Core Competencies, R&D Management and Partnerships - HEC Paris

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European Management Journal Vol. 18, No. 5, pp. 476–487, 2000  2000 Elsevier Science Ltd. All rights reserved Printed in Great Britain S0263-2373(00)00037-2 0263-2373/00 $20.00

Core Competencies, R&D Management and Partnerships BERTRAND QUE´LIN, HEC Paris Graduate School of Management Constantly focused on the role of competencies and resources, firms’ strategic management teams are becoming increasingly interested in discovering an effective way of managing the competencies that they possess. In high-tech sectors, these competencies have a direct impact on the firm’s future competitive positioning. In other sectors, technological competencies will determine the renewal of product lines. This article examines how firms manage their proprietary research and development programmes and how they succeed in establishing a co-operative relationship with their environment. Our background research includes forty interviews conducted in both the US and Europe.  2000 Elsevier Science Ltd. All rights reserved Keywords: Core Competencies, R&D, Strategic Management, High-tech

Main R&D Challenges Research and development programmes, like other business units, are under pressure to yield concrete results. Consequently, analysts are increasingly focused on key success factors, such as time-to-market, lower R&D costs, and greater control over the uncertainty that is an inherent part of any R&D activity (Arrow, 1962; Burgelman et al., 1996; Brown and Eisenhardt, 1998). We will be taking a closer look at these issues and at the solutions that a proactive management of technological competencies can provide. To meet today’s R&D challenges, many of the companies we interviewed have been attempting to devise new methods for managing technological competence (i.e. compiling skills directories, managing the breadth of the competence base, or monitoring the competencies that accumulate at the business unit 476

level). These efforts have often involved the formation of certain types of internal horizontal structures (project management, virtual R&D workgroups) as well as the establishment of a co-operative working relationship with actors in the surrounding environment (including universities, laboratories, competitors, clients and suppliers). In managing technological competencies and R&D cycles, the main concern is uncertainty. This phenomenon affects firms throughout their activities — from their attempt to mobilise the basic technological competencies, to their efforts to learn to internally control the interactions between these competencies, and to their ability to mobilise all useful competencies, including external ones. When the companies in our sample diagnose their own operations, they tend to focus on the interfaces between their operational divisions and the R&D laboratories. They seek for solutions to provide to their clients and for the corresponding technologies required. They sometimes create horizontal workgroups to foster the sharing of experiences and to facilitate the development of new ideas. They also commonly adopt project management structures. The purpose is to simplify the transfer of information from the marketplace to the technology research process, thereby ensuring that the preoccupations of potential users are considered in the R&D cycle. In their efforts to heighten their exposure to universities, competitors, suppliers and clients, companies also instil two policies: (1) increase R&D monitoring capabilities by improving internal procedures, and (2) implement procedures that allow for an effective evaluation of these projects. Through these linkage strategies, and by establishing durable relationships with external research partners, firms are able to stay abreast of current developments, increase their proximity to centres of competence, and gain access to the European Management Journal Vol 18 No 5 October 2000

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Table 1

Why Develop a Strategic Management of Competencies?

Adaptation: a competence, whether individual or collective, must enhance the firm’s flexibility It increases the company’s added value: a firm’s clients assess its ability to generate added value from its products, processes and organisation A firm’s performance is determined by its competence Competencies are a new source of capital growth Individual and organisational competencies need time to develop The mobilisation of competencies infers the existence of a structured approach, methods and tools

resources, knowledge and know-how that they do not possess. As such, the management of technological competencies faces two challenges. First, competencies must be identified and evaluated internally and/or in their manifestations as products or services. Second, as firms compete, they want to gain access to the complementary competencies that their rivals control and as a result, must increase their exposure to the external environment.

