by m arketi ng i nte l ligence or
customer cont act • 1 1 I t is furth er i ndi cated th at the proj ects are ex pected to
yie l d new ideas and approach es i n certai n fi e l ds . The y m ay be system
.
anal yses to determ i ne fe asi bi lity of a new ide a wh ich cou l d deve lo p i nto a
new e ngi neeri ng co ncept or rese arch to determi ne th e most e ffecti ve methods
of so l v i ng problems .
1
Ch arles B. Thornto n, 11 Busi ness and Rese arch , 11 Address to Th e H arvard
Busi ness Schoo l A l um ni Associ atio n, M arch 25, 1964, Los A ng e l es, C ali forni a.
67 .
answered before g i v i ng a fina l approve I to a particu lar projec t . Some o f th e
questions are obv ious, others a re not so much so . These w i I I be discussed in
somewha t more deta i l in th e nex t sec tion of th is paper .
1
Th e Cha i rman of th e Boa rd of li tton I ndustr ies states tha t th e way to
recreate the da rk ages wou ld be to stop a l l research acti v i ty of any k ind;
that is, to stop reach ing fo r new know l edge or bette r ways of do ing th i ng s .
� e a l so sta ted that research is on l y profita b l e in busin ess wh en i t has an
identi ty to or is re l a ted to the corporate main effort or when it can show tha t
th e corpora te m a i n effort can be di verted profita b l y into a new fie l d . Therefore a l l th e i r research is chosen with th is in m ind .
Ano th er compa ny who states that th e bu lk of the i r com pan y's sponsored
activity is app l ied research w i th l ess than 1 0% going into deve lopment, has
a very con c ise statement to descri be how research projects a re se lected:
" Research pro jects a re most ly i n terna l l y ge nerated technical ideas wh ich are
in tu rn freq uen t l y sti m u l a ted by a need identif ied by marketing inte l l igence or
customer contact . 11 It is fu rth er ind i ca ted th at the pro jects a re expec ted to
yield new ideas and approaches in, certa in fi e l ds . Th e y may be system
anal yses to determ ine feasi bi l i ty of a new i dea which cou l d deve lop i n to a
new eng ineering concept or research to determ ine th e most effecti ve methods
of so l ving prob lems .
1
Charles B . Thornton, 11 Bus iness and Resea rch , 11 Address to Th e Ha rva rd
Busi ness Schoo l A l um n i Assoc iation, March 25, 1 964, Lo s Ange l es, Ca l iforn ia .
68.
I n th e last of the reporti ng companies a fa i r l y forma l procedure is
used . Th e di visions review poss i b le projec ts and screen th em and present
the resu l ts for corporate review by the Office of Eng ineeri ng and Research .
Tentative p l ans and recommenda tions fo r a total research budget is forwa rded
to the Exec utive Office and as a resul t of tha t revi ew, funds are a pportioned
among the d i v isions . The ma jor c ri teria are B and C - th e i n terna l l y genera ted
tech ni ca l or market ideas and to me et com pet i tion .
2.
To what exten t are research proj ects forma l l y eva l uated? What are
the procedures used ?
a.
Before starting .
b.
Duri ng the work period .
. Th is q uestion has been partial l y answered i n d iscuss i ng th e previous
question , parti c u l a r l y w i th regard to the proced ures used before sta rting the
program .
Company H referred to previo us l y has a fo rma l procedure for eva l uating
th e pro ject . The ti me between th e proj ect re views i s not fixed but varies w i th
th e nature of the project . Th e l ong -range research programs are not eva l uated
as frequent l y as the short- term deve l opme n t prog rams .
I n another large compa ny, th e eva l uation of the resea rch effort i s
cond ucted at both the manageria I I eve ls . of th e company's operating organ iza­
t ion and at corporate h eadquarters leve l s . Norma l l y, eva luation and approva l
--
69 .
cons iderations are for a specified ca l enda r period, usua l l y a ca lendar yea r .
Th e a pp rova l b y th e corporate headq uarters of th e work to b e undertaken
carries with it th e approva l of th e a l location and th e expe ndi tu re of a l l
app l icable resources . During ea ch ca l endar yea r period, reports are provided
to management on a month l y or quarte r l y bas is for review of progress, end a n y
desi red action regard ing conti nuation o f the a l read y establ ished ra te, ac cel er­
ation, dec e leration , or cance l la tion . Al l of th e leve l s of management
having to do with th e dec ision-mak ing process in setting up the research
program ere i n vo l ved in th e continuing reviews and dec isions . Th is brief
desc ri ption of a review proced ure app l i es to a number of the oth er com pan ies
that answered the q uestionna ire .
Each research project, as i t i s set u p , w i l l have certa i n spec ifi c m i l e­
stones in th e schedu le that is set forth . One of the companies uses key
m i leston es as managemen t re view poi n ts . These are tech nica l m i l estones
and may s l i p at th e m utue l di scretion of th e project manager and th e top
manageme n t of the corporate division conc erned if the m i l es tone has not
been met . Th e poi nt be ing made here is that th e re view wi I I ta ke p lace a t
some po int where a technica l l y s ign ifi cant event h a s happened o r i t seems to
be proba b l e that it w i l l happen so th at th e project must be l ooked a t in th e
l ight of whether or no t i t shou l d con tin ue . Th is same com pany a lso uses a
70 .
spec ific ca lendar date for reviews . Th e ca l e nda r date rev iews tend to be
forma l i zed w i th an agenda , a specific l ist of invited peop l e, etc . M i nutes
are not publ ish ed , but th ere is a consensus of opi nion wh ich is wri tten dow n
by the proj ect ma nager in mem ora ndum form and reviewed and approved by
h igher managemen t .
I n th e d iscuss ion of the previous q uestion, I indicated tha t one l arge
compa ny has the primary respons i bi l i ty for th eir research program two l eve l s
be low co rporate in th e profi t and loss cen ters, w i th a very sma l l corporate
staff wh ich over looks th ese programs . I sh a l l refer to that company in th i s
and future q uestions a s Company T . Th ey have fo rm a l rev iews sched u l ed and
a brief check- l i st is g i ven to :the project managers for compl etion prior to th e
forma l revi ew . Actua l l y, th is i s more th an a ch eck- l i st i n that i t ends up
be ing a 3- pag e report on a pa rticular program . Th e form requi res that th e
techn ica l objectives be l isted very brief l y , th e tech nica l progress be desc ri bed
versus th e schedu l ed progress , th e pred icted m i l estones fo r the future, the
c l assifi catio·n of th e program such as appl i ed research or deve lopment w i th
e i ther techno log y or product ori entatio n , or perhaps basic resea rch . I nd i cations must be g i ven of opportun i ti es for mutua l support - e i ther interna l from
another corporate division or extema I from a government agenc y . A statement
m ust be made concern i ng the propri etary pos i tion and a brief statemen t co ncern;
ing fa I I out; th at is, wi I I any other useful informa tion come out of th e program .
I
I
i
71 .
Th is p l us title consti tutes th e first page of th e re view . Th e second page is
g i ven over to market considera tions . The product l i ne or l i nes supported are
indicated , a statement or i nforma ti on concern ing th e competi tion, advan tages
and d isadvantages to th e compan y concerned , a revised market esti mate,
coord i na ted efforts req u i red, and th e contri bution of th e program to sa l es
and prof i t . The last page is devoted to program e l ements and costs . H ere
management l earns how m uch is com i ng from prof its, from independent
1
resea rch and deve lopmen t, from con tra c t sou rces, or from oth er sources .
Duri ng the reviews th e corporate staff is respons i b l e for detecti ng arid ca l l i ng
attention of over l aps to th e peop l e invo l ved and to th ei r superiors . They have
no l i ne responsibi l i ty for stopp ing work if an overlap is detec ted . They a l so
se rve , on a corporate l eve l , to ca l l to the attention of th e di visions l eve ls of
com p l emen tary or supp l ementa ry work being carri ed out in other divisions and
can recommend that answers be obtai ned from another d i v isio n . One company
states, as pa rt of the i r pol i cy, that the su bject to be covered during quarter l y
revi ews is "th e best means of comm un icating researc h resu l ts w i th i n th e compa ny
and to th e sc i entific and engineering comm un ity . 11 I t is i n teresting th at th is
is a sta ted po l icy .
1
Th is name is gi ven to research and deve lopment work done by aerospa ce .
corpo ra tions and partia l l y government sponsored through overhead a l lowa bi l i ty .
!
72 .
3.
How are resea rch projects stopped ? Wh a t are th e conditions? Wha t
i s th e customer ro l e ?
Th e problem of stopp ing resea rch pro jects is one that is se ldom discussed
i n th e l i terature . As has been noted , th e l i tera ture on choosi ng and starti ng
resea rch projec ts is very vo l um inous , but on l y a few authors have rea l l y looked
at th e problem of actua l l y stopp ing a project . I n a conference sponsored by
the I ndustria l Resea rch I nsti tute i n 1 954 , three papers were presented on
sta rting, s l owing up, and stoppi ng pro j ects . Mr . George Roberts, J r .
1
discusses the reasons for stoppi ng resea rch projects .
1.
Th e objecti ve has been reached . Wh i l e successful comp l e tion
is obviously desira b l e , often projec ts do h i t obstac l es or
prob l ems that becom e increas i ng l y more d i ffi c u l t . If th e
costs become too h ig h , or if ta lents are req u ired that are not
a vai lable, then th e research has to be stopped .
2.
Anoth er reason i s the problem of i ncreasing hazards; fo r
examp l e , compan i es wou l d hes i ta te to start proj ects wh ich
wo u l d i nvo l ve exp l osive materia Is or rad ioac tive materi a l s .
3.
Anoth er reason fo r stopp ing th e project is finding a n a l ternate
so l u tion . Th is is re lated to th e prob l em of obso l esce nce .
Someti mes a comp lete l y diffe rent way of so l v i ng a problem
is found, and then work shou l d be stopped or she l ved, even
if l i censing a prod uct or process from another company appears
to be th e way to go .
4.
Anoth er reason for stopping p rojects is the sh ifting of compan y
i n terest . The most drama tic exam p l e of th is is a po l i cy
1
George Roberts, Jr . , 11 Stopp i ng Research Pro jects, 11 Chem i ca l and
Eng i neering N ews 33, No . 20, May 1 6 , 1 955, p . 2 1 36 .
