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Strategic planning and research and development—Can we integrate them?
0024-6301/83/010015-11$03.00/O Pergamon Press Ltd.
Long Range Planning, Vol. 16, NO. 1, pp. 15 to 25, 1983 Printed in Great Britain
Strategic Planning and DevelopmentIntegrate Them? Giorgio Petroni, Associate Professor,
and Research Can we
University
The main problem affecting the R & D function has always been caused by its lack of integration with the enterprise. Such a problem makes it difficult to pass from invention to innovation-that is. to turn the invention into processes and products to be exchanged on the market. The author points out the main social and organizational problems which prevent R & D from entering the ‘circulatory system’ of the enterprise. The identification of such problems is important in order to set up and to implement innovative strategies. This is the first of two articles by Professor Petroni on this subject. The second article will appear in April 1983.
The Concept of ‘Integration’ as a Means of Analysing Research Problems Those responsible for the organization of industrial research, and those professionally involved in staff administration (Personnel Department) are also responsible for the development and implementation of systems of integration which permit a high marginal exploitation of the innovative potential of researchers and technicians. The word ‘integration’ can obviously mean many things, but experts in organizational problems normally use it to mean the degree of coherence between the actual behaviour of men in an organization and the goals of that organization. In this sense one may speak, for example, of ‘integrated’ corporate structures when: (a) professional roles are objectively planned to contribute towards the realization of the organization’s goals (rational division of tasks, correct distribution of responsibility, effective decision chain, etc.). The author is Associate Professor of Management at the Engineering Department of the University of Udine, Italy.
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of Udine, Italy
(b) the
men who occupy these roles share the goals of the organization to which they belong and contribute to their realization by their positive activity.
Therefore ‘integrate’ means to obtain an effective link between the goals of an organization, its roles and those called to occupy them. It should be noted that these factors, although distinct, are also interdependent to a great extent. Thus, the context of organizational roles is never independent of the professional characteristics of those who occupy the roles. In the same way it may be affirmed that pure, objective goals do not exist in an organization of the industrial type. Large enterprises, in particular-as many analysts have clearly shown-are subject not only to strong external conditioning but also to contrasting influences (shareholders, parent organization, technical personnel, factory workers and management) l when it comes to planning a strategy. The concept of integration as defined above can be useful in dealing with the social-organizational problems typical of industrial research, as it is obvious that the degree and significance of the innovative output which is the institutional goal of an industrial research organization will be directly proportional to the integration of the structure called upon to produce it. The following pages will therefore be dedicated to an analysis-with the aim of identifying the main reasons for a lack of integration and coherence, and often sources of conflict, in the industrial enterprise.
The ‘Difficult’ Relationship Between Strategy and Research The first ‘non-integration’
factor we would like to
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examine is the difficult and precarious relationship between strategy and research in industrial enterprises. It can be said that a company follows a strategy when, with the aim of survival-or more appropriately, to grow and develop-it has consciously determined its own competitive character, identified its strong and weak points and decided in which directions (in addition to how much and when) to invest and disinvest. The fine tuning of a corporate strategy requires a long and sophisticated preliminary study of the product-market relationship, the competition, economic and financial structure, technological and scientific resources, functionality and age of the plant, administration system, management quality, possible evolution of external environment, etc. The process of gradual realization (and necessary control) of corporate strategy also raises problems of harmony and coherent behaviour at the various levels of management, of gathering and use of administrative information (tableau de bord), of flexibility of decision and action (in connection with any corrections or changes of route required) criticism of certain types of resources (economic, human) etc. To sum up, one can say that the soul of corporate strategy is innovation, i.e. the capacity of the enterprise to keep up or renew itself continually in a competitive situation where the rules of the game change rapidly and constantly. According to a common view, which is methodologically useful even though only partially true (because it is an excessive simplification of the real situation), there are two categories of innovation-that of administration systems and that of new products and processes. The dimensions of the industrial enterprise, its products, the market it operates in, the competitive system of which it forms part, its economic-financial structure, etc. are all factors which decisively influence the specific weight of the above-mentioned types of innovation. However, technological innovation has a profound influence (in the sense of conditioning) on the establishment and implementation of all industrial strategies. To grasp better the importance of this affirmation (which might seem obvious) one merely has to consider the fact that a company cannot decide where to invest or disinvest unless it already has an up-to-the-minute picture of technological areas of immediate or potential interest (technological forecasting), or has not evaluated the efficiency of its plant, also in the light of the foreseen innovation capacity of competing companies (technology intelligence). In this situation of organic interdependence between corporate strategy and scientific and technological innovation the main point of tension (due to its negative effects on the organization of industrial research and its staff) is the difficult and precarious compatibility between the scientific and cultural interests of the researcher and the need for technical and scientific company’s
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exploration. At the root of the matter lies the need to harmonize demands and models of behaviour which are often quite different-the intellectual curiosity of the researcher and his motivation to acquire knowledge are not always compatible with the areas of interest considered of strategic priority by the company. On the other hand the choice of areas of research (whether basic or improvement research) is not made (and cannot be made) by a ‘bureaucratic mind’, which establishes precise interaction between corporate strategy and scientific and technological innovation, and thus avenues of investment. An acceptable level of coherence (and thus of practical harmony) between development and outworking of a strategy and research activity is often the result of an arduous process of control and constant interaction among the various corporate departments involved (horizontal integration) and among the men who occupy the various levels of responsibility (vertical or bottom-up integration). These processes do not exclude, but rather emphasize the value of individual needs and requirements and render them in some way compatible with those of the organization. However, this requires considerable investment in terms of time, adequate professional resources, incentives, training, etc. Time is another critical factor in research work and significant results depend largely on the constancy and perseverance of the research in addition to the resources invested in it. The direction of an industrial enterprise, on the other hand, requires a considerable degree of flexibility due to the continual need for ‘changes of course’. This demand has doubtlessly become more marked during the last two decades of international economic turbulence (for example, the Kippur War and the so-called ‘currency war’ with the resultant chronic instability of exchange rates, etc.) rendering the conditions of business competition considerably more risky. In fact, the development and recent popularity of corporate planning methodology as well as the introduction of more refined corporate control methods may be explained by the need to keep under control the greatest number of economic and social variables which interact with the activity of the entrepeneur with a view to improving them and reducing areas of uncertainty and risk. At times a company, forming part of a certain competitive system, may have to request significant modifications, of course, due to: *
The unexpected non-profitability of certain productive processes caused by the modification conditions such as a of general economic significant increase in the cost of raw materials.