The Strategic Management of Competencies More and more, the strategic management field is focusing on the role of competencies and resources that accumulate within a firm (Dierickx and Cool, 1989; Barney, 1991; Que´lin and Arre`gle, 2000). This orientation attests to the specific and unique nature of how each firm accumulates technological and organisational competencies — even for two companies from the same sector. In the past, companies used to focus their energies on adapting to their environments (Porter’s viewpoint). Their concerns included those linked to being present in booming market segments, to servicing clients and to dealing with supply constraints. Now, more and more, these firms strive to develop a set of competencies that coordinates well with their strategy. They seek to implement horizontal and/or cross-division structures appropriate for accumulating resources and competencies, controlling strategic business(es), and fostering innovation. Table 2

An increasing number of companies now prioritise the effective management of competencies (i.e. through directories, databases, project groups, horizontal structures). Diversification policies, new product development, new partnerships — nowadays, all of these decisions depend primarily on firms’ perception of the ideal role of their strategic business units (i.e. a receptacle for the various types of knowledge, know-how, expertise and competence that the firm possesses). Tables 1 and 2 show that these factors have become the foundation upon which innovations and new products must be developed. Management of technological competencies has become a major issue for the functions (or persons) who are directly affected by it — and for whom the issue of a company’s technological competence is crucial. In high-tech sectors, technological competence determines how a company positions itself competitively (Brown and Eisenhardt, 1998; Doz and Hamel, 1998). In other sectors, it becomes the basis for product line renewal, or for the re-arrangement of market segments. As a result, companies in all activity sectors need to manage their R&D cycle carefully — and they need to be ready to launch their innovations at the right time. Consequently, they are often on the lookout for ways to benchmark.

Managing the R&D Cycle: The Main Problems and the Possible Solutions Research and Development Programmes Have Become Increasingly Market-Oriented One of the main concerns of the companies that we interviewed was how to shorten the R&D cycle — in

The Core Competence Approach: The Example of an Agrobusiness Company

Definitions A heritage: a collection of individual or collective knowledge bases and/or experiences A process of mobilisation: the implementation and validation of competencies through action and by outcome The heritage Knowing: all of a company’s knowledge, culture, professional experience and way of thinking Knowing how to do: all of the practices and solutions that are meant to solve problems Knowing how to be: everything within the organisation that allows it to comprehend and to evolve The implementation of competencies Knowledge in practice: knowing how to act The adaptation of the tools that are available to the firm: being able to act Special processes: interactions, information management and evaluation

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other words, to accelerate their technological responsiveness when bringing appropriate innovations to market (Gupta and Wilemon, 1996). It appears as if these companies have switched the emphasis of their R&D programmes from the discovery and implementation of new processes to the search of solutions for customer needs (Figure 1).

Shortening the R&D Cycle by Learning to Control Uncertainty By their very nature, R&D activities are a source of great uncertainty for companies. Uncertainty surrounds: ❖ The opportunity costs involved in launching a given research programme; ❖ The mobilisation of the appropriate tools for the task at hand; ❖ The completion calendar. Scholars (Dyer et al., 1999) traditionally classify the uncertainty impacting the nature and duration of the R&D cycle into five distinct categories: market uncertainty, the competitive environment, uncertainty over the technological evolution, the internal R&D process, and human resources and culture.

Market Uncertainty Most of the managers we interviewed see market uncertainty as the sum of its six principal characteristics: ❖ The definition of customer needs is imprecise and inadequate; ❖ The product’s attributes or features are only vaguely comprehended; ❖ There is an insufficient familiarity with the market’s workings; ❖ Sale-forces and commercial capacities are structured inappropriately (and are not extensive enough); ❖ The distribution network is incomplete; ❖ The value chain is poorly organised. Solutions to these problems can sometimes be drawn from the data that companies gather from the market and/or on the competitive environment. However, such external information usually does not reduce the uncertainty inherent in R&D activities. Too static, the information does not necessarily reflect the current situation and therefore, does little to enhance a company’s ability to acquire new markets, new technologies, and/or new segments. An example is the Smart car (Daimler-Benz), which was intended to be