73 .
decision change . Th e corpora tion may decide to d rop
its efforts in a pa rti c u l a r business area or to se l l a di vision
to anoth er compa ny, etc .
5.
Th e last gen era l reason i s a sh ift in the economic or bus in ess
c l i mate . Perhaps the market has disappeared .
I n l i ne w i th these genera l po ints, Company H gave five reasons for
term ination of a pro ject:
1.
O rig ina l intent of the proj ect is satisfi ed .
2.
Progress is too s low to warrant conti nuation .
3.
Condi tions have changed so th at the resu l ts of th is research
are now l ess i mpo rtant to Company H .
4.
Th e re is more importa nt research wh i ch needs atten tion .
5.
Com bina tions of the above reason s, as we l l as others not
mentioned h ere .
Dr . Con rad Berenson of th e C i ty Un iversity of New York has a form u l a
1
designed to indi cate when a chem ica l product shou ld be abandoned . H i s
formu la is based on a survey cove ring seve ra l hun dred companies in th e
chem i ca l i ndustry . I t i n c l udes five major categories, each of which has
severa l fac tors . The categories are as fo l lows:
1.
Current profi tabi I i ty of the item .
2.
I ts projected profi ta bi I i ty .
1
"Wh en to Sa y When , " Chem ica l Week, September 22, 1 962 , p . 89-9Q . ,
74 .
3.
Marketing strateg y (e . g . th e i terns sha re of th e market,
i ts i mportance in preserv ing th e com pany's image, patent
and trademark posi tions} .
4.
Soc ia l respons i bi l i ty (e . g . economic effect on a comm unity
if a p la n t m ust be c losed} .
5.
O rgani zed i n tervention (e . g . how l a bo r un ions m ig h t rea ct
to d iscontinuing a prod uct} .
Anoth er compa ny states th a t th e dec ision to stop is part of th eir reg u l a r '
review . Natura l l y tha t po int is made by most of the compan i es whose informa­
tion is inc l uded in th is paper .
Two of the peopl e who responded to th e questions poin ted out th at, as
one m ig h t suspec t, stopp ing a pro ject i s one of th e most di ffic u l t th ings to do .
Peop l e in vo l ved can th ink of ma ny exc uses to keep a pro j ect going , and there
is a l ways a major breakth ro ugh expected j ust around the corner . One of the
wa ys in wh ich a pro ject is most often stopped is by being substi tuted . By
th at is meant tha t some oth er project wh ich requ i res th e same peop l e is
sta rted, and the peop l e move over to that second project . The first project
is rea l l y not stopped , but simp l y d i es . Th i s is not as simp l e a p rocess as
desc ribed here so brief l y beca use th ere is th e pro b l em of keeping up the
en th usiasm of the peop l e concerned and the matter of priorities wi th regard
to how people are ass igned, etc . As an aside, the author had an unhappy
75 .
experience in c l eaning up a n umber of projects that had bee n started but
never compl eted . This i nvol ved fi nd ing th e peop le who had worked on the
pro ject in order to get expl anations of month l y reports so tha t a final summary
report cou l d be written. I nvo l ved was trying to soft-peda l the fac t th at som e
pro jec ts had been started tha't had no foreseeab l e cone I us ion and that h ad a
l i ttle l i brary research work been done, there wou ld have been no reason for
starting the pro ject . Certa i n l y no proj ect sho u l d be stopped w i tho ut arrang ing
for a reasonab l y c l ean comp letion , i n c l udi ng a fina l report.
One of the compan ies stated that projects are neve r rea l l y stopped they simp l y di e .
'
Al l of th e peop le concerned were genera l l y agreed that wh ere a customer I
is invol ved , the research is stopped by the customer and not by the company
itsel f .
4.
Do you separa te research and deve lopmen t? How?
Company H makes the dec i s ion to transfer from research to deve lopment
and differentiates between th e two after a successfu I demonstration of th e
feasi bi l i ty of a new devi ce or process or materia l . I f the operati ng d i v is ion
that is interested in th i s work has the interest and the eng i neering research
capa bi I ity and the necessary equ i pment, th en the transfer wi I I take pl ace
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d i rec t l y from research to d i vi s iona l deve lopment . I n man y cases, th ese
cond itions are not met, and i t is ne cessary or desirabl e for an experimenta l
76 .
or prod uction group in th e research organizat ion to do the next step . Th i s is
part i c u l a rl y necessa ry where considera b l e information is req u i red from th e
peop l e who did th e orig ina l research . I f a deci sion is made to transfer d i rect l y
to a division, then some o f th e eng ineering personn e l from that d iv ision wi l l
participate in th e transfer process at th e research orga ni zation . I t wo uld appear ,
that the separa tion is not c lean- cut as wo u l d be expec ted . Some projects are
sti l l in the research organization , a nd oth ers move to th e deve lopmen t organizetions .
Another large aerospace company has separate research and deve lopment
orga n izations except fo r a coup le of sma l l div isions wh ere peop l e are not
sepa rate l y organ ized and, in fact, may work on both research and deve lopment
projects s i m u l taneous l y or consecuti ve l y . Another company sepa ra tes the bas ic
1
research from th e app l i ed resea rch and deve lopmen t . Here a different iation was
made between direc ted and undi rected research wh ere di rected research is where
th ere is a spec ific goa l , w i th regard to ach ievement, and time and cost . I t i s
further assumed that such research wi I I head toward deve l opment a n d become
deve lopment in due course . The und irected research is refined as th e type of
th ing th at does not have a specific and object ive . I t is fundamenta l in the sense
that there is not an engi neer look ing over th e shoulder of the sc i entist wa iting
for an answer, bu t is done by th e sc ientist to increase know l edg e i n h i s particu lar !
f i e ld . I t norma l l y does not have sch ed u le l i m i ta tions and, w i th i n reason , does
--
77 .
no t have cost l im i tations . Tha t type of research is geograph i ca l l y separa ted .
I ts management is differen t and i t reports, i n th is pa rt i c u l a r company, at the
top leve l , wh i ch means into the executive offices i ndependent of the other
d i v isions of th e company . Th e d i rected research is norma l l y done with i n the
opera ting di visions .
Compan y T separa tes research and deve l opment on the hasis of wheth er
or not i t is custom er-oriented , wh ich is done primaril y for th e fee, and that
which is oriented toward corporate objectives . As i nd ica ted above , research
and deve lopment is essen tia l l y a product l i ne of th is company a nd is done for
i ts own sake . With i n th ese two broad categor ies a distinction is made between
basic resea rch , app l i ed resea rch , and deve lopment, w i th the product versus
tech nology orien ta t ion as indi ca ted ear l ier, bei ng used by some of the
companies . I t wou l d appea r tha t the d i vision is based primari l y on th e objectives .
Another company separates the two s im p l y by defin i tion a nd by fund ing
from separate poo l s . The last company makes no distinction between the two
categories of work .
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5.
At wh at po int wi l l a project be transferred from research to deve lopment ?
Agai n , th i s question is diffi cu l t to disc uss w i thou t question 4. Severa l of
I the compa n i es indicate that th ere is no t a defi n i te time but rath er a period of
I
I time over wh i ch
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th e transfer wou ld take, p lace . I t was ind ica ted that c ustomer
needs and req uiremen ts are often considered in mak i ng the decision for the
transfer . Peop le i nvol ved in Compa ny H in mak ing the deci sion fo r transfer are
78 .
market managers, product managers, and eng i neeri ng managers , as we l l as
I i ne superv ision . One company inc l udes a forma I review of th e project in
terms of th e compan y's sho rt- and long-range business obj ecti ves as pa rt of the
deci sion-mak ing process re l ating to the transfer of a proj ect .
Ano th er company sta tes: "We transfer a prog ram from research to
1
deve l opment when we re cogn ize that i t has progressed to such an extent that
i t can have sig nificant impact upon a new program about to be pursued by th e
orga n ization . 1 1
I n genera l , the transfer does not seem to be an orderly process and does
take place over a period of time as indicated . Cri teria used by ano ther compa ny
is that th e pro ject has reached a po int of very spec ific app l i cation , hardware
or prod uct deve l opment .
6.
I s th ere a fo rma l rev iew and dec ision poin t for th is?
Most compan ies seem to have a fo rm a l review at spec ifi c ca l endar
i n terva ls or achjevem ent po in ts, an d a dec ision to transfer wou ld be made a t
th is time . There is no separate meeting to consider th e probl em of transfe r
from research to deve lopmen t . I t usua l l y turns o ut tha t two o r th ree regu lar
reviews are requi red before an decis ion is fina l l y made for th e transfer . I n
th at sense, there is no spec ific po int .
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7.
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Wha t criteria a re used?
a.
Market surve y .
b.
Econom ic ana l ysis .
c.
Techn i ca l ana l ysis .
d.
O ther .
Th is question was not answered very c l ear l y or spec ifi ca l l y except in
a sense tha t most of the compan ies indi ca ted tha t essen tia l l y the same types
of criteria were used as were used for se lection of the orig ina I research projec t .
As wou l d a lso be expec ted , some of th e com pan ies indi cated th a t cons iderations
stipu l ated by govern ment agencies, directi ves and reg u lations were a l so used
i n making th is dec ision . Techn ica l success p lays an importa n t ro le in mak ing
th e dec ision . One compan y fee ls that technica l success i s th e most importan t
poin t . The market and economics factors enter into th e transfer de cision in
on l y a l i m i ted way . In genera l , th e c r i te ria t·are primari l y tech nica l with
.
' econom ics p la ying a secondary part and in governm ent marketing , consideration
is g i ven to the probabi l i ty tha t the m i l i tary p rog ram wi l l be carried forward .
I t was the author's opi n ion th at th is quest ion wou ld serve to bring out
d iffe ren ces between the ch em i ca l and aerospace industr y . The responses
rece ived did not accompl ish that purpose . I nd i cations were from the a nswers
g i ven that the cri teria used a re the same in both industries .
80 .
8.
I n defense projec ts or contracts, wha t infl uence does the pro ject budge t
category: te. , research , exp loratory deve lopment, eng ineering deve lopmen t
have in placing th e pro ject . I s th is overriding or is a sepa rate in-house deter­
m i nation made?
