To Win the R&D Bicycle Race, Focus on Strategy

Article excerpt

There has been a continuing concern that the level of R&D performed in Canada is well below that of other nations and could hurt the competitiveness of Canadian businesses in vital trade sectors. During 1990 and 1992, the Science Council of Canada (since abolished) undertook a study of the sources of technology in 15 such sectors, including telecommunications, electronics, machinery, and petrochemicals.

The Council commissioned a series of consultants' reports for each sector to examine what was going on in Canadian industry, and a parallel set of reports to compare Canadian industry with companies in other countries. The result was a wealth of information about Canadian-owned businesses, as well as about the operations of multinationals with branches in Canada and internationally competitive corporations headquartered and operating in other countries.

Analysis of this information has given me some trans-sectoral insights that I believe are relevant to medium and large corporations the world over, not just in Canada.

First, in all 15 sectors there was evidence of vigorous international competition between competent managements. There were few, if any, quiet preserves, free from the stress of competitive challenge.

Second, it was apparent that in most sectors of most businesses, there was an underlying business strategy that firms followed for lone periods of time. Sometimes this was an explicit and well stated strategy; on other occasions the actions over long periods showed a consistency which demonstrated that there was at least a consistent implicit strategy. Furthermore, the R&D activity, to a very high degree, was a consistent outgrowth of the business strategy; accordingly, for the rest of this discussion I shall treat business and technology strategy as essentially synonymous. In very large companies the strategies of different business segments were frequently quite different, but the above comments still apply when you look at individual business segments.

It is worth noting that significant shifts in strategy were frequently associated with changes in key personnel. The information does not tell us which is cause and which is effect. However, it is clear that in most cases, when a significant shift in strategy occurred, it left behind a significant trail of either un-utilized or under-utilized technology that had no further effect on that business's growth.

TWO BASIC OPTIONS

Across all the sectors, the reports identified two basic business/technology options. The first is to stay close to the existing product offering, with only closely related additions. (By product offering, I mean not only the product itself, but the system or other product support that makes the whole "offering" more attractive.) The second is to "diversify" into a loosely related or largely unrelated offering. Many companies were indeed pursuing both dimensions simultaneously. I classify these options as the first dimension in business/technology strategy.

The second dimension is one of competitive intent. To appreciate this, consider the strategy of bicycle racing. In the initial part of a long bicycle race, the object is to be part of the "pack" racing down the road but well positioned within that pack so that one's strategic options of getting ahead are quite viable. At some point, usually well into the race, a small group of the well-positioned cyclers break out from the pack at a point where they have some relative competitive advantage. And if there is a long hill to climb, this would favor certain competitors being able to break away from the rest.

When I looked at the information from the study, I could identify three competitive intents that companies seemed to be following: 1) To be competitive within a selected comparison group, or if you like, to be competitive within the pack; 2) To break away from the pack, primarily by being more cost effective; 3) To break away from the pack by increasing the value of the existing offering to customers significantly, or by adding a new specialty offering. …