Figure 1 Changing Paradigms in Industrial R&D

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a new concept for city automobiles as well as a new form of productive organisation and a new method of distribution — but which was ultimately the victim of poor positioning due to its sales price. However, by involving experts, consultants and even consumer panels in this data compilation process, companies can improve their ability to predict product and market trends and thereafter, integrate them into their technological research or development efforts. Moreover, cross-departmental or interfunctional groups can be mobilised within a company to help define the functionality and possible uses of a particular technology, process or product. An example is Saint-Gobain’s ‘Technological Marketing’ Corporate group, a unit whose function is to work with horizontal structures to improve the diffusion of ideas and innovations (Les Echos, 1999). The Competitive Environment Traditional analyses of competitive uncertainty reveal that companies are not aware of their rivals’ axes for technological development, i.e., their competitors’ innovation policies. This form of uncertainty largely involves the tools and strategies of a company’s competitors. The uncertainty also depends on the type and number of new entrants in a particular marketplace, as such firms can promulgate a process of technologically-based substitution or create a new market segmentation. A remedy to this problem is to establish good contacts and long-term co-operative relationships with State-owned laboratories, universities, consultants and research institutes. This makes it possible for a firm to remain abreast of recent technological devel-

opments, research trends, and the innovations that are likely to become significant over time. The company should also supplement its learning process by interacting regularly and closely with its principal customers. Air Liquid, for instance, works closely with its major customers, i.e. firms in the glass, automobile or metallurgy industries. This working relationship involves facilities management — a costcutting exercise — and the development of new systems, processes and equipment that are meant to boost the consumption of industrial gases. Table 3 shows how, in the case of a company in electronic devices, managing a research project requires that firms respond appropriately to various main challenges. Uncertainty Over Technological Evolution This form of uncertainty is clearly considered to be of utmost importance for firms in the management of their technological competencies and R&D cycles. The main technical and technological uncertainties revolve around: ❖ A lack of knowledge as to the future direction of technological development; ❖ The lack of intense and quality efforts in this area; ❖ The unavailability of necessary competencies and skills at an individual or group level; ❖ An insufficient interface with the firm’s clients; ❖ The teams’ inadequateness for the task at hand.

Table 3 Technological Uncertainties and the Management of R&D Projects: How to meet the Main Challenges? The Example of a Company in the Electronics Industry Not yet invented Surveys are conducted, and scientific literature compiled Competitors, suppliers, and universities are audited on a regular basis Links are established with universities Brainstorming sessions are organised together with the technical teams Insufficient investment in time and energy Assess whether available competencies and resources are appropriate for the project at hand Constitute teams on the basis of the competencies that the participants have accumulated Put together an adequate process for evaluating R&D projects as well as Total Quality Management Develop co-operative relationships with universities and research contracts wherever necessary Outsource projects that would be economically unjustifiable if carried out internally The skill level is too low Establish relationships with consultants and universities Develop co-operation agreements and research contracts Externalise those projects that are economically unjustifiable Involve staff members who are better suited to the strategy of the particular project The weakness of the company – client interface Establish relationships with the company’s biggest clients The teams are not adapted to the task at hand Establish a system of performance evaluation Put together a Total Quality process Set up a reward and bonus system

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Internal R&D Processes The R&D process faces a number of uncertainties that stem from the very nature of this activity. For instance, the R&D project may have little relevance to the actual situation in a given market or activity, or the group’s priorities in its technological development may change, or a certain number of infrastructures or technical capacities may be unavailable. In our interviews, we noted that companies react to such phenomena by focusing on the quality of the interfaces between their operational divisions and their R&D laboratories. They often create horizontal workgroups to share experiences and nurture new ideas. Indeed, firms usually adopt this organisational form because they believe that it can facilitate the transfer of information from the marketplace to their technological research teams — in this way, they attempt to ensure that their R&D projects consider the concerns of potential users. Other types of behaviour are also frequently observed. For instance, many companies are not satisfied with merely a static assessment of a given R& D project’s current progress — they will also periodically check to ensure that the project follows their strategic orientations and development plans.

Human Resources and Culture This type of uncertainty has a double dimension: on the one hand, the culture of the research and development activity and its ability to ‘listen’ to the market; and on the other hand, how well the R&D teams’ individual and collective competencies match the project’s prerequisites. Creativity needs to be uncovered in the market, and must follow the evolution of customer needs (whether professionals or consumers). Yet firms are permanently faced with the problem of transplanting new technological competencies onto existing ones. To bypass this difficulty, especially in cases where innovations develop at a rapid pace, they can acquire competencies externally, then integrate them internally, or they can gain access to the necessary competencies via co-operative relationships with universities and research laboratories, or with other companies.