One co mpany answered th is by stating that the cha rg i ng to an account
on beha lf of work done is genera l l y con trol l ed by th e phase of th e con tract
under wh ich it is be ing co nducted , a ctua l accoun ting procedures depend
primari l y on th e overa l l nature of th e con tract . As an example of th is,
accounti ng covering a contract end ing up w i th experi menta l demonstration of
an a rtic le or system wo u l d di ffer from that leading to th e u l timate prod uction of
an apprec iable quan tity of arti c l es or systems . Th is answer evades th e question
and does not ind icate whethe r a dec ision to p l ace the work done in any
partic u l ar organization is affected by the c ustomer1 s budget catego ry . However,
in answering other ques tions, th e same com pa n y indi cated th at considerations
stipu lated by government agenci es , directives and reg ulations wo u l d affe c t
the p l acement of resea rch projects . Another co mpany· uses th e standa rd DO D
defi ni tions and fo l lows those defini tions in assign ing the research w i th i n i ts
ow n organ ization . The th i rd compa ny indica tes tha t th e budget ca tegories
have abso l ute l y no affect wh atsceve r on the p l acement of the resea rch proj ect .
I n Compa n y T , th ere is an in-house determ ination as to th e character of
the wo rk to be done . For examp l e , they a re do ing some work for NASA wh ich
,I
81 .
is funded in a research category; however, th e work has bee n going on for some
time and the necessary computer routin es, etc . have been deve loped to th e
point wh ere i t is considered by Compan y T as essen tia l l y a prod uction type
effort and is hand led tha t way wi th i n th e compa n y . Th e in-house determ ina tion
is th e overri d i ng factor . Th e same answer was g i ven by one of the other
companies and th e last company commented that pro jects a re conducted wh ere
the techn ica l ta lent ex ists .
9.
Do pe rsonn e l transfer w i th the pro ject? Wha t cri teria are used?
A t Company H the peop l e usua l l y do not transfer wi th the pro ject on a
permanent basis . Project transfer w i l l i nvo l ve having eng ineers from th e divi ­
sion wh ere the proj ect w i l l be in res idence w i th the resea rch peop l e to p i ck
up the technology or a sci entist from the research di vi sion wi I I spend som e time
on a temporary basis at th e division to assist in th e techno logy transfer . Th e
second company has no set or un iform practices regard i ng th e tra nsfer of
person ne l . On some occasions th ey fee l i t appropriate to reta i n certa i n manag.­
eri a l and tech n i ca l personnel wi th th e pro ject from i nception in to produc tion .
I n other in stan ces entire l y new teams are formed . A very large aerospace
company indi cates that the transfer is determi ned enti re l y by th e persona l
inc l i na tions of th e research worker . I n anoth er compa n y the work is usua l l y
done by a gro up of people wh ich wi l l i nc l ude production, deve lopment and
research oriented personne l so tha t th e problem does not rea l l y exi st . Some
82 .
portion of the in itia l group wi l l stay with th e project for its enti re l ife .
Those resea rch personne l who wish to stay in research work may l eave a
project and go on to another one after the i n itia l period .
I n Company T there is no tran sfe r invo l ved . The personne l stay w i th the
program th roughou t . A l so the organ ization is suc h that th e prod uction
pe rsonne l tend to be housed w i th the deve lopment people so tha t th ere is
continuing con ta c t . Ano th er company indicates tha t th e research and deve lopment ph ases a re in th e sam e orga nization so that th ere is no change in pe rsonne l
wh i l e th e l ast compa ny indicates th at there is se ldom a transfer of personnel .
I t wou ld appea r that the transfer is dependen t upon the way the compa ny i s
organ ized a s much a s on a n y other factor .
10.
Is size of proj ect used in reach ing a dec is ion ? Wha t criteria are used ?
I n Compan y H size is used to d ictate the proper cho ice of peop l e to
ma ke th e transfer decis ion . In th e second company size is not a pri me cons ideration but on l y a m i nor po int used a long w i th other factors in a rriv ing at
deci sion . Another aerospace company says that size is immateria l .
An interesti ng poi n t was brought out in tha t si ze ma y be a prob lem i n
findi ng a location to a bsorb a n extra work load dictated by a new pro j ec t .
A l so size may d i c tate whethe r o r not a new department is set up for a new
prog ram . I f i t is l arge enough a new departmen t wi I I be formed . Anoth er
company states th at size is eva luated o n l y to assu re th a t th e project is a
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83 .
11 c ri tica l mass 11 and in R& D to compare the program cost to poten tia l pa yoffs
in contracts . I n gen era l i t wou l d appea r that size is not an important criteria .
11.
Wha t ro le do customer preferences p l a y? I feel tha t th is is partic u l ar l y
importa nt i n th e aerospace in dustry - a m I righ t?
In Company H wh ere th e corpo rate research group does work for th e
opera tiona I di vi sions, the y fee l that th e customer is th e operatio na l d i vis ion
and the work is oriented toward cri teria provi ded by those divisions . On e of
th e larg e aerosp ace compan ies po inted out th at an assessment of a c ustomer's
probab l e future requi rements is a major el ement in the commencement of a
projec t . Th is company occasiona l l y fi nd i t necessa ry to make dete rmi nations
wh ich do not ref lect th e c ustome r's curren t preferences but ra th er th e i r own
assessment of h is probable future ac tions; in other words they try to th ink ah ead
of th e c ustome r . Th ey also attempt to smooth out th e ups-and-downs wh ich
any new pro ject experi ences w i th any custom er o rgan ization in order to
m i n im ize budgetary and p l an n i ng probl ems; and attempt to m i n i m ize short term
po l i tica l changes . The same company points out that the di ffere nc e between
aerospace industry and other industri es is not a matter of econom ic factors
vs tech ni ca l and po l i ti ca l fac tors; th e differen ces in R& D trea tment are c l ear ,
but th ey are d i cta ted primari l y b y t h e consumer market vs th e government
customer . I n a consumer market, i t is necessa ry to make a ba lance sh eet of
84 .
expendi tures i n R&D in individua l deta i l agai nst the p rofi tab i l i ty of th e
resul ting consumer product . I n a defense industry and in most government
techn ica l bus inesses ma ny indivi dua l research or deve l opm en t contribu tions
can come together to be the winn ing factor in a sing le ma jor new program .
I n other words, th is parti c u la r compa ny fee l s they cannot readi l y identify a
sing l e research proj ect w i th a sing l e pi ece of new bus i ness and that that is a
major d iffe rence wh i ch character izes th e aerospace industry .
Compan y N fee ls th ey a re not inf luenced a t a l l by the gove rnment
c ustome r . Th is comes about because th ey have so thorough l y entwined th eir
di rec ted resea rch and deve l opment tha t th e q uestion doesn ' t rea l l y arise .
Company T tends to spend the ir research funds in such a way as to be respon­
s i ve to c ustomer req uirements . O ther compan ies si m p l y agreed w i th m y state­
ment tha t company preferences a re very importa n t . Th e l ast company fee ls
th at the entire techn ica l effort is determ i ned pr imari l y by the c ustomer .
12.
How are deve lopment proje cts stopped ? What are th e condi tions?
Wha t is the customer ro le?
Compan y H fee ls the reasons for stopping a project in the deve l opmen t
stage are essentia l l y th e same as those in research . Th ese reasons have been
l i sted under q uestion 3 . Th e second company fee ls tha t p ro j ects are stopped
norma l l y on th e basis of evidence of a defi n i te l ack of interest in the intended
end prod uct by c ustomers or an i n terna l compa ny dec is ion to a l locate the
85 .
app l icable resources to more promising or more prof i table products . There is
a l ways the possibi l i ty of unpred i c ted tech n ica l d ifficu l t ies be ing acco unted
wh ich causes the project to stop . Th is same th eme and th e sa me types of
answers are given by a I most a I I of th e compan ies . One i m portant factor
was poi nte d out . By th e time th e program has become a deve lopment pro ject,
th e costs a re h igher both on a tota l bas is and ori a unit ti me basis 7 more
peop l e a re invo l ved and therefore th e dec ision is more diffic u l t to make .
I n summary th e criteria fo r stopp ing deve lopment pro jects are essentia l l y
th e same a s fo r research p rojects .
13.
Who participates in th e dec isions di scussed he re ? ( By titl e and
organization) .
Th e l i st of people who parti cipate in decisions h as been partia l l y covered
in answering the ea rl ier questions . I n Compa ny H , th e pa rti cipa n ts are the
market managers, the prod uct managers, and th e eng i neering ma nag ers .
cit
th e d i visiona l le ve l wh ere a prod uct w i I I be tra nsferred to . I n the re sea rch
center, where the work is in itia l l y carried out, a number of manag ement and
superviso ry personnel wi l l partic i pa te . Th e size, i mportance a nd nature of
th e project dictates the choice of peop l e who pa rti c i pate in a decision . I n
the second compa ny, management a t a l l l eve l s i s i nvo l ved i n th e decision .
Th is inc l udes appropriate represen ta tion from the appropriate headqua rters as
we l l as operating divisions . I n th e thi rd com pan y, the ma in dec ision maker
86 .
i s th e Ch ief Eng inee r of each division ass isted by h i s staff . I n these
d i visions th e D i rector of Research reports to th e Ch ief Engi neer and th e
Di rector of Research is one of th e c h ief advisors to the Ch ief Eng ineer in
making dec isions . I n the next company we again have the same k i nd of
dec ision th at depends on how much money is to be spen t or how big th e
pro ject is . A proj ect th at is perhaps in tens of thousands of dol lars wou l d be
un l i ke l y to go h i gher than di vision leve l; a much larger proj ect wo u l d be
consi dered by th e Board of Di rectors, th e Pres ident's Office and inc l ude a
staff rev iew a t headqua rters .
I n Company T, th e Ma rk eting Manager and the Eng ineeri ng Manager
parti c ipate in ma king the dec isions . I n the nex t compa ny, major program
dec i s ions wh ich in c l ude rev iew of proposa l s for corporate sponsorsh ip are
reviewed by a commi ttee composed of a V ice President, P l ans and Programs;
Supe rvisor of New Techno l og y; a System Vice Presi den t,and o thers as reques ted
by th e comm i ttee itself . The Di rector of Corporate Re search reviews and
i m proves th e p l ans . I n th e last compan y as in some of the others, participation
is l i m i ted to di vision ma nag ement, and in some cases, corporate managemen t .
14.
Are pro j ec ts ever moved back to research from deve l opment .? Under
what c i rc umstances?