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Following the introduction by competing companies of a production process or product with such a high innovative content as to discourage further investment in research. In this case it may be advisable to fall back on cooperation agreements involving the purchase of know-how. A grave crisis in the company due to, for example, a sudden, sharp fall in its profitability (cash flow, debt, etc.) or crisis in management, which, for various reasons, can undergo change. The object of these few comments has been to present a simplified list of causes which can produce a more or less significant modification of research programmes often with very serious influences on the motivation and thus on the behaviour of scientific personnel. This specific area of serious potential conflict between research staff and the rest the corporate establishment confronts the industrial organization expert with the problem of constructing an adequate and effective system of communication between research and other areas of the company as well as that of ‘capitalizing’ knowledge acquired in areas of research where it has not been possible to come up with practical applications. These and other problems obviously validate the more advanced organizational models of scientific work based on interdisciplinary integration, temporary assignment to specific projects, matrix crossing of knowledge and responsibilities, team building, and liberty of option for the specialist who can choose, within limits, the projects to which he can contribute. In the relationship between corporate strategy, innovation and evolution there is another ‘critical point’ for the structures and human resources involved in industrial research. The difficult and precarious equilibrium between these three factors may, in other words, constitute an important source of conflict and thus represent a serious obstacle to effective research work. In particular, the problem which has always been the object of analysis and debate in industrial circles (and to be honest, has never received a universally-accepted and lasting solution) is that of the relationship between innovative research and so-called evolutionary or improvement research. This question is intimately connected with corporate strategy planning (where to go, where to invest, etc.) as the decision, for example, to abandon certain areas of research and purchase knowhow or to concentrate resources on certain improvement research projects and abandon new product research, are acts which have a profound influence on the life, growth and development of the company. In particular that which is the object of thorough analysis, farranging debate and therefore difficult decisions can be summed up by the following questions:
*
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How much do we invest in new product research or alternative production processes?
b How much must we invest in research improve existing products and processes?
to
b Given the level of knowledge and experience already acquired by our competitors is there a possibility of success in research area X? It always seems very difficult to give a clear answer to these and other similar questions as, apart from certain general guidelines dictated by experience (for example, not to spread oneself too thin, or to concentrate improvement research on those products or processes which are already the company’s strong point with a view to reaching a position of undisputed dominance, etc.) the potential contribution to the development of a company of new product or improvement research are not practically foreseeable. In theory, a solution to the problem has been found in most industrial enterprises by assigning the task of exploratory research to the Corporate Research department, and improvement research to the divisional research centres.* In practice the decision on the relative importance to be given to innovative and improvement research is based on a periodic analysis of the results obtained on the various fronts as well as, obviously, the evaluation of available resources and data and experience outside the company. This is particularly important at the moment when we are witnessing a strong concentration of industrial research in the improvement field and a reduction of effort in exploratory research. The relationship between innovative and improvement research is of utmost importance if there is to be efficient structuring, from at least three points of view: The periodic revision of the space given to the two types of research results in a stop-go process which is responsible for ill-feeling and demotivation among scientific personnel; we have already mentioned the importance of the prospect of a medium-long period and a resultant constant dedication and flow of resources for efficient research work. It is obvious that when these essentials are neglected a situation of potential conflict between scientific personnel and the company is created. Taking into account the equilibrium between exploratory and improvement research, which we have defined as ‘unstable’, it is necessary to establish and follow a path systematically and avoid leaps in the dark. Very often, in other words, an alternative research project is crowned with success when the limitations and defects of the product or process for which an alternative is being sought are determined at the outset and
*The policies of major American and European companies tend constantly in this direction. Obviously these policies take different forms in the various companies.
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the details of other attempts at improvement have been fully examined. This means that, in order not to risk wasting available resources it is essential that specialists in a certain area, whether they be involved in innovative or improvement research, work in close organizational collaboration. Finally, there is no doubt that improvement research requires a considerably different approach to exploratory research. In fact the possibility of obtaining significant results with existing products and processes depends greatly on the integration that the researchers succeed in establishing between their work and that of their colleagues in production, marketing, technical assistance or applicational development. This integration is difficult because, as has been clearly underlined2 the value systems and motivation determining the behaviour of these professional groups are very different:
(4
Researchers tend to put the company in second place to their profession. It is thus intellectual and scientific curiosity and the desire to acquire knowledge which drives them towards research work, and their main aim is not to produce innovations for the development of the company.
O-9Marketing
and production personnel, on the other hand, appear much more integrated with the organization of which they form their aspiration is mainly that of part; attaining clearly defined and economically significant corporate (production and sales) targets.
(4
The same relationship between those in the fields of marketing and production is, in the absence of particular methods of integration (common economic incentives, etc.) in general, as is known, rather difficult.
In this context it seems obvious that the obtaining of results in improvement research is dependent on the implementation ofa far from easy integration of elements with completely different motivation and aims. In the foregoing analysis of the relationship between corporate strategy and innovation the aim was to emphasize those problems which represent potential sources of conflict for scientific personnel and thus cause negative behaviour and a considerable waste of resources. But the analysis also underlined the fact that the relationship between strategy and innovation is two-way and characterized by reciprocal influence. There is no bureaucrat in an industrial enterprise laying down a strategy which assigns a precise role to innovation-in fact the opposite is true, seeing that the strategic concept also emerges and takes shape in the renections and conduct of management with reference to technical and scientific evolution inside
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and outside the company. Finally, research has emerged as a body which is subject to diverse stimuli which must be co-ordinated and expressed in an orderly and coherent way if they are to contribute to a healthy growth of the body. In this sense it is possible to speak of reciprocal influence and unstable equilibrium between explorative research and improvement research. To guarantee the presence of this delicate balance in research activity and to ensure an effective interaction between innovation and corporate strategy, what are the structural solutions the industrial world proposes? In other words, how do we safeguard the connection between those who engender the strategic concepts of a company and the various centres (sometimes composed of thousands of people) delegated to produce technical and scientific innovation? On the basis of what we can learn from available literature and of the author’s personal knowledge and experience, there are basically three ways to solve the problem raised by the foregoing questions: (A) The first method, adopted in an exemplary way by the large British chemical company, I.C.I. (Imperial Chemical Industries) involves the presence of the person responsible for Research and Technology on the Board of Directors, the top decision-making body of the company. The originality of this solution is that the person occupying this position does not have a staff of his own but guides and co-ordinates the divisional research laboratories by means of scientific preparation, a profound knowledge of the company and with the aid of considerable personal prestige. At the same time he gathers ideas, suggestions and orientations from his divisional collaborators and relays them to the Board which is obviously the body which takes the most important strategic decisions. Thus the role of this director is that of a mediator between the divisional research structure and the highest decisional body permitting a process of comparison and critical analysis in two directions-from bottom to top and vice versa. (B) The most common method of creating a link between research activity and planning makes the even on the organizational level, distinction, between improvement research assigned to the and explorative research various ‘profit centres’ which is entrusted to the central research group (operating at corporate level above the more specific interests of the ‘profit centres’).