How Technological and Core Competencies are Related By presenting the topic in these terms, we imply that it is indeed possible for an R&D function to contribute to a firm’s strategic management of competencies. Firstly, any analysis of the relationship between core competencies and technological competencies should recognise the value of the competencies accumulated 480

in an R&D function (Teece, 1998). Secondly, we must also consider how R&D activity contributes to the company’s portfolio of competencies.

Recognising the Value of Technological Competencies Based on our interviews, we ascertain that the fundamental issues in any analysis of value recognition are: ❖ The preservation of value: the maintenance and preservation of the key technical and technological capabilities that serve to support a firm’s current products. An example is Canal ⫹ , the French pay television company, which has always invested in the technological competencies used in the design of television decoders. Its investment enables it to remain independent and to control other firms’ access to its market. ❖ The extension of value: the necessary development and improvement of key technological competencies in an effort to extend the current product base. The technological co-operation between Saint-Gobain and Scholtes in the market of hightemperature glass used in cooking plates is one such example. ❖ The creation of new value: the acquisition and development of new technologies that are used to create and foster new markets. An example is Alcatel, which has started to co-operate with Sharp in the terminals market. Alcatel possesses a great amount of know-how in the radio technology used in mobile terminals. Its competencies in telecommunication networks are also an important type of know-how. Sharp, on the other hand, is a specialist in LCD screens and possesses technological competencies in areas such as memory storage, communications and the storage of information in personal communication organisers. Technological knowledge, know-how and expertise underpin several of the competencies that may exist in a firm’s portfolio. In a certain number of cases, R& D can play a leading role in the strategic management of competencies (i.e. in the aeronautics, components, and telecommunications, industrial gases sectors, etc.).

How R&D Contributes to a Company’s Portfolio of Competencies This topic lent itself to a number of comments. All in all, our corporate interviewees clearly identified nine ways in which an R&D activity contributes to a firm’s base of competencies: ❖ It develops new key technologies. ❖ It implements strategies that lead to an improvement and/or acquisition of fundamental technoEuropean Management Journal Vol 18 No 5 October 2000

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❖ ❖





logies. This necessitates an agreement on a budget that provides for the protection and purchasing of the identified competencies. R&D plays a fundamental role in horizontal management, and therefore, in the diffusion of technologies within a company, especially when it is comprised of a variety of strategic businesses. R&D renews the firm’s portfolio of competencies by identifying the new technologies that are likely to become crucial over time. R&D is frequently a means for learning new methods and new forms of organisation. R&D management can rely on tools that make it possible to manage the firm’s knowledge base. For instance, a large number of companies accumulate information on researchers — compiled first in directories, then later in databases. These companies focus on researchers’ area(s) of expertise, their past participation in other projects and their involvement in external co-operations. Consequently, these companies can identify which competencies are incomplete, and which are lacking altogether. For example, Air Liquid had evolved from its historical activity in mechanics to an approach based on a technology to separate gases, to yet another based on membrane control for chemical and materials. This significant move towards the use of materials and membranes gives the company, now with an enriched skill base, a competitive advantage over competitors incapable of making such a transition. When working relationships with universities and external research laboratories are fostered, an environment which nurtures new competencies can be created (Que´lin, 1999). Firms can pro-actively seek to co-operate with their competitors, suppliers or clients to gain access to complementary technological competencies. Many industrials in the microcomputer and mobile telephone terminals sectors have created alliances with industrials in the energy sector to jointly develop increasingly miniaturised, but more durable, batteries, decisive characteristics in

the marketing of microcomputers or cell phones (Table 4). Finally, the case of Daimler-Benz provides a good example of the management of technological competencies. This internal process lasts from two to three months, and involves the group’s senior management. External consultants corroborate the internal analysis and further develop the opinions gathered from the business units. The process is summarised in the nine main phases described below (Table 5). Daimler-Benz launches this internal process by drawing up comparisons with competitors in each of its business units’ main markets. It then tries to identify, through a multi-criteria analysis, competencies that could one day become key competencies. The results are checked against the perceptions of clients, competitors and experts. This step facilitates the fine-tuning of key competencies.