I n Company H , a project or sometimes a pa rt of a project, wi l l be
return ed to research because technical probl ems arise which cannot be so l ved
87 .
except by th e personnel and/or foci I ities a va i labe i n th e research organi zation .
Th e second company indicated th at the sh ift of th e deve lopm ent effort ba ck to
resea rch status is a re l a tive l y rare event . Th e few occas ions when th is has
occu rred have been at customer request and s temmed from unforeseen cha nges in :
requi rem en ts or opera tiona l need . I n th e next company i t was stated
unequivoca l ly th at there was no instan ce where an en tire pro jec t has moved
ba ck from deve lopme nt to researc h . However, there are ma n y examp l es of
deve lopment projects wh ich required furth er work by th e research laboratory
on some aspec t of th e program . I n Com pa n y N the deve lopment peop l e often
ask th e research g roup fo r h e l p , but it is u n l i k e l y th at an entire project wo u l d
be moved back . When a deve lopment g roup has prime responsibi l i ty, the y
wi l l keep that responsibi l i ty and subcon tra ct the work necessary from a resea rch
organ ization . Com pan y T does not transfer projects back to research but are
l i ke l y to put th e resu l ts of a partic u l ar project awa y and review th em period­
ica l l y w i th the idea of using th em in a new prog ram . The last two companies
. simp l y stated th ey se ldom moved a project ba ck to research from deve lopmen t .
16.
Does th e i n terest exh ibited by th e deve lopmen t organ iza tion i n th e pro ject
have an y affect on th e transfer?
Very few of the companies answered th is question d i rectl y . Sta tem en ts
were made wh ich indicated that the transfer i s depend en t on such i tem s as
prod uct competition and sa l es rather th an atti tudes of the organ izations
88 .
i n vo l ved . I n two cases th e answe r to a quest ion was a simple " yes " an d th e
reasons for th is response had to be deduced from answers to o ther questions .
As Company N poin ted out, you ca n 1t force work on so meone who isn 1 t rea l I y
wanting or able to put h is heart and so u l i n to th e work . There is a l wa ys th e
N - 1 - H (no t inven ted here} a tti tude and th e transfer problem a lways invo l ves
th is; en thusi asm must be aroused i n the pe rson ne l to whom the project is bei ng
transferred or i t wi l l sure l y fa lter . I n add i tion, the deve lopmen t organ ization
w i l l norma l l y put a far l arger sum of money into th e program than wou l d be
true of the research organ ization and w i l l a l ways cons ider ca refu l l y before
accepting a prog ram . One company po in ted out that the atti tude of th e
deve lopmen t organization was parti c u l a r l y important i f a commerc ia I component was be ing consi dered .
17.
What effect does location , type, lack, etc . of testi ng fa c i l ities have
on the transfe r?
Th is question rece ived a d i rect answer from most of the compa ni es
invo l ved . Th e use cos t or i nvestmen t cost in new fa ci l i ties is a pa rt of the
decision making process . I f fac i l ities are ava i l a b l e , th is parti c u l a r question
w i l l have l i tt l e effe c t on the transfer program . I f fa ci l ities a re not avai l a b l e ,
i t w i l l be o n e of the numerous i tems inc lu ded i n the eva l uation procedure .
Company N poi nts out tha t the loca t ion and type of th e fa c i l i ty may affect
89 .
the transfer from research to deve lopment in that if a faci I ity p l a ys an
extreme l y important pa rt in the project, managemen t of the projec t ma y be
transferred to th e fac i l i ty manager. Th is dec i sion is a l so affected by the
uniq ueness of the fac i I i ty . Company T brough t up the probl em of transferring
capa b i l i ties be tween essen tia l l y autonomous corporate divisions . Peop le
a t th e corporate l eve l can look at operating d ivisions and see that th e problem
cou l d better be so l ved in one division than i t ca n be so lved in th e division
in wh ich it is presently being adm inistered . However, transfer to th e
a ppropriate divis ion i s often diff icu l t even though t h e fac i l i ty in th e d ivision
wh ich can do th e work is better sui ted to the problem . Th is is, of course,
re l a ted to the N - 1 - H factor men tioned above . Two companies stated tha t
fac i l i ties type , location, e tc . have no effec t o n a dec isi on; th is is somewhat
d iffi c u l t to visua l i ze .
18.
I s the transfer affected by l i m i ts set on the size of the resea rch organiza-
tion ?
The genera l consensus was tha t th e answer was 1 1no'' .
19.
Hbw is research and deve lopmen t funded, i . e . , interne I fun ds, contrac t,
bo th or some other way ? What i s the ratio of funding from various sources?
I s there any a rbi trary amount of money set aside for R&D such as percent of
sa l es? Who makes such a recomm endation and dec i sion ? How is the dec ision
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regard i ng leve l of fund ing made ? What are th e d ifferences, if any, as th e
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project moves from research to deve lopment?
1
Dr . Quinn of Dartmouth Co l lege indicates that th e two l i m its of
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J resea rc h budgeting are :
I
on the low end, th e requirement to insure that the
! compan y's competi tive posi tion w i th i n -i ts i ndustry does not deteri orate, and
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l
on the upper end, by the ra te at wh ich th e company can assim i l ate th e
resu l ts of th e i r resea rch program e i ther orga n iza tiona l l y or financi a l l y .
Wi th i n these l i m i ts the fol lowing criteria are used for the research prog ram size .
1.
Percent of sa l es .
2.
Ma tch ing or exceeding compet i tor's out lays .
3.
Growth rate standards , and
4.
Pro jected rate of return .
Answers g i ve n by th e aerospace companies were not genera l l y spec ific
. w i th regard to these criteria . Company H d i d not answer th e question . Th e
second company po inted out th eir work is funded both interna l l y and under
1
con tract w ith no prec ise or average ra tio between these two fund i ng sou rces .
However, th e i n terna l l y funded effort is tradi tiona l l y larger than the effort
'
i carried out from the contrac t . They use no arbi trary cri teria such as basis of
!
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1
B . Q ui n n , " Budgeting For Research , 11 Handbook of I ndustria l
!j Resea rch1 James
Ma nagement, Carl H eye l , Editor, New York: Rh ei nho l d P u b l ish i ng Co . , :
,
I
1 959 .
fi
91 .
percent of sa l es . The fund ing l eve l more happi l y stem from market resea rch
and ana l ysis trends and co mpeti tion and new and advanced company orig inated
conc epts and i nnova tions . Another ve ry l a rge compan y funds th e projects fo r
th e first one or two years from th eir own financia I resourc es . As soon as
possible, they in trod uce the ideas to perspec t i ve c ustomers so th at they can
supp l ement the funds bei ng spent after thi s in itia l period . Th ey norma l l y
have about a 50- 50 sp l i t between i n terna l l y funded programs and c ustomer
funded R& D pro jects . Aga i n th ey have no sp ecific cri teria such as percent
of sa l es . Th e d i visions make th e i r own dec is ions based on th e i r sa les
objecti ves and those dec isions are revi ewed at th e corporate l eve l .
One company mentioned " independent research and deve lopmen t"
wh ich is partia l l y funded by th e governmen t in th at expendi tures on these
programs become a portion of a l l owa ble overh ead costs . A l though these
programs are often referred to as co m pany funded, in rea l i ty, a l a rge portion
may ac tua l I y be governmen t funded i n that the costs a re recoverable . For
th is same company, th e statement was made that for every one h und red dol l a rs
in contract R & D, th ere is about $3 in reim bursed R & D and a bout $2 spent on
R& D th at comes from company profi ts . Co ntract R&D here is def ined as th e
ea r l y stages of any large program wh ich inc l udes de l ivery of prototype hard­
ware . H ere aga i n , deci sion on the amo unt of mo ney to spend on research
predi ca ted more o n the mad< et ana l ysis than on any arbi trary cri teria . I n
IS
92 .
another compa ny, the amount to be spent is a ma tter for negoti ation between
the d i vision h ead and th e corpora te offi c ia ls. It wi l l depend on the prog ress
made by tha t d i v ision during the yea r under discussion . One company
i n d i cated that from 1 to 1 1 /2% of sa l es is spent for R& D . Th e l ast company
indi cated th at in the government di visi ons, development is funded from a
pool wh i ch qua l ifi es for recovery on governmen t contract.
In commerc ia l
d i visions, deve lopment is funded from profi ts. No spec ific percentages or
q uanti ties were g i ven.
20. P l ease append any da ta you can d i vu lge concern i ng the amount of money
spen t for R&D in your company. What is the average size of your projects
i n R&D?
Th is q uestion was pa rtia l l y answered under 1 9 above. One company
i ndi cated that th e a verage size of p rojects is abo ut $1 00, 000. Ano ther one
i nd i cated from $40, 000 to $1 00, 000 wh ich i n c l udes overh ead a l so. A th i rd
company, gave $5 0, 000 as th e average size with a range from $20, 000 up
to $200, 000. One company w i th a commerci a l d i vision had proj ects as
sma l l as $5 00. Th is was an exception.
Summary
Th ere was noth ing in th e responses from th e companies so l i c i ted wh ich
wou l d i nd icate that th ere are any dis ti nctive criteria for transferri ng a pro jec t
from research to deve lopment in the aerospace i ndustry. There was a steady
1
93 .
recogni tion th roughout th e answers g iven tha t th e s i tuation can best be
descri bed as a monopsony and th a t th e government is th e c ustom er. Th e
information furnished tends to bea r out the concept . Th e criteria fo r proj ec t
transfer are fa i r l y consi sten w i th on l y m inor diffe ren ces between th e various
compan ies . These differen ces are a ttri b utable to the type of organ iza tion
or whether or not the parti c u l a r company does comm erc ia l work as we l l as
go vernmen t work or is essentia l l y dependen t upon government work . Those
compan ies wh ich do govern ment work tend to di fferentiate somewh at i n how
they hand l e proj ects in the two a reas . I n genera l there is a rationa l ,
coord inated , we l l laid out program for eva l ua ti ng a resea rch pro ject and
fo r transfer from research to deve lopmen t . Transfer cri teri a are the sa me as
se lection criteria; i nformation generated is a lways more deta i led beca use of
th e larger sums of money invo l ved .
}
CHAPTER V
RESEARCH A N D D EVE LOPME N T I N TH E C H EMICA L I N DUSTRY
Characteri stics
I n con trast to th e aerospace industry, wh ich can best be desc ribed as a
, monopsony, the chemica l ind ustry is best descri bed as o l igopo l y tending toward
pure competi tion .