This central group has the institutional responsibility for maintaining the high quality of the basic knowhow possessed by the company. Often the commission the central various ‘profit centres’ laboratories to perform particular research which requires specialized and exclusive knowledge. In this way the central group puts its experience at the
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disposal of the various components of the company. These ‘commission jobs’ are rendered formal by the preparation of internal research contracts which also have the important function of establishing the distribution of the cost. A ‘Research Committee’, made up by representatives of the various ‘profit centres’ ensures the coherence and integration of the various corporate research projects. In this model, adopted by Montedison, Bayer, Siemens and the points of cross-fertilization and Philips, integration between innovation and business strategy are mainly composed of: The Research Committee which, formed as it is by certain members of the Board and representatives of the ‘profit centres’, cements at corporate level the strategic relevance of company needs and the proposals of the various peripheral groups. The ‘contracting’ relationship and the resultant exchange of information, knowledge and experience between periphery and centre and vice versa. In general this model proves to be rather ineffective just when the methodology and planning processes are weak and does not succeed in integrating in a unified whole the contributions of centre and satellites. In order to understand this better it should be remembered that effective strategic and operational planning requires a continuous confronting of top management’s viewpoint (often attained in the light of available opportunities, restrictions, priorities, etc.) and the proposals of managers occupying key positions at the various levels of the corporate structure. If this ‘bottom-up’ process is absent the results of planning are in general contradictory and unproductive. Furthermore, the constant involvement of the technical department in a continuous circuit of proposals to the top and checking through feedback not only makes it possible to clarify the direction in which the company is proceeding but also to ‘socialize’ (in the sense of knowing and often sharing) the objectives and ‘rules of the game’ which govern the activity of the individual components. In this sense, if there is not an adequate participation by the technical component in the
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planning process both the structural solutions mentioned become ineffective in integrating the role of research with the process of developing and implementating corporate policies. (C) A third way of integrating explorative research with improvement research and business development is the formation of ‘business teams’. An excellent example is Union Carbide3 which has created research departments for each product line (various branches of the plastic family). Each product line corresponds to a business with its own special characteristics-a committee or business team made up of marketing production, research and development and technical assistance experts work beside the person responsible for the business. In a situation of this nature, research activity is commissioned and paid for by the production side and by agreement only a small part (15 per cent) of the total cost of research is borne by the Division (not by the individual business) as each research activity is considered as having a ‘fundamental innovation’ element, even though aimed at the development of a specific business. Obviously these structural models cannot be put in the same category as the first two, which are designed to solve the problems of the strategyinnovation relationship while in the case of the ‘business team’ the problem addressed is that of the relationship between innovation and product or product-line planning. Thus it is helpful to summarize the differences between these three organizational models.
The Value System of the Researchers as a Professional Group and the Corporate Value System The individual value system of researchers is profoundly different from, and thus often contrasts with, the value of an industrial organization and the behaviour models it implicitly requires. This ‘constitutional’ difference, according to some,4 is one of the main reasons for lack of integration, in particular we pointed out that the profession of researcher produces a mental outlook in which:
Table 1. Structures and typical roles for the R & D integration
within the structure of the enterprise
Model
Role
Requirements
Organization
A. Person responsible for research member of the Board
Create reciprocal and continuous collaboration between research and top level decision makers (Board)
Research coordinator must have great professional competence and prestige; Board members must have thorough knowledge of company
autonomously as a ‘profit centre’ and possesses its own research structure
B. Committee composed by members of the Board and the divisional research directors
Direct divisional research activities; establish priority projects and consider technological problems inherent in basic business decisions
Contracting between divisions and central research; business knowledge on the part of Board members
Each division
Strategic planning
operates
and operational mechanism
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all evaluation and judgment must be based on impersonal, objective criteria (objectivity and universalism of science) ;
down as a fundamental within the company;
the sense of professional responsibility toward researchers as a group and toward the company (principle of corporate loyalty);
the advancement of knowledge is far more important than the benefit of individuals and thus the company (social value of science);
the personal disinterest of the man of science (who on the ethical level is only interested in acquiring and communicating knowledge) and the authority retribution and status symbols which increase with the attaining of higher posts in the corporate hierarchical structure;
the work performed by a researcher may only be evaluated by other researchers with the same or a higher level of knowledge and not by an organization (like the company) the ultimate goal of which is not scientific (mistrust of the economic-productive system);
socialization and continuous exchange of notions (as essential methodological requirements for the advancement of knowledge) and the ‘asset’ value of knowledge obtained by the company as a means of competition (know-how value).
researchers must be completely free to choose their fields of work (researcher’s freedom of action).
loyalty towards the company; observation procedures;
of
the
established
policies
and
hierarchical structure with its corresponding distribution of power (of decision and command) ; economic retribution in relation to the level of responsibility and position reached in the corporate hierarchy; professional progress, seen as a refinement and further acquiring of knowledge, takes place in the context of the company and thus is limited by the corporate sphere. Thus the company on one hand (considered as an organization), and economic/productive the researcher on the other, are motivated by sets of values which are very different, if not antithetic. The difference is immediately obvious between: *
the independence asserted by the researcher and the respect for the policies and procedures laid
principle of behaviour
the principle of peer association and the formal, hierarchical structure (of the company);
one may not pretend property rights on basic knowledge acquired, which on the other hand must be shared (community emphasis of science) ;
On the other hand membership of an industrial organization requires the acceptance and respect of certain fundamental rules such as:
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The table which follows summarizes the conflicting sets of values which tend to motivate professional researchers and middle management (that is those who are more directly and strictly subject to the company’s ‘code of behaviour’) : A-from
the researcher’s point of view;
B-from
the company’s point of view.