The Management of Technological Competencies: Company Responses A number of firms use external sourcing of technology to create technological changes in their organisations. Many have attempted to co-operate with universities, competitors, suppliers and clients. They also increase their R&D monitoring capabilities by improving internal procedures and by implementing procedures necessary for an effective project evaluation (Sen and Rubenstein, 1989). These linkage strategies, coupled with durable relationships with external research partners, enable firms to stay abreast of current developments, to be closer to centres of competence, and to gain access to the knowledge and know-how that they do not possess.

Table 4 Organisation and Key Technologies in the Industrial Surfacing and Plastic Injection Sectors: A European Company Divisions

Critical technologies

Internal trimmings for motor vehicles Vinyl surfaces Bathrooms and furniture Urban equipment packaging for perfume and cosmetic products

Plastics processing technology Extrusion Injection Extrusion via air pumping Extrusion via insufflation Thermoforming Foaming (aeration) techniques Surfacing technologies Tufting Coating techniques Weaving

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Table 5

Identifying and Highlighting Key Competencies: The Daimler-Benz Research Division Approach

Stages

Level of identification

Phase 1 Phase 2

Products, clients and markets Key factors of success (KFS) The characteristics that the customer will perceive Internal processes Future market trends and the evolution of KFS Identification of areas of key competencies Initial formulation of key competencies Multi-criteria checking Excellence The basis of a competitive advantage Contributions made to the value created for the customer Sustainable yet difficult to imitate Can create value in new markets Fine-tuning and honing of these critical competencies Contacts with customers and competitors Interviews with experts Return to phases 5 and 6 of the loop Needs analysis in terms of the key competencies Elaboration of a plan for improving the present situation Definition of a strategy that makes it possible to: Transplant new competencies onto the existing ones Combine the existing and the new competencies Study of competencies other than key competencies Can they be externalised? Analysis of the competencies that should be preserved

Phase Phase Phase Phase

3 4 5 6

Phase 7

Phase 8

Phase 9

Source: EIRMA (1997)

Relationships between Universities and Industry Participants’ Expectations Companies generally expect that their co-operation with public or private research centres and universities will provide: ❖ An interpretation and understanding of the research (whatever it may be); ❖ Access to a pool of expertise and to scientific networks; ❖ An analysis of the practical aspects of technological innovation; ❖ A proposal of feasible scientific and technological options which takes into account advice and external opinions; ❖ Information on scientific and technological trends; ❖ A renewal of scientific and engineering skills within that industry. In contrast, companies’ expectations insofar as research centres or laboratories are concerned are not geared towards a commercial development of products or processes. Therefore, they willingly share with universities their knowledge and understanding of a certain number of technological or industrial challenges, their training, facilities, man-hours, and funding. 482

The Selection of Partners for Co-Operation Programmes In general, the companies we interviewed that collaborated with universities based their choice on the following criteria: ❖ Capability, excellence, reputation; ❖ Ease of co-operation (language, culture, logistics, etc.); ❖ Incentives (financial, legal, etc.); ❖ The motivations and preferences of their own staff members. As for universities, they generally opt to co-operate with a firm with a solid reputation, one that provides funding and offers adequate compensation, and finally, one that proposes a relevant research topic.

Key Success Factors in University – Industry Partnerships Co-operation is not an end in and of itself. It is meant to reinforce an R&D strategy, the purpose of which is to enable a group to acquire proprietary technologies (i.e. technologies the group itself can control). An example is the Pirelli Tyre Company, which cooperates in the CORECOM consortium with Milan Politecnico, the University of Southampton, the University of Milan and the University of Akron. These European Management Journal Vol 18 No 5 October 2000

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associations involve optics technologies as well as amplification techniques that are useful in the transmission of signals via cable. Historically, as Pirelli’s research teams had always placed a particular emphasis on these specific fields of research, its collaboration with the universities complements well its strategic orientations (Que´lin and Mothe, 1998). The success of a co-operative working relationship of this sort appears to be strongly influenced by several factors: ❖ An awareness of the diversity in motivation and culture; ❖ A mutual or convergent interest: commercial success on the one hand, greater recognition on the other; ❖ The strategic character of the project; ❖ A long term association; ❖ Highest quality management methods; ❖ Clear and realistic objectives; ❖ Transparent contracts, particularly when the financial considerations and the publications that are associated with a co-operation programme are under the aegis of the contract; ❖ Direct and regular interactions; ❖ On-site availability of appropriate resources; ❖ Precise and clear modalities of control. Supported by Pirelli’s example, we can conclude that the success of a university–industry co-operation

Table 6

programme is especially dependent upon four aspects: ❖ Confidentiality which must be strict and unconditional with respect to third parties; ❖ The mutuality of the interests at stake; i.e., the programme must be tantamount to a ‘win–win’ strategy; ❖ A continuity in the relationship between the participants; ❖ The rapid exploitation of results.

