THE PRESSURE ON today’s corporate managers to maximize short-term profits often seems at odds with the need for a research and development program that will sustain company value over the long term. The solution to this apparent dilemma starts with the recognition that a business enterprise’s value depends on the level and rate of growth of its cash flow. A firm’s ability to maintain an advantage in market value depends on whether investors perceive that the rate of cash flow growth will be sustained.
The goal of strategic technology management is to contribute to the value of the enterprise by helping assure that the cash flow on which this value depends will be sustained and will continue to grow. Effective management of this kind can help a firm gain and sustain competitive advantages, ranging from incremental improvements in product quality or cost to major breakthroughs that create new market opportunities. Management of technology must, however, be purposeful rather than hopeful or “hands off’ and must always be connected with the firm’s overall business strategy.
Five sets of questions are useful in systematically examining the relationship of a company’s program of managing technology to its business strategy:
•Does the company have a clear product and market strategy? What markets does it want to attack? How? What markets does it intend to defend? What product and service attributes will accomplish these goals?
•What technologies support the product and market strategy? Which ones produce competitive advantage in existing markets by adding value or lowering costs? Which ones promise to support new market initiatives or to define a new plateau of product performance?
•What technological successes can the company support or exploit?
•Does the R&D program focus on developing capability in technologies that will, or may, support its product and market strategy? Are options for technology acquisition (in-house development, licensing, academic support, etc.) being examined in relation to the company’s immediate product and market strategy as well as its future vision?
•Does the company have the means to answer, and keep reviewing the answers to, these questions? Does the R&D staff have access to the firm’s key customers? Do the R&D staff, manufacturing engineers, and marketing people work together to ensure that R&D ideas can be made into high-quality, low-cost products that will meet customers’ needs?
These questions cannot be answered in a facile or casual way. Answering them requires work, understanding, and realism. Corporate leadership that presses for answers can, however, help to assure itself and its stakeholders that the R&D program will sustain growth in company value.
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