The outworking of these different sets of ‘values’ are not lacking in the day-to-day administration of human resources in the research field. Later the principal models of organization and administration of these resources in western industry will be described. First, three typical problems facing those who are responsible for organizing industrial research should be mentioned: (a) If, as has just been mentioned, the task of industrial research is to produce technical and scientific innovations to provide the company with further doses of competitivity (innovation at the service of the corporate productive system and of its product-market relationship) it is normal for research programmes to undergo modifications (of content, methods, length, etc.). These modifications may be justified by various economic and
Table 2. Conflict between value systems of researchers and the enterprise Sense of the scientific community (socializing of knowledge)
Priority of social value of scientific
B. Individual roles; evaluation of contribution and potential; individual retribution and career
Scientific and technical knowledge is a basic asset of the company and an essential condition for business competition
Prime goal of scientific/technological innovation is production-marketing
A. Scientific community
Independence
of researcher
Value system and behaviour researchers
Determination projects
and completion
A. Objectivity (impersonal,
B. Corporate hierarchically
and universalism objective
organization
structure
of science
judgments)
as a peer
organized
of research
Corporate
progress
code of
value system and behaviour
code
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social factors such as a sudden unforeseen increase in the price of raw materials, market trends and greater awareness of pollution problems with resultant greater strictness of legislation. It is therefore comprehensible (from the standpoint of an industrial enterprise) that it may be necessary to use research resources (principally human) in new projects or ones with different goals, abandoning, perhaps only temporarily, the work already in hand. However, when it comes to this type of change there is usually strong resistance on the part of researchers who tend to justify their attitude by the risk of losing (or not exploiting) their professionalism and knowledge acquired. In other words taking on the responsibility for another research project different from that on which one has worked over a period of time makes the researcher fear an inadequate capitalization of knowledge as this is the main factor in gratification or the recognition by the international scientific community of which he feels a member. From this standpoint involvement in new research projects which do not necessarily (given the particular requirements of an industrial enterprise) provide scope for the development of all the knowledge and experience acquired previously, also risks interrupting the reciprocal contracts of the researcher with the scientific community and tarnish professional prestige. (b) All the organizations (industrial enterprises, organizations, public administrations) service which have undertaken human resources develophave adopted methods and ment programmes instruments which differ greatly from those normally used in other parts of the company (or other organizations) where the hierarchical model is more pronounced. For example, instead of the evaluation of performance by a manager there is self-assessment. Training is the result of an independent and conscious choice on the part of the researchers, as is the composition of the various fringe benefits (such as participation in congresses, publication of articles, career development etc.). This tends to reconcile the requirements of a productive organization and the value of progress of knowledge and the social significance of science, which, as has been seen earlier, are researchers’ professional ideals. At one of the largest laboratories of the U.S. Navy near Dahlgren (Washington), where about 2000 researchers work, research activity is characterized by three fundamental factors: b Extremely high investments in training and a vast range of opportunities are offered to researchers who have systematic access to the most advanced experiments in the area of their scientific and professional interest. It is well known, by now, that Dahlgren offers exceptional prospects of professional advancement and thus of acquiring experience and knowledge even though salaries are in the medium-low bracket.
*
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The researchers are free to choose their research projects from a wide and varied list after not less than 2 or 3 years of constant dedication to a specific project.
fi The organizational (and consequently economic and financial) structure of the research centre revolves around contract work. These contracts come not only from the U.S. Army but also from other organizations, both public and private, industrial and otherwise. The availability of funds, which come in the form of an annual budget, depend on the results obtained and this is well known by all the centre’s researchers. It cannot be overlooked that this model tends to motivate researchers to attain specific research targets (on which the survival of the institution depends) using as factors of motivation the natural aspiration of researchers to acquire and exchange ever more advanced knowledge and the independence (within certain limits) of their own professional obligation. The participation of researchers in trade union activities gives us an interesting insight into their ethical and professional principles. The emphasis of their claims is on social issues (safeguarding of worker’s health, consumer protection, ecology, etc.) and the contribution of the company to the development of the community it is located in (education, socialization of knowledge as a factor in democratic development, full employment, etc.). Thus, the researcher tends to emphasize the interests of society (production of knowledge for the service of others, contributing to the progress of the community) boundaries of the company with its individual and competitive emphasis.
Value System of Researchers and Other Professional Groups: Their Relevance to the Relationship Between Invention and Innovation The distinction is certainly arbitrary but when people speak of innovation in the context of an industrial enterprise they refer exclusively to Research and Development. However, one should remember that there is a substantial difference between invention and innovation as the latter is the result of a process which involves other areas in addition to Research and Development. Often, in practice, the invention does not reach the production stage (that is it does not become an innovation) due to a lack of integration between Research and Development and marketing or production. This problem, according to A. D. Biller and E. Shanley,6 is due mainly to the different cultural systems of the various groups (researchers,
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marketing personnel, production staff etc.). This creates large industrial organizations, professional families whose cohesion is the result of sharing a specific social and professional code of behaviour. The different degree of risk in the attainment of professional success (very high in the case of researchers), the different time spans allotted for producing results (much shorter for marketing but even more so for research), the different range of alternatives (certainly wider, but also more uncertain in the case of researchers), the analytical, critical approach to problems (typical of researchers and not always compatible with the ‘rules of the game’ characteristic of other professions) are factors of social and professional differentiation of no mean importance according to these authors. Therefore for Biller and Shanley it is not so much the contrasting system of values of researchers with that of the company but different ‘value systems’ with social and professional roots, which represent the major obstacle to the development of innovations within a company.
The Question of the ‘Creativity’ Scientific Personnel
of
Another source of potential friction between researchers and the industrial organization of which they form part is the phenomenon of ‘creativity fall-off. It has been established, using empirical methods, that after a certain age the creativity of researchers tends to diminish until it disappears completely. It is our aim to show the consequences that this phenomenon can have in an efficient industrial research organization, and thus we will avoid going into the details of a very complex question. However, for even a basic understanding of the question it is necessary to mention certain empirical concepts. First of all, one must remember that the capacity of an industrial research centre to produce innovations depends on the quantity of the financial resources available, the adequacy of the instruments and equipment, the level of knowledge of the researchers, their capacity to work together (and thus their openness to an interdisciplinary approach), their motivation, the temporal continuity of their labour, the constancy of financial resources, etc. These factors, which are certainly not new to experts in the field, demolish the romantic myth of the research genius capable of extraordinary and sudden invention. On the other hand, it is fully realized that the constancy of effort, the establishing of a tradition and a ‘school’ and the capacity to overcome the frustration caused by failure represent the real seedbed of industrial innovation. During recent years, breaks of continuity have been becoming ever more rare (that is the discovery and acquiring of new knowledge which constitutes a radical alternative). In practice, the progress of knowledge, although rapid, is the fruit of a cohesive and continuous process based on additions and developments of previous dis-
1983 coveries. In the more’ specific field of industrial research, as mentioned earlier, the last 5 years have seen a more consistent output on the side of improvement research than on the border between improvement and new product research. One merely has to consider the fact that many research projects designed to invent a new product end up in contributing new knowledge and experience which are particularly useful for improving existing products. These introductory remarks are needed to clarify that by ‘inventive capacity’ we mean (with a good dose of empiricism, as mentioned above) the quantity and quality of knowledge and experience a researcher (all things being equal) attains in a certain period of time. It isjust this quantity which tends to diminish after the age of 32-35. Even before this concept had been fully developed, many industrial companies had incorporated its implications into their research organization. The major German chemical companies, for example, have a long tradition of graduate turnover amounting to about 10 per cent per year, at different periods from their arrival (that if after 2-3-5-6 year etc.). Many researchers, after the initial experience in research, progress into other departments such as technical assistance, commercial, production, planning etc. Therefore if every 5 years the research establishment, on average, undergoes a 50 per cent turnover the aim is to maintain a permanently young structure in which there are career prospects only for those with particular motivation. On the other hand, with the passing of time the researcher’s experience increases and thus his professional worth. There is thus a ‘critical age’ for the researcher (about 35-40) when there is a high degree of specific competence which is certainly necessary but not sufficient to obtain a high level of innovation. The maintaining of a permanently young personnel, mentioned earlier, has the aim of meeting a structural need of research i.e. a body in which managers (organizers of research activities), specialists (scientists) of a high professional standard, operate together with young researchers capable of a notable creative contribution. To obtain this balance it is necessary to adopt a programme of human resources development in the research field (examples will be given later on). In this way there can be a high marginal exploitation of these resources within the industrial organization.