Technological Co-Operations and Partnerships Most of the companies we interviewed see co-operation as an alternative to internal growth — and as a way of avoiding the costs and inflexibility that often accompany a merger or an acquisition. In fact, external development usually competes with internal growth. For example, in 1995, 60 per cent of CISCO’s internal R&D results involved product improvements while new products and technologies only accounted for 40 per cent. The interviews helped to identify some common problems with external sourcing and discuss potential solutions. Table 6 summarises the three solutions for a company to develop its technology base. When an activity involves a core business, and is a basic component of fundamental technological competence, firms almost always opt for a strategy in

Three Strategic Ways to Growth and to Developing New Competencies

Paths for developing and acquiring competencies Competencies are created internally

Competencies are acquired Acquisitions

Main characteristics

Internal growth based on existing competencies

Implications

The new competencies must be accessible and disseminated throughout the company

Limitations

Path dependency Intrinsic limitations in the ability to innovate Limitations of the learning process

External growth aimed at extending the competence base

Development of new products It is difficult to integrate the through the linkage of internallyorganisational dimension developed and acquired competencies Co-operation programmes The partners may both A successful combination of One partner acts opportunistically involving complementary decide to specialise complementary assets can lead to resources and the innovation becoming competencies successful Unilateral dependency Are the intangible assets and competencies truly transferable? New resources and The co-operation covers the Capacity for creation and One partner acts opportunistically competencies are creation, and then, the development Risk that one partner dominates created through cointernalisation of the new Question of how the competencies Capacity for learning operation competencies that have been developed will be Risk that partners do not benefit Bilateral dependency controlled equally from the co-operation (appropriation) Source: adapted from Que´lin (1997)

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Table 7

Members of the EUCAR Consortium

Car manufacturers

Equipment manufacturers

External partnerships

BMW and Rover Daimler Benz Fiat Ford Europe Opel Peugeot SA Renault Volkswagen Volvo Porsche

Components and systems manufacturers Materials makers Oil companies Infrastructure builders

Universities Research laboratories

Source: EEC

which external competencies are internalised through mergers and acquisitions. Companies often view this approach as the most efficient and rapid way to control a share of markets that possess the basic technological or organisational competencies beneficial for their future growth. Moreover, co-operation not only makes it possible to gain access to the technology held by one or the other of the partners — it is also a type of organisation that allows for the reduction of risks and costs, thus ensuring the development of new technologies, new know-how, and new competencies.

in a sector affected by the automobile sector. The European Commission and certain States provide funding for this programme. The consortium contains both a horizontal and vertical dimension. A member’s level of participation in a particular project or industrial programme depends on its competencies and objectives.

The Experience of Fiat: the EUCAR Consortium’s Added Value EUCAR (European Council for Automotive Research and Development) is a large association of automobile manufacturers — American, Japanese and European (Table 7).

How to Make a Consortium Succeed R&D consortiums are flexible organisations that bring a certain number of actors together — industrials, as well as laboratories, research centres and universities. They focus, for all intents and purposes, on research or on development — as long as such activities possess a pre-competitive dimension.

This consortium provides a forum not only for car and equipment manufacturers, but also for universities and research centres, and for any firm operating Table 8

What are the consequences of an R&D consortium such as EUCAR? For the FIAT Group, the answer lies in the value created by this particular form of European co-operation (Table 8).

