Improving the Quality of R&D Decision : A Synopsis of the SDG Approach

Matheson James E., Menke Michael M., Derby Stephen L.

doi:10.20801/jsrpim.4.4_400

Managing R&D is a difficult challenge because of technical complexity, technical and business uncertainty, long time horizons before results are known and capitalized upon, and competition among many new ideas from creative people. Nonetheless, business and government must rely on leaders of R&D to solve serious technology problems and create new sources of competitive advantage.Analysis of decisions to invest in R&D projects must address two complementary activities: creating the R&D results and creating market value from the R&D results. Both activities are equally important. The R&D managers' attention, however, is often too narrowly focused on conducting "good research" as perceived by the R&D community rather than on R&D results that will be highly valuable if brought to market.The secret to successful R&D management is understanding and evaluating this interface between the corporate abilities to obtain successful R&D results and to capture high commercial value from this success. Unlocking this secret requires evaluating the two characteristics of the technical and the commercial activities: the probability of technical success and the probability distribution of commercial value given technical success. The process for evaluating these fundamental measures of R&D investment decisions is based on the discipline and methodology of decision analysis.Strategic Decisions Group (SDG) consultants have led the development and application of decision analysis to R&D project management. This paper presents the key principles of this unique approach and two examples that illustrate the successful application of these principles.

Improving the Quality of R&D Decision : A Synopsis of the SDG Approach

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