As will be shown in detail later on, the main aim of these development programmes is to prevent the researcher arriving at the ‘critical age’ without a continuing role to play in the strategy of the company. In fact, it often happens that the researcher, who has built his career in a specific area, reaches the critical age without a real ‘slot’ in the new research developments and does not possess the
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experience or the personality required to perform a managerial role outside the research department. In these cases, there is a strong psychological resistance against accepting positions which take him away from the ground in which his professional fertilization and growth has taken place. This ‘marginality’ of the researcher is rather frequent in industrial organizations and obviously the source of considerable conflict with the corporate organization. Models designed to programme and develop human resources in industrial research, as will be shown analytically later on, if they are to avoid these situations of potential ‘break-up’, must integrate, first and foremost, personnel recruitment and selection. It is impossible, for example, to have a satisfactory ‘turnover’ from research to other areas of the company (roles which are often of the managerial type and thus requiring the organization and administration of resources) without a clear recruitment and selection strategy which sets out to ascertain not only whether the candidate has an adequate level of experience and knowledge, but also certain fundamental personality characteristics such as: leadership, co-ordination, flexibility, sensitivity, perseverance etc.). Finally, it should be pointed out that the model of professional growth, the control of turnover from and to other departments of the company, the reward system, and the need for professional status, depend on research development objectives, which are linked to the other strategic goals of the company.
Matrix Structure Research
in Industrial
The commonest organizational model in research centres (industrial and otherwise) defines areas of professional responsibility which together constitute the basic grid of the structure. These areas of scientific and professional enquiry which require the continuous and stable investment of resources (human, technical, financial) are generally termed ‘Departments’ (e.g. Physics Dept., Inorganic Chemistry Dept. etc.). The Department is then divided into organizational sub-divisions, also defined according to specific scientific-professional field (e.g. spectrography laboratory or section). The section is further divided into units called Research Groups made up of 2-4 persons one of whom normally possesses academic qualifications (group leader) and the others, being technical assistants. This basic structure is developed horizontally into ‘research projects’ which are characterized by dynamic organization (projects change objective and content rapidly), temporary nature (research projects come and go, especially in an industrial context) and linked to specific objectives (often practical problems). In other words, the Department-the global unit of the research establishment-will pursue the general and permanent aim of producing and acquiring knowledge, for example, in the area of solid-state physics.
we Integrate Them?
23
Certain of its members will contribute by participating in research projects which are generally aimed at solving specific problems with direct practical implications (e.g. the corrosion of plant X, the treatment of waste from plant Y or the use of polymers produced by plant Z etc.). Such an organizational model (which, as stated earlier, is the most common in industrial research centres) is termed the ‘Matrix Organization’ of research (see Figure 1). This model, which seems to be fully justified from the logical and rational standpoint (a permanent structure produces and acquires knowledge in a certain area to be utilized when needed in projects aimed at reaching specific temporary targets), in fact poses notable practical problems as it is the structural source of conflicts which may be attributed mainly to a functional root (that is, connected with the organization and planning of research work) and to sharing of the decision process (who decides what, who is responsible for what, who has the authority to . . . ). It is worthwhile to explore this area further and focus on one of the greatest problems facing those who wish to give industrial research an efficient organizational order. In an industrial enterprise, which, as mentioned above, often identifies technical innovation as the critical factor of its success, the development of new products and processes (or their substantial improvement, making them cheaper or more competitive) implies a continuous examination of activity undertaken, and consequently a systematic review of research objectives. The rapid obsolescence of technical and scientific knowledge, the stiff competition and the growing sophistication of the buying public, impose a high ‘birthrate’ but at the same time, a high rate of death at an early age of research projects. It is therefore obvious that matrix organization can be the cause of acute problems for those involved in industrial research. The following detailed observations may be made:* (a) As far as management of research work is concerned (planning, practical organization and control), the goal of the project is always the attainment of results. Those responsible for research projects are always concerned about obtaining an output after a certain predetermined time (even though the period may not be rigidly prescribed) and using certain budgeted funds. On the other hand, for the Department that normally supplies equipment and specialized data to the various research projects, the main concern of a manager is that of obtaining a high marginal exploitation of
*Some of these comments were inspired by an unpublished work dated 1976 prepared by Urwick International of London, a research and consultancy company, on behalf of TNO, the important Dutch technological research establishment mainly financed by the state.
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Long Range
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Project
February 1983
A
Figure 1. The matrix organization
of research
the resources entrusted to him, not in relation to objectives of the individual project (for which he has no responsibility) but with relation to other criteria (optimal use of personnel for the various projects, motivation of his collaborators, accumulation of knowledge and experience which the Department gathers as a result of participation in the various projects). In other words the person responsible for a research project is judged mainly on the basis of the results expected from that project, while the Department head is judged mainly by whether he has used the resources entrusted to him correctly, independent of the results that such use has contributed to. (b) It follows from the above that, if one takes the project as the standpoint, each operational intervention must have a clear goal and the efforts of all the researchers participating in the project are considered as contributing to the attainment of the results. From the point of view of the Department the goal is to supply an adequate and specialized service and therefore it is not concerned with organizing the various interventions in a sequential and integrated way. From the project standpoint the practical activity is more dynamic and characterized by precise interaction between the various acts, which can change, in either quantity or quality, according to the dictates of the project. From the Department’s point of view, on the other hand, the contribution of its members, being the result of specific responsibilities, is more static and
easily defined. In fact, as the development of the project is outside the sphere of responsibility of the Department there can even be an attitude of resistance or perhaps refusal as a result of the legitimate but spontaneous requests of the project leader. (c) It goes without saying that, from the project standpoint, research work is characterized mainly by an interdisciplinary approach while the Department’s contributions are specialized and monodisciplinary. (d) Finally, for the Department, the planning, distribution and execution of research work and the consequent control flow along a chain of command typical of a hierarchical organization in which role and responsibility is clearly defined. Research work, on the other hand, which is project-centred, proves to be effective only when there is a strong spirit of cohesion (normally anti-hierarchical) among the individual researchers who must be willing, independent of their role in the corporate hierarchy, to share experience, points of view, intuition etc. in order to criticize and improve them. Furthermore, in a project the distribution, execution and control of work depend on professional competence and the specific contribution of individuals which does not always coincide with the assignment of authority and responsibility typical of a hierarchical organization. In order to clarify the functional causes of strclcttrral in matrix-type organization we may refer to the following table:
conzict
Strategic Table 3. Conflicts
Planning and Research
and Development-Can
between project and functional
department
we Integrate Them?