An example of partnership and joint development in the aircraft manufacturing industry is the LCD pro-

How the FIAT Group Evaluates the EUCAR Consortium

‘SOFT’

Benchmarking for markets and competitors Enhanced knowledge and mutual awareness More individual knowledge Expertise in piloting international projects Pre-competitive co-operation ‘HARD’ Sharing of costs and risks whilst working towards common objectives Validation of concepts, provides approaches and methodologies that can be applied in the immediate future Technical and managerial integration of sourcing relationships

Source: EIRMA

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ject. This technological co-operation unites an internationally renowned aircraft manufacturer with a European industrial company specialised in flight instrument panels. The technologies required for this project involved LCD matrixes, rear lighting instrumentation, inlay techniques, and mark-sensing cards. A multi-disciplinary team was constituted of the two partners and external suppliers. The aircraft manufacturer brought in people from their marketing, development, purchasing, industrial methods, and after-sales services divisions. The creative phase was distinct from the specification definition phase as suppliers were involved in the latter, but not the former. The consortium was faced with two obstacles: it needed to learn to control a process of simultaneous engineering, and it needed to somehow bridge the geographic distance between its various members. In order to solve the first problem, the managers solicited the expertise of all actors throughout the value chain. This was especially important since the project was meant to be more than a simple prototype. As for the difficulties associated with the geographic dispersion of the consortium members, specific instruments to improve the quality of communications were formalised. Finally, the partnership was exceptionally sensitive to the twin issues of cost and timeto-market, especially because in this particular line of business, the former depends on the latter (Table 9). Based on our interviews, the success of an R&D cooperation or partnership programme seems to depend on several factors: ❖ The consortium project must be coherent with the strategies of each partner in the consortium. ❖ Members must rely on their own internal competencies. ❖ Participants in the consortium must be responsible for its operational management. ❖ The co-operation must reflect participants’ selfTable 9 An Example of a Vertical Partnership with Suppliers: An Electronics Firm’s Checklist Risk analysis — elements that require supervision The supplier’s ability to innovate Investment capacities (processes, human resources) Contracting abilities Confidentiality Cost, calendar and quality control Design and production capacities Motivation Independence vis-a`-vis potential competitors Managerial capabilities Methods of verification Criteria for assessing performances Criteria for assessing aptitudes Definitions for different categories of suppliers Planning a schedule for supplier evaluation Creation of a list of supplier classes for each technological family

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interest, and it must be related to a real activity — research of a more fundamental nature should be left to the laboratories and the universities. The various business cultures should be as similar as possible (both industrially and commercially). A past experience in R&D co-operation is frequently considered as useful and even necessary. The various participants should have reached a comparable level of scientific aptitude. Their reputations should also be equivalent, and mutual respect must abound.

Cross-Departmental, Horizontal or InterFunctional Workgroups Horizontal workgroups are teams comprised of persons working in different areas of activity or functions. Generally, the characteristics of a horizontal workgroup are the following: ❖ Their purpose is to solve problems and/or to propose a particular solution. ❖ Their life span may be limited from the very outset because they may not succeed. ❖ Even if they are successfully implemented, the structure is not intended to be permanent. ❖ Three phases are often observed: reflection/ creativity, feasibility testing, and implementation. ❖ The workgroup’s composition evolves over time and depends largely on the process’ phase at a particular moment in time. ❖ The project leader may change and the choice of a leader depends on the project’s development and advancement. The uses and functions of a horizontal workgroup are as follows: ❖ Horizontal workgroups are essential for the elaboration of satisfactory responses to complex problems. ❖ They make it possible to handle problems sequentially, rather than simultaneously. ❖ They improve the circulation of information. ❖ They provide employees with less seniority with the opportunity to contribute to their company’s developmental activities. How should these groups operate? ❖ Their legitimacy must derive from the group’s senior management; ❖ Every project member must have equal status (except for the project leader); ❖ Workgroups should also involve potential clients (as long as all of the rules of confidentiality continue to be respected). 485

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Table 10

Tools for Managing Competencies Internally: A List of Current Practices

An approach based on the identification of key competencies An approach based on individual competencies, primarily dominated by the human resources department Using a database to manage human resources Areas of competence The assessment of expertise Previous projects, etc. Connecting organisation and strategy through a precise definition of strategic business units Technologies Process Know-how Collective competencies Organisational competence is usually revealed when work is organised into projects Project management, mixed teams, budget and cost management, reporting on the project to a Pilot committee, etc. Setting up cross-departmental structures An approach based on a strategy for competencies Defining technological platforms for the various ‘business units’ Constituting ‘poles of competence’ Technological planning Marketing innovations