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A
n umber of su bdivisions in th i s gen era l ca tegory have been
identified but the i ndustry. i s made up of a re la tive l y sma l l num ber of suppl iers
of very competi tive prod ucts . Th e best description of research in th e chem i ca l
! i ndustry which has appeared recen t l y is tha t of Da vi d M . Ke ife r . 1
i
I n th is
! a rti c l e 27 compa nies were q uoted , these are in order of the i r a ppearance:
I
1.
1 5 . A i r Reduction
American Potash
Koppers
1 6 . O l in Ma th ieson
2.
3.
Monsan to
1 7 . Abbott Labora tories
4.
American Cyanam i d
1 8 . H erc u l es
19.
5.
S tauffer
DuPont
6.
2 0 . U . S . Borax
A l coa Che m ic a l
7.
2 L Eastman Kodak
A l l i ed Chemica l
22 . H ooker Chem i c a l
W . R . G race & Co .
8.
9. .
Dow Chemica l
23 . Commerc ia l So l vents
10.
Sm i th , K l i ne & F rench
24 . Pi ttsburgh P late G lass
11.
Minnesota Mining & Mfg .
25 . Parke- Davis
12 .
Un ion Carbide
26 . Pfizer
2 7 . E l i Li l l y
13.
N a tiona l Disti l lers
14.
Standard O i l (N . J . )
1
David N . Keifer, loc , c i t . , Chem ica l Engineering News, 1 964 .
94 .
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95 .
The companies th at responded to the quest iona i re , wh ich is the basis fo r
1
I
th is th esis, are inc l uded in that l i st . The Nationa l Sci ence Foundation statistics
J are quoted by K i efe r and they indicate that the chem i ca l in dustry ra nks th ird
!
i among a l l th e industries in spending for research and deve lopmen t . These are
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1
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1 962 figures and i t is un l ike l y tha t th ere has been any major change since tha t
tim e . Howeve r, the chemi ca l i ndustry is f i rst i n spending i ts own money fo r
R&D . Th e a i rc raft and m iss i l e industry is fi rst i n spending but a cons iderab l e
1
portion of th e i r funds come from the federa l government as opposed to th e
chem i ca l industry where company funds are used fo r R&D spending . Th e
! chemi ca l industry i s a l so first in spend ing for basic research in con trast w i th
I
I a ircraft
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and mi ssi l es , wh ich is th i rd i n th is category . I n regard to spend ing i ts
own money, ai rcraft and missi l es ranks th ird . The spend ing fo r bas ic resea rch
accou nts for abo ut 1 1 % of th e tota l R&D budget i n th is ind ustry . The compara b l e
figures in th � ae rospace industry i s about 1 6% . G reat tech no log y strides have
'
been made i� th is ind ustry in the period since Wo rld Wa r I ,. large l y due to th e
resea rch effo:rt and th e trans lation of resea rc h into useable products . Changes
1 that are tak i ng p lace in the industry have to do w i th reduc tion in rate of g rowth
I
land a more caref u l contro l of research and deve lopment expend itures .
I
II
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I.
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96 .
Resul ts of th e Survey
1.
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As wou ld be expected from the h istorica l l y sec reti ve character of the
industry, th e answers recei ved were less deta i led than notes from th e aerospace
industry . However, suffic i ent i nformation was g i ven to make a com parison with
the resu lts of those rece i ved from the aerospace industry . The Kiefer reference
c i ted above from Chemica l and Eng ineeri ng News wi l l be used in fi l l i ng in
deta i l s for those questions dea l ing with th e research programs .
I
Question 1 5 - How do you define research and development?
Th e chem i ca l compan i es tended to have a more individua l i zed defin ition
j of resea rch and deve lopment than wh at is true of th e aerospace industry .
I
For
example, one com pany separated th eir technica l effort into 11 pioneering11 and
11supporting11 resea rch ra ther than resea rch and deve lopment as is usua l l y done .
1
The pioneering effort incl udes fundamen ta l researcb and research d i rected
toward development of new products . Th is i s comparable to the research defini-
1 tion given earl ier, but it a l so inc l udes some deve lopment.
!
1
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j
In the supporting
category, there is a great dea l of what oth er companies ca l l research . Support­
i ng research is connected with ex isting c lasses of products rather th an new
products . Th is answer came from a corpora te development department in a very
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! large chem i ca l company and it was poi n ted out that th e divisions have a consider- !
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able amount of autonomy with the resul t that there may be some difference in
I
97 .
the defin i tion wh i c h wou ld be g i ven by di vision rather th an th is corporate
orga nization .
Another compa ny gave a defi n i tion of research and devel opment as
technica l effort prior to manufacturing . A th i rd company simp l y referred to
the reference g i ven above . Mr . K iefe � spends more time in that arti c l e
d iscussing what research is not in th e sect ion devoted to defi n i tion ra ther than
to g iving a very exact defin ition . He g i ves th e fol lowing examp l e:
1
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The wa y that individua l companies look at R& D costs a lso undergoes
changes . I n i ts 1 960 annua l report, for examp l e , DuPont l isted
i ts R & D outlays as $96, 000, 000; for 1 96 1 i t reported o n l y $59, 000, 000
spent fo r "p ionee ring research . 11 The d ifference reflects a change
i n accounting methods rath er than a change i n th e vo l ume of
tech n ica I work . Th e company's tota l R & D spending, in fa ct, has
inc reased since 1 960 .
H e summarizes by osing th e Na tional Sc ience Foundation defi n itions wh ich
were g i ven in an ea rl ier chapter of th is paper . Th e last compa ny had an
inte resting statement concern ing researc h;.
i
Research is th reaten ing , upsetting , and undependab l e . Like a baby
i t seems to be lovable j ust wh en it is most ob ject ionab l e . Se l fish,
no isy and seem ing l y uncertain yet commanding some k i nd of
irrationa I and enrapt adm i ration . ''
I
I The sa me company d i vides th eir research and deve lopment into fi ve categories .
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I
The fi rst ca tegory is idea sea rch ing . Th e second catego ry is defin i t i ve research
I wh ich i nc l udes appl ica tions, resea rch , process resea rch , eva l uation of properties
1
David N . Keifer, loc . c i t . , p . 90 .
98 .
and an outl ine of th e process and the produc t . Th e th ird step is laboratory
deve l opment wh ich inc l udes app l i cations deve lopm ent, process deve l opment,
l arge sa mple preparation . Tha t step l eads into design deve lopme nt which has
to do with process design and veri fication, fie l d tria l s , com puter en g ineering
and a m i n i -plan or pi lot p l an . The fina l step is comm erc ia l deve l opment
wh i ch i n c l udes,of course , in troductory sa les and i n terim or fina l operationa l
p lan . Referen ce is a l so made to th e two ma jor dichotom ies of industria l
research and deve l opmen t: first i s the d i chotomy of ind i vi d ua l creati vity versus
team effort . The second dichotom y i s th e a ppa rent incompati bi l i ty of scientific
research defi ned as free rov i ng and ana l ytica l inquiry into the doma in of
unpred ictable ph enomena ve rsus commerc ia l deve lopment wh i ch is the u l timate
business outcome of succ essfu l industr ial research i nc l ud i ng th e prob l ems of
econom ics and company objectives . Understan ding these prob l ems l eads to a
better understanding of the defi ni tion .
The defini tion in th is i ndustry depends somewh at on size and organ ization
of th e co mpany . As indicated above , where th ere were a num ber of autonomous
d ivi sions th e defin i tion was not th e same in a corporate organiza tion as i t was
in those divisions .
Q uestion 1
-
How does your compa ny se lect research pro je c ts? Is there a
defi n i te proced ure , p l ease out l i ne th at proced u re .
a.
N eed resu l ting from a market survey .
b.
I n terna l l y generated technica l or market ideas .
99.
c.
To meet competi tion .
d.
Seri ndipi ty (happenstan ce) .
e.
O ther .
Th e fi rst compa ny indicated that the pioneering research pro j ec ts are
sel ected through an i nterp lay of a I I of these fac tors I i sted, but th ey l ean most
' h eavi l y on i n terna l l y generated ideas . They try to seek areas that are ahead of
competi tion but some of the ir work is a reac tion to competi tion where ver i t
appears . Th e second company fee ls th e i r se lec tion i s based o n needs resul t ing
from a market survey and i n terna l l y generated ideas w i th no addi tiona l comments
oth er than that . The th i rd company fee ls the i r programs are a i med a t crea ting
prod ucts tha t th ey know are needed and tha t h a ve a profi ta b le ma rket ahead .
1
Dr . Cairns fee l s that p l ann i ng for bas i c resea rch invo l ves the problem of
1
carefu l se l ection and adequate support of basic sc ien tists . I n add i tion, i n
i ndustria l resea rch there is a l so th e problem of sti mu lation of the sc ien tist .
Th is i n c I udes keepi ng the exploratory resea rchers aware of oth er fac ets of
company tech n i ca l acti vi ties i n encourag ing c lose re l ationsh i ps wi th other
technica l people in di verse pursui ts . Se lection of th e project i s l eft up to the
I
I
researchers but i t is company respons i b i l i ty to keep the research sc ientist aware
I of com pany purposes,
l ong range object ives , and s trateg i c capa b i l it ies i n order
I
I to poi n t the way for the research scientist .
�
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1 Robert W . Ca i rns, " Pl an n ing For Research , 11 Ta l k for Research and
Deve lopment Com m i ttee, Pharmaceutica l Man ufacturers Assoc . , Nov . 5, 1 963.
1 00 .
Research d i rectors, as poi n ted out by Keifer, have to sel ect those pro j ec ts
wh ich look mos t prom ising . At th e same time they h a ve to mai nta in a ba lance in
th e en tire research program . The ba lance i n vo l ves th e work be ing done fo r the
various di vis ions and prod uct l i nes , yet a lso i n vo l ves a balance between basic
research , app l i ed resea rch , advanced deve lopment, and etc . As indicated
above , they must a l so consi der defen sive wo rk in meeting thei r competi tion for
o l d products and work di rec ted toward en ti re l y new products . As has been
descri bed in Chapter 3, th ere a re ma ny ways of picking projects and i t wo u l d
appea r th at the che mical industry covers th e enti re spectrum .
