Question

Discuss about research and Development Centre in MCS (Management Control System)

Answer 1

Research and Development (R&D) is a key factor that contributes to the success of any business organization. But the outcome of R&D is highly uncertain. Organizations face three important dilemmas while planning and controlling the R&D activities.

 

First, the integration of the objectives of the R&D function with those of the organization and linking customer preferences with the objectives of R&D. Lack of proper information from the marketing function, lack of proper integration of the other functions with R&D, and poor commercial viability of the R&D projects are factors that influence this integration.

Second, the problem in planning and managing the R&D activities. A proper R&D plan has to be devised and each R&D project should be controlled by controlling the intermediate targets, time frames and budgets, and by creating appropriate performance measurement systems for the R&D function.

 

Third, considering R&D as a strategic infrastructure that includes knowledge assets and competencies, and not merely as a function or collection of projects.

The R&D function may be viewed as a system consisting of inputs, the processing system, outputs, the receiving system, outcomes, and the interactions between them. The reasons for the failure of R&D measurement systems are: focus on internal measurements, difficulty in separating the R&D contributions to profit, extensive use of qualitative measures, etc. The performance measurement system should be designed after taking all these issues into consideration. In addition to internal and external measurements, it is important to measure technical progress, timeliness, and costs.

Measuring effectiveness involves finding out those aspects in R&D that need to be measured with a proper measurement system. A framework has to be created that considers ten different R&D activities and the levels of effectiveness of the R&D function (from level 0 to level 5) in each of these activities.

The value of R&D as strategic infrastructure can be judged based on parameters such as inimitability, durability, appropriability, substitutability, and competitive superiority. The monetary value of the ongoing R&D projects can be arrived at by calculating the net cash flows for two different time periods - from the beginning of the R&D project to its end, and from the beginning of the utilization of the R&D outputs to the end of the forecasted economic life of the project.

Conducting an R&D audit is one of the ways of monitoring and controlling an organization's research and development activities. The R&D audit would typically cover issues such as alignment of R&D objectives with the overall objectives of the organization, budget allocation, expense tracking, recruitment of competent personnel, treatment of commercially unviable projects, coordination of R&D activities with concerned departments, and availability of necessary inputs and equipments.

Management control of new product development is done through tools/techniques such as the Stage-Gate™ framework, the balanced scorecard, and concurrent engineering. The Stage-Gate™ framework has six stages, each representing a set of activities that are included as a part of the new product development project. These stages incorporate aspects such as customer preferences, quality of product, and product-market fit. The gates in the framework are the points at which the project is evaluated for quality through a stringent reviewing process. They help in differentiating between valuable and less valuable projects.

The integration of the balanced scorecard with the R&D activities starts with the process of deciding the strategic indicators for the organization. The metrics are selected in such a way that they match the strategic objectives of the organizations. Concurrent engineering covers a wide array of strategic, process, technological, and organizational integration methods that bring about better collaboration between the R&D, manufacturing, and marketing functions.