as base units for R & D
ASPECTS OF WORK AND RESEARCH
FROM PROJECT STANDPOINT
FROM DEPARTMENTS
Practical activity
Dynamic and unique
Constant and repetitive
Work groups
Interdisciplinary approach
Single discipline approach
Drstribution and execution of work
Task oriented
Along lines of authority
Direct activity (planning, organization and control)
Result oriented
Designed to obtain high marginal exploitation of physical and human resources
(e) In the examining, be found in ambiguity)
The person responsible for a research project, in fact, finds himself in the unusual situation of having to deliver results within a certain time span and utilize human resources which depend on others (researchers, technicians etc. who form part of the departmental staff) and equipment to which he does not have exclusive access. In other words, he is limited by a d ivision between responsibility for the conducting of the project with its expected results (which are truly his) and full formal control over certain essential resources (which is not conceded to him). It is therefore obvious that a situation of this type tends to encourage and establish informal relationships which are cemented by the charismatic personality of the project leader (leadership, adaptability, sensitivity, tenacity, stress resistance etc.).
“A useful distinction is made by Kahn, R. I. (‘Organization Stress’, Wiley, New York, 1964) between rd/e conflict which occurs when an individual is subject to clear but contrasting expectations from the people he works with and ro/e ambiguity when the expectations of colleagues and superiors are vague or unclear. This role ambiguity often occurs in research centres when the matrix model is used.
STANDPOINT
analysis’ (for which the numerous works of E. Jaques, the inventor, may be consulted. The adopting of this method permits the identification of the roots of interpersonal conflict and the conquest of it by a social therapy which involves the participation of the various members of the organization, formal and informal, working on the project.
‘matrix organization’ model we are however, the main disfunctions are to the complexity (and we may even add, of the decision process.5*6,7.
Thus an essential condition for the success of the matrix model lies in the choice of a project leader with a strong managerial capacity, and a capacity for actively motivating and obtaining collaboration. In this way one can overcome, at least partially, the structural conflict situations latent in the organizational model we are examining. A useful method for identifying r61e conflicts* is what is termed ‘social
25
The main aim of this social-therapeutic approach is obviously that of reconstructing the points of convergence between responsibility and authority in the research project activity.
References (1) S. Sterpi, Un contribute alla revisione della teoria dell’impresa. Giuffre, Milan0 (1966).
(2) A. D. Biller and E. S. Stanley, Understanding the conflicts between R & D and other groups, Research Management, 22-27 (1975).
3,
(3) J. J. Smith and T. T. Szabo, The dual ladder: importance of flexibility, job content and individual temperament, Research Management, 7. 3&37 (1977). (4)
R. C. Parker, Human aspects of R & D organization, Research Management, 3, 34-38 (1977).
(5) T. Burns and 0. Stalker, Tavistock, London (1961).
The Management
of Innovation,
(6)
H. P. Gunzand A. W. Person, Introduction of matrixstructure into an R & D organization, R and D Management, 6, 3&45 (1977).
(7)
K. Knight, Responsibility and authority in the matrix organization, R and D Management, 7,33-38 (1976).
Long Range Planning, Vol. 16, NO. 1, pp. 15 to 25, 1983 Printed in Great Britain
Strategic Planning and DevelopmentIntegrate Them? Giorgio Petroni, Associate Professor,
and Research Can we
University
The main problem affecting the R & D function has always been caused by its lack of integration with the enterprise. Such a problem makes it difficult to pass from invention to innovation-that is. to turn the invention into processes and products to be exchanged on the market. The author points out the main social and organizational problems which prevent R & D from entering the ‘circulatory system’ of the enterprise. The identification of such problems is important in order to set up and to implement innovative strategies. This is the first of two articles by Professor Petroni on this subject. The second article will appear in April 1983.
The Concept of ‘Integration’ as a Means of Analysing Research Problems Those responsible for the organization of industrial research, and those professionally involved in staff administration (Personnel Department) are also responsible for the development and implementation of systems of integration which permit a high marginal exploitation of the innovative potential of researchers and technicians. The word ‘integration’ can obviously mean many things, but experts in organizational problems normally use it to mean the degree of coherence between the actual behaviour of men in an organization and the goals of that organization. In this sense one may speak, for example, of ‘integrated’ corporate structures when: (a) professional roles are objectively planned to contribute towards the realization of the organization’s goals (rational division of tasks, correct distribution of responsibility, effective decision chain, etc.). The author is Associate Professor of Management at the Engineering Department of the University of Udine, Italy.
15
of Udine, Italy
(b) the
men who occupy these roles share the goals of the organization to which they belong and contribute to their realization by their positive activity.
Therefore ‘integrate’ means to obtain an effective link between the goals of an organization, its roles and those called to occupy them. It should be noted that these factors, although distinct, are also interdependent to a great extent. Thus, the context of organizational roles is never independent of the professional characteristics of those who occupy the roles. In the same way it may be affirmed that pure, objective goals do not exist in an organization of the industrial type. Large enterprises, in particular-as many analysts have clearly shown-are subject not only to strong external conditioning but also to contrasting influences (shareholders, parent organization, technical personnel, factory workers and management) l when it comes to planning a strategy. The concept of integration as defined above can be useful in dealing with the social-organizational problems typical of industrial research, as it is obvious that the degree and significance of the innovative output which is the institutional goal of an industrial research organization will be directly proportional to the integration of the structure called upon to produce it. The following pages will therefore be dedicated to an analysis-with the aim of identifying the main reasons for a lack of integration and coherence, and often sources of conflict, in the industrial enterprise.