What are the repercussions of project groups or horizontal workgroups? ❖ They are an excellent way of sharing the diverse experiences from the many different entities that are usually buried deep within the company. ❖ If they do not succeed, the workgroup itself will have failed, rather than the individual participants. ❖ Members should all continue with their normal operations in parallel with their activities in the workgroup.

cally sensitive areas (i.e. laboratories specialising in genetic engineering or bio-technologies); ❖ Mirror the international nature of projects that are financed, at least partially, by public grants; ❖ Accelerate a company’s development by providing it with access to young and dynamic persons. An example is the Siemens group, which affirms that the average age of young Bengali engineers is 24, about two researcher-generations less than the European average.

Due to globalisation, a large part of R&D activities is now being conducted abroad. A virtual R&D workgroup can be viewed as a response to the relational problems that arise when teams and laboratories are physically dispersed across several continents and countries. Success will depend on the environment created around the virtual R&D workgroup: it must be conducive to an exchange of ideas, and similar to that of a project being carried out at a single location.

The Advantages of a Virtual R&D Group First, savings on wages and salaries for companies can vary substantially from one country to another. Second, the interconnection of teams and sites infers that at least some codification of know-how and knowledge is necessary, if only because of the way in which the members of the various teams exchange these elements. Third, such virtual workgroups provide a great opportunity to work with one’s customers. Finally, they make it possible to envisage new forms of R&D organisation — the various stages of a project can now be carried concomitantly rather than merely sequentially.

The Objectives of a Virtual R&D Group A virtual R&D workgroup aims to:

Perspectives

A Recent Development: Virtual R&D Workgroups

❖ Improve access to resources and to scientific and technological competencies (i.e. the software competencies of companies who are active in the development of operating systems or search engines); ❖ Gain access to certain types of competencies and know-how that are not yet available in a given geographic area, thus boosting teams’ productivity; ❖ Transfer activities towards less politically or ethi486

Technological research and development are the two poles of a vector that will lead to a new type of management — the management of competencies. This art aims to bring together the various types of expertise, knowledge and know-how that a firm’s engineers accumulate with the products and services that firms actually offer to their markets and customers (Table 10). To achieve this, a growing number of companies European Management Journal Vol 18 No 5 October 2000

CORE COMPETENCIES, R&D MANAGEMENT AND PARTNERSHIPS

have developed and adopted new management tools and new organisational forms. This article has explored some of these developments, all of which reflect the general need for firms to discover the relevant links between R&D and marketing, and between internal and external competencies.

Acknowledgements This paper has benefited from the financial support of companies that are members of the HEC Foundation. The author would like thank them for grants made available.

capabilities through strategic alliances. In Strategic Learning and Knowledge Management, eds R. Sanchez and A. Heene. John Wiley, New York. Que´lin, B. (1999) Learning more by learning together. In Mastering Global Business, ed. The Financial Times, pp. 86–90. FT Publications, London. Que´lin, B. and Arre`gle, J.L. (2000) Le Management Strate´gique des Compe´tences. Collection HEC, Ellipses. Que´lin, B. and Mothe, C. (1998) Co-operative R&D and competence building. In Strategic Flexibility: Managing in a Turbulent Environment, eds G. Hamel, C.K. Prahalad, H. Thomas and D. O’Neal. Wiley, New York. Sen, F. and Rubenstein, A.H. (1989) External technology and in-house R&D’s facilitative role. Journal of Product Innovation Management 6, 2. Teece, D.J. (1998) Capturing value from knowledge assets: the new economy, markets for know-how, and intangible assets. California Management Review 40, 3.

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BERTRAND QUE´LIN, HEC Paris, Graduate School of Management, 78351 Jouy-en-Josas Cedex, France. E-mail: [email protected] Bertrand Que´lin is Associate Professor at HEC (Paris), and currently Associate Dean for the HEC Ph.D. Programme. He teaches Industrial Economics and Strategic Management. He is the author of numerous academic articles. His main topics of research involve economics of organisation, the strategic management of competencies, and strategic outsourcing. He specialises in the telecommunication and information technology industries. He has led a number of consulting missions in these activities.

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