Q u estion 2 - To wh at exten t are research projects forma l l y eva luated ? What
are th e p rocedures used?
a.
Before starting .
b.
Doing the work .
The fi rst compa ny uses a l l the norma l deg rees of form a l eva l ua tion of
pioneering resea rch proj ects depending on how much money is in vo l ved and
how the project conforms to the objec tives and goa ls as budgeted . The
executive comm i ttee of th e compa n y approves the tota l research budget but
, w i th i n that budget a se lection of proj ects is l eft to th e man agemen t of th e
i
department . Priori ties a re esta b l i shed based on sal es problems and g oa l s .
The oth er compa nies use formal eva lua tion programs, but th ey were not descri bed .
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II
{
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101 .
Ke ifer indicates that severa l compan ies have worked up standardized
I
forms such as desc ri bed in Chapter 3. On the other hand, as wo u l d be expec ted ,
j compan ies are getting away from the forma l proced ures and re l yi ng more on th e
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j udgm ent of peopl e who are most know ledgeabl e . Minnesota Mi ning has
sta rted to use an informa l project aud i t system . A comm i ttee of th ree of i ts
techn ica l d i rec tors inc luding th e Director of th e laboratory whose work is being
eva l ua ted revi ews the more importa nt projec ts, either sem iannua l l y or annua l l y .
i
As a res u l t,..of th ese revi ews, recommendations are made to management .
Most of th e math ematica l form u l as used to eva l uate research projects
' attem pt to compare th e return expected from an outl a y with th e cost of th e
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effort requ ired . Th ese form u l as have been descri bed ear l ier i n th is paper .
Man y ma nag ers fee l that such th ings as i n tu i tion and j udgment are more
important, however , tha n any form u l a . Th e next step in soph istication is
bu i l di ng up a mode l of th e product and th e wa y that i t is manufactured, th e
probable market, etc . Computers have to be used for such mode ls . These
mode l s get more deta i l ed and are much more comp lete as the project moves
a long in i ts l i fe cyc l e .
I
Q uestion 3 - How are research pro j ects stopped ? What are the co ndi tions?
i What is th e c ustom er ro le?
Th e f i rst company stops th e i r pioneering research project when other
j projects seem more worthwh i l e and th ere is no partic u l ar c ustomer ro le .
I
The
1 02 .
seco nd compa ny stops th em simp ly by cutting off funds with a g reat num ber of
cond itions wh ich w i l l cause th em to stop th e project . Aga in th ere is no
def i n i te customer ro le . Keifer quotes Crawford H . G reenwa l t of DuPon t, who
said:
Th e d ifference between a good d i rector of research and one whose
performance is indifferent is that th e good one knows wh en to stop .
The on l y time th at i t is easy to stop a program is when th e peop le do ing the
work adm i t th emse l ves th at they have run out of ideas or wh en th ey run out of
enth usiasm . Th is is unusual w i th thei r research workers . Most resea rch
d irectors fee l tha t by proper app l i cation of market and process cri teria
a
good
dec ision can be made regard ing stopp ing a research projec t . I n genera l , th e
1
cri teria a re primari l y technica l with econom ics p l a ying a seco nda ry part .
Q uestion 4
-
Do you sepa ra te resea rch and deve lopment ? How ?
The fi rst company partia l l y answered th i s question i n th e disc ussion of
p ioneering and supporting research (Question 1 5) . That company usua l l y
doesn 1 t make any fo rma l sepa ration of research and deve lopme nt but tri es to
( 1 ) determ ine whether a new product is prom ising by runn ing a marketing and
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econom ic study ea r l y in research stage , and (2) speed up commerc ia l ization
i of a prom ising new product by gi ving ea r l y 11 new ven ture11 status to it and
i
I assign ing responsibi l i ty for resea rch or
deve lopment, ma nufacturing and
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r
103.
market deve lopment, forecasting and p l anning to a s i n g l e manager . Th i s
company does not rea l l y separate research and deve lopmen t . The second
company i nd i ca ted th ey separate research and deve lopment i nfreq uen t l y and
i t is done by transfer to a di fferent location or a different sponsorsh i p . Th e
th ird company has a system for eva l uating th e need for a pi lot p l ant . I n years
past, deve l opment co u ld be descri bed as operati ng a pi lot p la nt, ·w i th the
advent of more soph isti cated laboratory a nd computer techn iques, th i s straigh tforward def i n i t ion no l onger app l ies . However, the cri teria for th e pi lot p l ant
step wou ld be compara b l e to those for th e transfer from research to deve l opment
and wou l d i nd i cate th e separat ion of these two activi ties . Th e c r i teria used
are ( 1) econom i cs, ( 2) i nvesti gation p lan for th e pi lot p l ant, ( 3) market goa l s
and (4) a pa tent report . Th i s co mpan y a l so uses so-cal l ed stage system def i ned
as fo l lows:
Stag e 1 - Exp lora tion - ea rly stage pro j ects on l y vague ly foc used .
Stage 2 - Examination - i n tensive l a boratory deve lopment; susta ined
effort on a project a i med at a def i n i te comm erc ia l goa l .
Stage 3 - Confirmation - fina l stage of eva l uation; obtai n i ng
adequa te process and product da ta so that a dec is ion to
produce can be made .
Stage 4 - Comm i tment - Th e company has made a comm itment i n
the form o f authorization of commerci a l production
fac i l i t ies, or comm i tment to de l iver to a custom er, such
that respons i bi l i ty for the pro ject has i n part or comp l ete l y
passed from research to prod uction and sa les groups, wi th
research planning playing a supporting ro l e .
1 04 .
These stages as defined tend to be essen ti a f ly a I I deve lopmen t work ,
but th ey do serve to show how sepa ration can be carried ou t . I n the last
company, th e separation has a l ready been exp l a i ned i n the answer to th is
question above .
Q uestion 5 - At what po i n t wi I I a pro i ect be transferred from research to
devel opment?
Th is question was not answe red d i rectl y, but on l y indirec t l y by a l l of
the compan ies concerned . The various economic and market problems as we l l
as th e techn ica l feas i b i l ity w i l l be stud ied and i f there is a considerab l e
dec ision to commerc i a l ize the proiect, i t w i l l have the equ iva l ent of a transfer
from research to deve lopmen t . Th is may or may not in c l ude a transfer to a
new managemen t group w i th i n the company . I t may on l y be add i tional emphasis
or add i tiona l budget on the work bei ng done .
Q uestion 6 - I s th ere a forma l rev iew and dec is ion po int for th is?
Aga i n th is answer was on l y h i nted a t . Th ere are forma l revi ew po i n ts
for every proiect varying from quarte r l y to sem i-annua l to ann ua l in a l l of the
compan ies th at responded . These review po i n ts may or may not serve as the
dec ision po int for transfer of the pro i ect . I n another sense ea ch of these review
po ints cou l d be the po int at w hich th ere is suffi c i ent information gath ered to
make a dec i s ion regarding th e transfer .
II
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1 05 .
Q uestio n 7 - What c ri teria are used ?
a.
Ma rket Survey
b.
Economic Ana l ysis
c.
Tech ni ca l Ana l ysis
d.
Oth er
I t wou l d appear that a l l of th ese types of ana lyses are used in arriving
a t a decision . The responden ts indicated that th e more i nformation avai l a b l e
the better wou l d b e th e dec ision and th ey preferred to use as m uch information as
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they possib l y cou l d . One company indicated that the fo l lowing lengthy l ist
! of items was considered in making a dec ision to go from one stage to th e n ex t .
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Synth esis - preferred m ethod
Synth esis - a l ternate m ethods
Raw materia I s
App l i cations - oth er uses
Sam p l ing (exten t of samp l e d istribution)
Product Qua l i ty
Engi neering Da ta
Patents, Product N am e and Trademark
license and Know-How P urchase
Toxico logy
Safety Problems
Byprod uc t Studies
Ma teri a l s of Construc tion
Process Contro l and Ana l ysis Methods
Specifica tions
Econom ics
Waste Disposa l
Handl ing and Shipping
Estimated Time to Reach Next Stage
A l l of these spec ific items fit in the broad ca tegori es l isted .
1 06 .
One company po inted out tha t th is is the time a t wh ich market
deve l opm ent becomes an important fa cet in ma king decisions to continue w i th
a particular project or program .
A re l a ted subj ect is the payoff from research wh ich is d iscussed in
Mr. Keifer's artie l e . H e indicates that research exe cuti ves fee l they can
; budget for research and select pro j ec ts m uch more effec tive l y if th ey cou l d
find some wa y to rate produ cti v i ty of the i r l abo ra tories . No one measu re can
be expected to assess objective I y the outpu t of th e research laboratory . Man y
ru l es of th um b for mak i ng such ra tings have been suggested such as th e n um ber
of papers publ ish ed , th e n um ber of pa tents and th e number of new products .
One Vice President of Resea rch fe l t th at the best ya rdstick was simp l y the number
of sa l a b l e new prod ucts . Another com pan y used a number of projects com p l eted
as a rough gage of productivity . Some of these cri teria cou ld be somewhat
m i s l eading since for examp l e one company very stron g l y encourages paten ts
and ano ther one may not . More soph isticated tec hniques such as return on
i n vestm ent as di scussed ear l ier may a l so be used .
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Q uestion 8 - I n defen se contra c ts or proj ects, wha t infl uenc e does the project
budget ca tegory
i . e . , exp lora tory deve lopment, eng ineering deve l opment
h ave in p la c i ng th e pro ject . I s th is overrid ing or i s a separate in-house determi nation made?
The chemica l compa nies that a re inc l uded in th is su rvey did very l i ttle
t
go vernment busi ness and fe l t the quest n was not app l icab l e .
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107 .
Question 9 - Do personn e l transfer with the pro ject? Wha t cri teria are used ?
The first company indicated that sometimes the research perso nn e l wi l l
fol l ow al ong w i th a pro j ect a l l the wa y th rough to comm erc i a l i zation bu t
usua l l y they do not . The other compa n i es i ndicated that occasional l y such a
transfer does take pla ce but not as a genera l ru l e . I f a pro j ec t goes to a
pi l o t p lant stage, differen t ski l ls are req uired a nd th e research personne l w i l l
act as consu l tants to the eng i neeri ng personne l op erat ing th e pi lot p l ans .
, Question 10 - Is th e s i ze of a project used i n reach i ng a dec ision ? Wh a t
cri teria are used ?
