Jointly published by Elsevier Science Ltd, Oxford and Akaddmtai Ktad6, Budapest
QUANTITATIVE RESEARCH
METHODS
Scientometrics, Vol. 45, No. 3 (1999) 455-457
IN INDUSTRIAL
AND DEVELOPMENT A. AIRAGHI Senior Vice-President
Finmeccanica Piazza Monte Grappa 4, 1-00195 Rome (Italy)
Making explicit reference to the industrial environment my comments could be extremely short: the first input for a company is the market, and the latest one is again the market. As a consequence, the market is the only judge of the industrial research. Then you do not need any more evaluation than the market results. But this is too rough and simplistic and I want to elaborate more on it. What happens in a company? You have an embryonic activity, which to become a real product, needs to be developed. Development needs many inputs: research is one of them, but there is, also a contribution coming from the existing stock of cumulated knowledge which, as in many other cases, must be, from time to time, revised. And if you perceive that your stock-knowledge is weakening, or contains failures and so on, you can launch (if you have money) research projects not strictly related to support the development of new product or process, but only to update your stock o f knowledge. Why this distinction between research related or not related to Product development? And why if is useful? 9 First, because, this clarifies the ties between research and development at industrial level, (done by industries or done by universities or research centres under a contract with an industry) and puts in evidence that both have the same objective: making good products and making profits on it. 9 Second, because this clarifies also that research and development can be relatively tight, but can be even relatively separated, decide in different ways and managed with different procedures. 9 Third, because helps to understand why there are no precise statistics on it and that means that there are no indicators, also because it is not easy to split what is really research (meant as update of the knowledge base) and what is 'applied' research needed to develop a process or a product, and what is not research but is
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A. AIRAGHI: QUANTITATIVE METHODS 1N INDUSTRIAL RESEARCH AND DEVELOPMENT
development. Some analyses done in the past, could bring to the conclusion that research, at industrial level, is a relatively small part of the overall R&D effort. My preferred estimate is that research is one tenth of it. If we take as assumed the split between the likely independent research and the development with the correlated research efforts we arrive relatively easily to a conclusion. The development activity, together with the directly related research efforts can be (and normally is) evaluated as part of the product costs. In almost every situation. Sometimes it is formalised, sometimes it is not. But it is true. If you have to redesign a product and you have to make some research efforts finalised to increase its performances or its quality this is part of the product costs. And is measured as you measure all the other product costs. You compare them with revenues: if the result is positive and bettering, everything done is good. If you arrive a negative conclusion, it means that everything was wrong. This is not the case for the not strictly related research projects, in which, as I tried to say earlier, the evaluation can be done in another way. You have a portfolio of projects which basically relies on the strategic perception you have of the future of your company. And this is the base to select new research projects. The number and the cost of these new projects depends on how much money you want to dedicate to the maintenance and improvement of your knowledge base. Once decided and launched, you have to monitor them, normally through milestones. When you reach a milestone you have to check what happened, and if everything goes in the proper way and so on. And you must be prepared to stop a project, even if properly managed, because the environment or the company's priorities are changing. And this is normal practice in every good company. In a company, the real effort is concentrated on the selection of the projects to be funded and launched, and in their management. Is it possible and useful to do something else? Here my reply is that you can do something but, the usefulness of such an additional effort is uncertain. Even some indicators like patenting, are not totally useful to understand what happens at the industry level, and this weakens also the overall figures which do exist. There are sectors in which you cannot patent anything. Typically the defence industry. But there are other situations with the same attitude. Some companies, for example, are convinced that when you patent something, in reality you give information to your competitors. And if the 'time to market' is very short, the best is to arrive on the market with a surprise for your competitors and not informing them that you are doing something. Moreover, patenting is a weak barrier in many cases. The competitors patents are good inputs for your strategy, very good inputs. Other indicators, like
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Scientometrics 45 (1999)
A. AIRAGHI: QUANTITATIVE METHODS IN INDUSTRIAL RESEARCH AND DEVELOPMENT
publications, are not applicable at all, because, by definition, the industrial research is not devoted to publish anything. And this is the reason why, in my view, all the classic instruments to measure these activities are very weak. There are other quantitative methods. For example, some companies have tried to build up systems to evaluate their research activities fi'om the economic view point, (cost-benefit analyses, and so on). But also these methods can be applied with great care on the results. In general are not so welcomed, are considered a way of loosing time. As a conclusion, I can summarize all these comments on three points: 9 First, research as I tried to define and confine it, is a very small part of the overall industrial activity. Normally, (apart from the high-tech business) research is something between 0.1 and 1% of the companies' turnover. 0.1 or 0.2% is 'peanuts': and the research not related to product development is ten time less. Insurances arc much heavier on the balance sheet and public relations are extremely more expensive than these. This means that basically you can consider this kind of research (to update your knowledge base) as a sort of insurance for the future. You spend something to be sure that the company knowledge is really good. You don't need to measure its effectiveness. 9 Second, the content of such research activity. Here, the effort is on the projects selection: and the dominant key is their strategic content. The top management of a company in general should be involved in such an exercise. Normally they are not. But that is a mistake. Monitoring is another key component of a sound research management effort. 9 Third, the impact of the research activity on the overall economic performance of the company. And this is the only real evaluation mean. How much to spend in research is a question of wealth of the company. If the company is very good it can spend something more, if times are difficult budget are shrinking, and so on. But again it is a question of policy and not of methods and numbers. Quantitative methods can be applied, but, as I said, results are uncertain, and, generally speaking, they don't justify the involved costs.
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