The ‘Difficult’ Relationship Between Strategy and Research The first ‘non-integration’
factor we would like to
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examine is the difficult and precarious relationship between strategy and research in industrial enterprises. It can be said that a company follows a strategy when, with the aim of survival-or more appropriately, to grow and develop-it has consciously determined its own competitive character, identified its strong and weak points and decided in which directions (in addition to how much and when) to invest and disinvest. The fine tuning of a corporate strategy requires a long and sophisticated preliminary study of the product-market relationship, the competition, economic and financial structure, technological and scientific resources, functionality and age of the plant, administration system, management quality, possible evolution of external environment, etc. The process of gradual realization (and necessary control) of corporate strategy also raises problems of harmony and coherent behaviour at the various levels of management, of gathering and use of administrative information (tableau de bord), of flexibility of decision and action (in connection with any corrections or changes of route required) criticism of certain types of resources (economic, human) etc. To sum up, one can say that the soul of corporate strategy is innovation, i.e. the capacity of the enterprise to keep up or renew itself continually in a competitive situation where the rules of the game change rapidly and constantly. According to a common view, which is methodologically useful even though only partially true (because it is an excessive simplification of the real situation), there are two categories of innovation-that of administration systems and that of new products and processes. The dimensions of the industrial enterprise, its products, the market it operates in, the competitive system of which it forms part, its economic-financial structure, etc. are all factors which decisively influence the specific weight of the above-mentioned types of innovation. However, technological innovation has a profound influence (in the sense of conditioning) on the establishment and implementation of all industrial strategies. To grasp better the importance of this affirmation (which might seem obvious) one merely has to consider the fact that a company cannot decide where to invest or disinvest unless it already has an up-to-the-minute picture of technological areas of immediate or potential interest (technological forecasting), or has not evaluated the efficiency of its plant, also in the light of the foreseen innovation capacity of competing companies (technology intelligence). In this situation of organic interdependence between corporate strategy and scientific and technological innovation the main point of tension (due to its negative effects on the organization of industrial research and its staff) is the difficult and precarious compatibility between the scientific and cultural interests of the researcher and the need for technical and scientific company’s
1983
exploration. At the root of the matter lies the need to harmonize demands and models of behaviour which are often quite different-the intellectual curiosity of the researcher and his motivation to acquire knowledge are not always compatible with the areas of interest considered of strategic priority by the company. On the other hand the choice of areas of research (whether basic or improvement research) is not made (and cannot be made) by a ‘bureaucratic mind’, which establishes precise interaction between corporate strategy and scientific and technological innovation, and thus avenues of investment. An acceptable level of coherence (and thus of practical harmony) between development and outworking of a strategy and research activity is often the result of an arduous process of control and constant interaction among the various corporate departments involved (horizontal integration) and among the men who occupy the various levels of responsibility (vertical or bottom-up integration). These processes do not exclude, but rather emphasize the value of individual needs and requirements and render them in some way compatible with those of the organization. However, this requires considerable investment in terms of time, adequate professional resources, incentives, training, etc. Time is another critical factor in research work and significant results depend largely on the constancy and perseverance of the research in addition to the resources invested in it. The direction of an industrial enterprise, on the other hand, requires a considerable degree of flexibility due to the continual need for ‘changes of course’. This demand has doubtlessly become more marked during the last two decades of international economic turbulence (for example, the Kippur War and the so-called ‘currency war’ with the resultant chronic instability of exchange rates, etc.) rendering the conditions of business competition considerably more risky. In fact, the development and recent popularity of corporate planning methodology as well as the introduction of more refined corporate control methods may be explained by the need to keep under control the greatest number of economic and social variables which interact with the activity of the entrepeneur with a view to improving them and reducing areas of uncertainty and risk. At times a company, forming part of a certain competitive system, may have to request significant modifications, of course, due to: *
The unexpected non-profitability of certain productive processes caused by the modification conditions such as a of general economic significant increase in the cost of raw materials.
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Following the introduction by competing companies of a production process or product with such a high innovative content as to discourage further investment in research. In this case it may be advisable to fall back on cooperation agreements involving the purchase of know-how. A grave crisis in the company due to, for example, a sudden, sharp fall in its profitability (cash flow, debt, etc.) or crisis in management, which, for various reasons, can undergo change. The object of these few comments has been to present a simplified list of causes which can produce a more or less significant modification of research programmes often with very serious influences on the motivation and thus on the behaviour of scientific personnel. This specific area of serious potential conflict between research staff and the rest the corporate establishment confronts the industrial organization expert with the problem of constructing an adequate and effective system of communication between research and other areas of the company as well as that of ‘capitalizing’ knowledge acquired in areas of research where it has not been possible to come up with practical applications. These and other problems obviously validate the more advanced organizational models of scientific work based on interdisciplinary integration, temporary assignment to specific projects, matrix crossing of knowledge and responsibilities, team building, and liberty of option for the specialist who can choose, within limits, the projects to which he can contribute. In the relationship between corporate strategy, innovation and evolution there is another ‘critical point’ for the structures and human resources involved in industrial research. The difficult and precarious equilibrium between these three factors may, in other words, constitute an important source of conflict and thus represent a serious obstacle to effective research work. In particular, the problem which has always been the object of analysis and debate in industrial circles (and to be honest, has never received a universally-accepted and lasting solution) is that of the relationship between innovative research and so-called evolutionary or improvement research. This question is intimately connected with corporate strategy planning (where to go, where to invest, etc.) as the decision, for example, to abandon certain areas of research and purchase knowhow or to concentrate resources on certain improvement research projects and abandon new product research, are acts which have a profound influence on the life, growth and development of the company. In particular that which is the object of thorough analysis, farranging debate and therefore difficult decisions can be summed up by the following questions:
*
we Integrate Them?
17
How much do we invest in new product research or alternative production processes?
b How much must we invest in research improve existing products and processes?
to
b Given the level of knowledge and experience already acquired by our competitors is there a possibility of success in research area X? It always seems very difficult to give a clear answer to these and other similar questions as, apart from certain general guidelines dictated by experience (for example, not to spread oneself too thin, or to concentrate improvement research on those products or processes which are already the company’s strong point with a view to reaching a position of undisputed dominance, etc.) the potential contribution to the development of a company of new product or improvement research are not practically foreseeable. In theory, a solution to the problem has been found in most industrial enterprises by assigning the task of exploratory research to the Corporate Research department, and improvement research to the divisional research centres.* In practice the decision on the relative importance to be given to innovative and improvement research is based on a periodic analysis of the results obtained on the various fronts as well as, obviously, the evaluation of available resources and data and experience outside the company. This is particularly important at the moment when we are witnessing a strong concentration of industrial research in the improvement field and a reduction of effort in exploratory research. The relationship between innovative and improvement research is of utmost importance if there is to be efficient structuring, from at least three points of view: The periodic revision of the space given to the two types of research results in a stop-go process which is responsible for ill-feeling and demotivation among scientific personnel; we have already mentioned the importance of the prospect of a medium-long period and a resultant constant dedication and flow of resources for efficient research work. It is obvious that when these essentials are neglected a situation of potential conflict between scientific personnel and the company is created. Taking into account the equilibrium between exploratory and improvement research, which we have defined as ‘unstable’, it is necessary to establish and follow a path systematically and avoid leaps in the dark. Very often, in other words, an alternative research project is crowned with success when the limitations and defects of the product or process for which an alternative is being sought are determined at the outset and
*The policies of major American and European companies tend constantly in this direction. Obviously these policies take different forms in the various companies.