This question was answered in the discussion of Questi on 7 . The
cri teria have to do w i th market and econom i cs as we l l as techn ica l prog ress
as ind ica ted above and the s i ze wi l l have re lat i ve l y l ittle to do w i th the
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i dec ision . Th is is parti c u larl y true if one con trasts a company making i ndustri a l
chem i cals wh i ch are so l d on a tonnage bas is wi th a pharmec utica l company
wh i ch wi l l make re lative l y sma l l quan tities of ma teria ls . A dol l ar va lue
comparison wou l d be more va l i d than simp l y size .
Q uest ion 11 - What ro l e do custom er preferences play?
I fee l th is is part i c u l ar l y i mpo rtan t in th e aerospace ind ustry . Am
I right?
Th e f i rst company states tha t the customer preferences play on l y a
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genera l ro le, " We want to d e l iver . th i ngs customers w i l l buy . " The second
1 08 .
company fee ls th at the market is a sing l e fac to r wh ich u l timate l y j ustif ies
! expe nd iture of research and deve lopment funds . A th i rd compa ny sa ys that
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is re l ative l y m i nor . Mr . K iefer
D i rector of Research who fee ls that market needs, both present and
future , must be the dedd ing factor i n resea rch dec i sions . I n sum mary i t wo u l d
appea r tha t if by customer prefere nce i s mea nt ma rke t needs , these wou l d p l a y
a n extreme l y importan t ro le in making a dec ision on R&D proj ect .
Q uestion 1 2 : How are deve l opment projects stopped ? What are the conditions?
Wh a t is th e custome r ro l e ?
Serious consideration o f products for commerc ia l iza t ion is either stopped
: or more research is recommended when th e products don • t work out - is the
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fee l ing of th e f i rst company . If th e market req ui rements are not enough to
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j ustify work , the pro j ect wi I I be stopped . The second compan y states that the
projec ts a re stopped by cutting off of the funds an d that customer preferences
p la y no ro l e at a l l . A l l of th e companies were ag reed th at th is was a d i ffi c u l t
problem a s was true in the aerospa ce industry . Some resea rch managers fee l
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! that th is i s th e most perp l ex ing probl em they h ave to dea l with . Most of th e
i cri teria disc ussed under question 2 are pertinent when refe rring to deve lopment
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p rojec ts as we l l as to research projects . Aga i n it must be remembered that th e
l eve l and rate of fund ing is much g rea ter in deve l opment than it was in research .
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Question 1 3 - Who parti c ipates in dec isions d iscussed here ? { By tit l e and
j organ iza tion) .
I n th e fi rst com pany the answer was th a t th e people invo l ved in th e
program make a decis ion . Th i s wo u l d appea r to be l a rge l y research person nel .
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I n the second company dec isions are made by com mi ttees which represent
research and de ve l opment manufacturing and sa les . I n th e th ird company, a
i rath er l ength y
I ist
of departmen ts a re represented as fo l lows :
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2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Prod uct Departmen t
Eng i nee ring Department
P l an t Supe rintenden t
Sa I es Deve I opmen t
Economic Eva l uation
Production Con tro l
Patents
Safety
Biochem i ca l La bora tory
Waste Di sposa l
Accoun ting
Com puta tions Laboratory
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! I n the last compan y the review group i n c l udes the opera ting depa rtment manager,
deve l opment d i rector, compa ny vice president, l a boratory d i rector, resea rch
divi sion manager and director of research . Ea ch of these six men has a persona l
. responsibi l i ty in a particu lar project.
110.
Quest ion :14�- Are pro j ects ever moved back to research from deve lopment?
i Under what c i rc umstan ces ?
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I n th e f i rst company wh ich d i v ides thei r proj ects into pioneering and
I supporting, this question does not app l y . I n the second company, projects are
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: moved back if the manufactur i ng process is unsatisfactory, that is if th e process
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cannot be transferred i n to a large sca le prog ram . The th ird company cannot
answer th is q uestion i n a simple way . I f we refer back to th e response to
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: question 7, wh ere a l engthy l i st of criteria are g i ven , i t can be seen that if
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satisfactory answers a re not ava i lable to th e questions ra ised, the project cou l d
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be moved back to research .
Question l& - Does th e i n terest exh i bi ted by the development organ i zation i n
! th e project have a n y effect i n the transfer?
Th ere was genera l agreeme nt tha t o ther cri teria are m uch more important
'a nd i nterests a lone have very l i ttle effect on the dec ision made .
Q uesti on 17 - What effect does location , type , lack, etc . of tes ting fac i l i ti es
have on the transfer?
In th e chem i ca l industry it wo u l d appear that th e answer is - none .
\ I f a deci sion has been made because of market econom i c or techn ica l reasons
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Ito go to a larger sca le pi l ot pl ant or sem i -work p l ant, the deci sion w i l l inc l ude
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� etting aside suffic ient money for the work to be done from a fac i l ity standpo i n t
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bs we l l as from an operation a l standpo i n t .
111.
Q uestion 1 8 - Is th e transfer affec ted by any l i m i ts set on th e size of th e
research organ ization ?
Th e answers wo u l d indicate that th is has no appl ication in th e chem ica l
i ndustry . The stage at which the transfer wi I I take p lace is more I ike l y to be
effected by ski l l s and fac i l i t ies ava i l a b l e ra th er than an y arbi trary l i m i t on th e
' size of th e research organ ization .
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Question 1 9 - How is research and deve lopment funded , i . e . i nterna l funds,
con tra c t, bo th or some other way? What is th e ra tio of fundi ng from various
sources ? I s th ere any arbi trary amount of money set as ide .for R&D such as
percent of sa l es?
Wh o
makes such a recommendation and dec i sion ? How is
the dec is ion regard ing I eve I of funding made? What are th e differences, if
any, as the p ro j ect moves from research to deve lopment?
The first compa ny funds th eir work complete l y th rough interna l funds .
Th e second company indicates tha t fundi ng comes from both internal funds and
contra c t sources . However, the i r numerous divisions are a u tonomous and th e
differen ces are between d i vi sions ra ther than w i th in any on e d i vision .
Keifer disc usses th is at some l ength and the poi n ts h e has made are
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! covered pa rtia l l y in the in troduction to th is chapter. Man y resea rch managers
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[ adm it tha t contro l l i ng factors are lab fac i l i ties and manpower resources .
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H igh
ca l i ber pe rsonnel are in short supp l y and a labora tory staff cannot be increased
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1 1 2.
i n a short period of time . As a res u l t , research budgets are usua l l y bui l t on a
h istori c fo undation . The amount of mon ey spent in a n y one year is d i rectl y
re lated to what was spen t th e year pre vi ous l y i ncreased by the need for higher
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! sa laries and oth er cost increases . Surpri sing l y eno ugh , it was indica ted th at
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: sa laries account for rough l y 2/3 of th e typic a l R&D budgets . An other factor
wh ich affects the size of the research budget is how m uch competitors a re
spending . A company has to be defensive to a certain extent i n its research
' spend ing . However, care must be exerc ised i n maki ng eva l uat ions between
com pan ies beca use differe nt activi ties may be l umped under research . In one
, compa ny for exa mp l e , tech n i ca l service is part of a research budget and in
another the patent departme nt may be or ma y not be a part of the resea rch
budget . I t appears th at compari sons are made i n th e ch emical industry usua l l y
on a percen t of sa l es with 3 1 /2% of sa l es bei ng th e a verag e expendi ture for
research in rec ent years . Th ere i s however, oppos ition to that cho i c e of g uide
l i nes . At least one company uses operat ing resul ts as a cri teria . Th is drug
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company spends between 25 and 30% of earn ings before taxes . However, it
m ust be recogn ized tha t drug companies in g enera l w i l l spe nd mo re fo r research
than those companies norma l l y cons idered as part of the chem i c a l industry . I n
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a few cases, such soph isticated id eas as estimating the size of th e research
program based on profi ts , cosh I low and i nvested cap i Ia I have been used . One
or two companies attempt to bu i ld the i r budget from the ground up , that is,
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based on th e work to be don e , th ey decide how m uch money has to be spen t .
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these cases , however, th e tota l cost usua l l y comes out to so meth ing l i ke
what they have do ne in th e past .
Q ues tion 20
- P l ease append any data yo u can d i vulg e on the amoun t of mo ney
: spent for R&D in your company . What is th e average size of your pro je c ts i n
i R&D?
Th ere was no defi n i te answer to the first part of the question , but genera l
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agreement that th ere i s no meaningfu l average size .
Summary
The cri teria used for transfer from resea rch to deve lopment have to do
! wi th market surveys ,
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econom ic ana l ysis and tech n i ca l p rogress . Carefu l
atten tion has to be pa i d to th e competit ive si tuation and making deci sions on
products . Com p l e te rep lacement of a product ra ther than s i mp l y i mproving i t is
often the case .
As was true in th e aerospace industry , the cri teria for th e project transfer
i a re fa i r l y consisten t wi th on l y m i nor d iffe rences between th e va rious compan ies
!
! attributable to d ifferences in th e organization .
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Aga in there is a rationa l
! coordinated prog ram for eva l ua ti ng research pro jects and their transfer from
! resea rch
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to deve l opment work . The compan ies that responded and that a re
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! disc ussed in th e l i terature do very l i tt l e government work and are not affec ted by
governm ent funding .
CHAPTER VI
SUMMARY AN D C ON C LUSIONS
Th is th esis dea ls w i th the crite ri a for transfer of a p roj ect from research
to deve lopment ma nagem en t . I n order to better understand such cri teria cind
, the i r app l ica tion , research program eva l uation cri teria were disc ussed in
Chapter 2 . Th e most importa n t sing l e factor is th e a l ign men t of research program
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goal s with corpo ra te goa l .
The spec ific criteria for pro ject transfe r are c l ose l y re lated to research
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pro ject eva l uation cri teri a . These are desc ribed in Chapter 3 . Many ways of
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i orga niz ing th ese c ri teria are descri bed in the l i te rature; one of the more
com pl ete l i stings of criteria was used as .a guide for orga niz ing th e d iscussion .
Most emphasis has been p laced on eco nomic eva l ua tion procedures; the
i mportance of such fa ctors as eng inee ring , production, g rowth and marketabi l i ty
shou l d no t be over looked .
I n the fo l low ing two cha pters, th e resu l ts of the survey are expla ined .
