"Third Generation R & D: Managing the Link to Corporate Strategy"
by Philip A. Roussel, Kamal N. Saad, & Tamara J. Erickson

The R&D imperative for industry has never been more compelling. The key to profit from R&D will be a new kind of company leadership. In Third Generation R&D, three senior executives of the international management and technology consulting firm Arthur D. Little—Philip A. Roussel, Kamal N. Saad, and Tamara J. Erickson—explain how firms can enhance the value of their R&D investments. Drawing on decades of experience with major corporations in a wide range of industries on all continents, they offer conceptual and practical guidance to corporate, business, and R&D management that, implemented with vision and determination, will lead to more effective and confident R&D organizations and growing return from the investment in them.

Three broad approaches to R&D management characterize companies today, differentiated by philosophy, organization, and operating principles. Some firms still leave resource allocation decisions largely to R&D management. Many others, frustrated by the difficulty of realizing payoffs from large R&D investments, have moved toward a more systematic second generation model: they subject R&D projects to the same kind of cost-benefit scrutiny applied to other business investments. These companies have begun to apply the sort of purposeful R&D management recommended by Roussel, Saad, and Erickson. The second generation approach may better identify and manage individual projects, but it will not ensure a strategically balanced portfolio of R&D work, a key objective of third generation management.

This book sets forth the guiding principles of a third generation approach to managing R&D, now emergent in leading companies. It articulates the issues that any firm must consider as it decides how to define its overall technology strategy, set project goals and priorities, allocate resources, among R&D efforts, balance the R&D portfolio, measure results, and evaluate progress. One principle is crucial: corporate, business, and R&D management must act as one to integrate corporate, business, and R&D plans into a single action plan that optimally serves the near-, mid-, and long-term strategies of the company.

Historically, business and R&D management have found it difficult to communicate effectively because of differences in education, experience, culture, and values, often reinforced by organizational barriers. To manage R&D for strategic advantage, companies must dismantle these barriers and establish a common language in which all can communicate. The authors offer concrete suggestions for overcoming the isolation of R&D departments and for developing more productive, mutually trusting working relationships with corporate and business management. Perhaps more important, the concepts set forth in Third Generation R&D will allow corporate, business, and R&D management to build a true spirit of partnership that is the foundation for lasting success.

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Philip A. Roussel is a director of the North American Management Consulting Group at Arthur D. Little, Inc., the international management and technology consulting firm, based in Cambridge, MA. Kamal N. Saad is a vice president and European director of the firm, and Tamara J. Erickson is a vice president and managing director of its North America Management Consulting business.

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