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As indicated i n Chapte r 1 , it was postu lated that a transfer of a project
I between research and deve lopment ta kes p l ace in both th e aerospa ce and
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chem ical industries . I t was determ ined in th is study tha t in genera l th is is true ,
1 14.
115 .
however, there are numerous exceptions to the ru l e . For exampl e, a s i ng l e
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management gro up may carry a program a l l the way th rough from the idea to
th e fi na l product . Secondl y, a concept of pioneeri ng and supporting research
was put forth by one of the chem ical compan ies . I n both th ese categor i es the
work is carried a l l th e wa y through w i th i n th e same organ i zation . Pioneering
research was defined as work on new products, supporti ng research was defi ned
as work on o l d produc ts .
Th e second postu late dea l t wi th the fact that the cri teria for transfer
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: wou l d be di fferent in the two i ndustries . Th e informa tion ava i l a b l e wo u ld
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i nd i cate that there is very l i tt l e difference i n the criteria .
Di fferences cou l d
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i on l y be attri buted to differences i n th e cha racter of the two i ndustry groups .
1
The aerospa ce i ndustry can best be descri bed as a monopson y and the chem i ca l
ind ustry is mo re nea r l y a form of pure compe ti tion . Cri teria for transferri ng
in the chem i ca l industry are heavi l y weighted towards market and econom i c
fac tors and the same can be said to be true i n the aerospac e i ndustry .
I mpl i c i t i n decisions made i n both i ndustries is tech n ica l feasi bi l i ty .
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I n summary, i t can be sa id th at th ere is no fi rm g round for assum i ng
J tha t there
I
is any difference i n cri teria fo r transfer of a project from research to
J deve lopment managemen t in : 'th e chem i ca l and aerospace industries .
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APPE N D IX A
Q uest ion List
1 16
1 17
PROJ ECT TRANSFER F ROM RES EA RCH TO D EVELO PM E N T
Q uestion list
1.
2.
How does your company sel ec t research projects ? I f th ere is a defi n i te
procedure, p l ease outl ine tha t procedure .
a.
A need resu l ting from a market survey .
b.
I n terna l l y genera ted techn ica l or market ideas .
c.
To m eet competi tion .
d.
Serendi p i ty (h appenstance) .
e.
Other
To what ex ten t a re research projects forma l ly eva l ua ted ? Wha t are
th e procedures used?
a.
Before starting .
b.
During th e work period .
3.
How are research pro j ec ts stopped? Wha t are the condi tions? Wha t is
th e customer ro l e ?
4.
Do you separate research and deve lopmen t? How?
5.
A t what po int wi I I a project be transferred from research to deve lopment?
6.
I s there a forma l review and deci sion po int for th is?
7.
What cri teria are used?
a.
b.
c.
d.
Market S urvey
Econom ic Ana l ysis
Technica l Ana l ysis
Other
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8.
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9.
10.
11.
12 .
13.
14.
15.
16.
17.
18.
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19.
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I n defense con trac ts or p ro j ec ts, what inf l uence does th e p ro j ect budget
ca tegory; i . e . , Research , Exp loratory Development, Eng ineeri ng Deve lopment have in p lac i ng the project . Is th is overriding or is a separate
i n-house determ i nation made?
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Do personn e l transfer with pro j ect? What cri teria are used?
I s size of p roject used in reach ing a dec ision ? Wh a t criteria are used ?
What ro l e do customer p references p lay? I fee l th is is pa rti cul arly
important in the aerospace industry . Am I right?
How are deve lopment p ro j ects stopped? What are th e condi tions ? What
is th e c ustomer ro l e ?
Who partic ipates in the dec isions d iscussed here? (By title and organ ize.;.. ·
tion) .
Are pro j ects ever moved back to research from deve lopment? Under
whcit c i rcumstances?
H ow do you define research and deve lopment?
Does th e interest exh ibited by th e development organization in the
project have any effect on th e transfer?
What effec t does location , type , lack, etc . , of testing faci l i ties
have on th e transfer?
Is th e transfer affected by a ny l i m i ts set on the size of the research
organ izati on .
1-bv
is research and deve lopment funded , i . e . , i nterna l funds, con tract, .
both or some other way . Wha t is th e ratio of funding from va rious sources(
Is th ere any a rbitra ry amount of money set aside for R&D such a s percent
of sa l es? Who makes such a recomm endation and dec ision ? How is the
dec ision regarding l eve l of fundi ng made? What are th e differences, if
any, as the project moves from research to deve lopm ent?
·
20 .
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21 .
P l ease append any data yo u can divulge concern ing th e amount of money
spent fo r R& D in yo ur compan y . What is th e average size of your
projects in R&D?
P l ea se add any other information that you fee l is perti nen t.
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APPE N D I X B
list of Compa n i es to Whom Q uestion Li st Was Sen t
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1 19
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A l l i ed Chemical Co rporation
61 Broadway
N ew York , N . Y . 1 0006
American Cyanam id Co .
Stamford Research Laboratori es
l937 W . Mai n St.
Stamford , Conn .
Ameri can Mach i ne & Foundry Co .
Morehead Patterson Research Center
689 Hope Street
Springd a l e , Conn . 06879
AVCO Corp .
Research & Advan ced Dev . Di v .
201 Lowe l l S t .
W i lm ington , Mass . 0 1 887
The Bend ix Corporation
F ish er Bldg .
Detroit, Mich . 48202
The Boeing Co .
P . 0 . Box 3707
Seatt l e , Wa S, . 98 1 24
Borg -Warner Corp .
Roy C . Ingerso l l Research Center
Wo lf and A lgonq uin Roads
Des P l a i nes, I l l inois
Doug las Aircraft Co . , Inc .
3000 Ocean Park B l vd .
Santa Mon ica , Ca l if . 90406
The Dow Chem ica l Co .
M i d land, Mich igan
E . 1 . duPon t de N emours & Co .
Deve lopment Department
N ewport Laboratory
Newport, De laware
E . I duPont de N emours & Co .
Cen tra I Research Dept .
Experimenta I Station
Wi lmi ngton, De l aware
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Ethyl Corp .
1 00 Park Aven ue
New York, 1 7, New York
FMC Corp .
1 1 05 Co l eman Ave .
P . 0 . Box 760
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Gen era l Dynam i cs Corp .
One Rockefe l l er P laza
N ew York , N . Y . 1 0020
W . R . Grace & Co .
Wash ington Research Cen ter
Cl arksv i l le, Mary land 2 1 029
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Grumman Ai rcraft Eng r . Corp .
S . Oyster Bay Rd .
Bethpage , Long Is land, N . Y .
H e rcu l es Powder Co .
9 1 0 Market S t .
Wi lmi ngton, De l aware 1 9899
Hon eywe l l , I nc .
2701 Fou rth S t . , S .
Minneapo l is, M i nn . 55408
H ughes A i rc raft Co .
Centinela Ave . and Tea l e S t .
Cu lver C i ty, Ca l i f .
Litton Industries
9370 Santa Moni ca Blvd .
Beverly H i l ls, Ca l if . 902 1 3
Lockh eed Ai rcraft Corp .
2555 N . Ho l l ywood Way
Burbank, Ca I if . 9 1 503
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3 "M" Co .
2501 Hudson Rd .
St. Pau l , Minn . 551 1 9
O l in Ma th ieson Chem i ca l Corp .
460 Park Aven ue
New York , N . Y .
Mc Donne l l A i rcraft Corp .
Lam bert- St . Louis Mun i c i pa l Ai rport
P o O . Box 5 1 6
S t . Louis, Mo . 631 66
Thompson Ramo Woo ldridge, I nc .
2355 Euc lid Avenue
C l eve land, Ohio 44 1 1 7
Martin Co .
Friendsh ip Internationa l Airport
Maryland 2 1 240
Monson to Co
800 N o Lindbergh B l vd .
St . Lou is 66, Missouri
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Nationa l Disti l lers and Chem i ca l Corp .
National Di sti l l ers Bldg .
New York , N . Y o
North Am erican Aviation, Inc .
1 700 E . Imperia I H ighway
E I Segundo , Ca I if . 90246
Rayth eon Co .
1 4 1 Spring St .
Lexi ngton, Mass . 02 1 73
Union Carbide Research Insti tute
P . 0 . Box 278
Tarrytown, N . Y . 1 0592
Uni ted Aircraft Corp .
400 Ma in Street
East Ha rtford, Conn . 06 1 08
Wei nman Pump Co .
2303 Onan daga Drive
Co l umbus, Ohio
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APPE N D IX C
Transmi tta l Lette r
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1 22
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1 0804 Ch imi neas Avenue
North ridge, Ca l ifornia
November 30, 1 965
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As a graduate student in Business Admin istration at San Fernando Va l l ey
State Col lege , I am wri ting a thesis on th e transfer of projects from research
to deve lopm ent . Yo ur help in supp l ying info rmation a bout certa in practi ces
and procedures would enable me to com pl ete th is study .
I t is my proposi tion that the criteria used in the chemical industry is
different from that used in the aerospace industry . I n the ch em ical
industry, more em phasis is p laced on economic fac tors and in the aero­
space i ndustry, the emphasis is on tech nica l and po l i tical fac tors . Th ere
is a cons idera b l e body of l iterature on choosing research projec ts, but
I i ttl e on the transfer from research to deve lopment.
Attached is a l i st of questions . I hope that th ese wi l l serve only as a guide,
and tha t you wi II add any comments th at yo u fee l are pertinent . Such
comm ents w i l l be very helpful .
P l ease indicate if yo u prefer that the source of info rmation be kept confi dentia l .
A copy of my thesis wh en comp leted wi I I be furn ish ed to you . Comments on
my thesis topic would a l so be we lcomed . I w i l l furnish any addi tional infor­
mation you wish .
Thank you for your hel p .
AR:sl
Enc l .
Sincere ly,
Aaron Rose
I.
BI BLI O G RAPHY
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Chem i c a l Eng i neeri n g
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Ch em ica l Eng i n eering
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•
11 Bus i n ess Warms Up To Research , 11 Chem ica l and Eng i neeri ng N ews 34 No . 2 1 ,
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11 Defense Spend ing Trend Breeds Discord , 1 1 Chemica l and E ngi neering N ews,
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11
Chemica l
Disman , So l oman . " S e l ecting R&D Proj ects For Profit, 11 Chemi ca l Engi neeri ng,
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I I
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