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the details of other attempts at improvement have been fully examined. This means that, in order not to risk wasting available resources it is essential that specialists in a certain area, whether they be involved in innovative or improvement research, work in close organizational collaboration. Finally, there is no doubt that improvement research requires a considerably different approach to exploratory research. In fact the possibility of obtaining significant results with existing products and processes depends greatly on the integration that the researchers succeed in establishing between their work and that of their colleagues in production, marketing, technical assistance or applicational development. This integration is difficult because, as has been clearly underlined2 the value systems and motivation determining the behaviour of these professional groups are very different:
(4
Researchers tend to put the company in second place to their profession. It is thus intellectual and scientific curiosity and the desire to acquire knowledge which drives them towards research work, and their main aim is not to produce innovations for the development of the company.
O-9Marketing
and production personnel, on the other hand, appear much more integrated with the organization of which they form their aspiration is mainly that of part; attaining clearly defined and economically significant corporate (production and sales) targets.
(4
The same relationship between those in the fields of marketing and production is, in the absence of particular methods of integration (common economic incentives, etc.) in general, as is known, rather difficult.
In this context it seems obvious that the obtaining of results in improvement research is dependent on the implementation ofa far from easy integration of elements with completely different motivation and aims. In the foregoing analysis of the relationship between corporate strategy and innovation the aim was to emphasize those problems which represent potential sources of conflict for scientific personnel and thus cause negative behaviour and a considerable waste of resources. But the analysis also underlined the fact that the relationship between strategy and innovation is two-way and characterized by reciprocal influence. There is no bureaucrat in an industrial enterprise laying down a strategy which assigns a precise role to innovation-in fact the opposite is true, seeing that the strategic concept also emerges and takes shape in the renections and conduct of management with reference to technical and scientific evolution inside
1983
and outside the company. Finally, research has emerged as a body which is subject to diverse stimuli which must be co-ordinated and expressed in an orderly and coherent way if they are to contribute to a healthy growth of the body. In this sense it is possible to speak of reciprocal influence and unstable equilibrium between explorative research and improvement research. To guarantee the presence of this delicate balance in research activity and to ensure an effective interaction between innovation and corporate strategy, what are the structural solutions the industrial world proposes? In other words, how do we safeguard the connection between those who engender the strategic concepts of a company and the various centres (sometimes composed of thousands of people) delegated to produce technical and scientific innovation? On the basis of what we can learn from available literature and of the author’s personal knowledge and experience, there are basically three ways to solve the problem raised by the foregoing questions: (A) The first method, adopted in an exemplary way by the large British chemical company, I.C.I. (Imperial Chemical Industries) involves the presence of the person responsible for Research and Technology on the Board of Directors, the top decision-making body of the company. The originality of this solution is that the person occupying this position does not have a staff of his own but guides and co-ordinates the divisional research laboratories by means of scientific preparation, a profound knowledge of the company and with the aid of considerable personal prestige. At the same time he gathers ideas, suggestions and orientations from his divisional collaborators and relays them to the Board which is obviously the body which takes the most important strategic decisions. Thus the role of this director is that of a mediator between the divisional research structure and the highest decisional body permitting a process of comparison and critical analysis in two directions-from bottom to top and vice versa. (B) The most common method of creating a link between research activity and planning makes the even on the organizational level, distinction, between improvement research assigned to the and explorative research various ‘profit centres’ which is entrusted to the central research group (operating at corporate level above the more specific interests of the ‘profit centres’).
This central group has the institutional responsibility for maintaining the high quality of the basic knowhow possessed by the company. Often the commission the central various ‘profit centres’ laboratories to perform particular research which requires specialized and exclusive knowledge. In this way the central group puts its experience at the
Strategic
Planning and Research
and Development-Can
disposal of the various components of the company. These ‘commission jobs’ are rendered formal by the preparation of internal research contracts which also have the important function of establishing the distribution of the cost. A ‘Research Committee’, made up by representatives of the various ‘profit centres’ ensures the coherence and integration of the various corporate research projects. In this model, adopted by Montedison, Bayer, Siemens and the points of cross-fertilization and Philips, integration between innovation and business strategy are mainly composed of: The Research Committee which, formed as it is by certain members of the Board and representatives of the ‘profit centres’, cements at corporate level the strategic relevance of company needs and the proposals of the various peripheral groups. The ‘contracting’ relationship and the resultant exchange of information, knowledge and experience between periphery and centre and vice versa. In general this model proves to be rather ineffective just when the methodology and planning processes are weak and does not succeed in integrating in a unified whole the contributions of centre and satellites. In order to understand this better it should be remembered that effective strategic and operational planning requires a continuous confronting of top management’s viewpoint (often attained in the light of available opportunities, restrictions, priorities, etc.) and the proposals of managers occupying key positions at the various levels of the corporate structure. If this ‘bottom-up’ process is absent the results of planning are in general contradictory and unproductive. Furthermore, the constant involvement of the technical department in a continuous circuit of proposals to the top and checking through feedback not only makes it possible to clarify the direction in which the company is proceeding but also to ‘socialize’ (in the sense of knowing and often sharing) the objectives and ‘rules of the game’ which govern the activity of the individual components. In this sense, if there is not an adequate participation by the technical component in the
we Integrate Them?
19
planning process both the structural solutions mentioned become ineffective in integrating the role of research with the process of developing and implementating corporate policies. (C) A third way of integrating explorative research with improvement research and business development is the formation of ‘business teams’. An excellent example is Union Carbide3 which has created research departments for each product line (various branches of the plastic family). Each product line corresponds to a business with its own special characteristics-a committee or business team made up of marketing production, research and development and technical assistance experts work beside the person responsible for the business. In a situation of this nature, research activity is commissioned and paid for by the production side and by agreement only a small part (15 per cent) of the total cost of research is borne by the Division (not by the individual business) as each research activity is considered as having a ‘fundamental innovation’ element, even though aimed at the development of a specific business. Obviously these structural models cannot be put in the same category as the first two, which are designed to solve the problems of the strategyinnovation relationship while in the case of the ‘business team’ the problem addressed is that of the relationship between innovation and product or product-line planning. Thus it is helpful to summarize the differences between these three organizational models.
The Value System of the Researchers as a Professional Group and the Corporate Value System The individual value system of researchers is profoundly different from, and thus often contrasts with, the value of an industrial organization and the behaviour models it implicitly requires. This ‘constitutional’ difference, according to some,4 is one of the main reasons for lack of integration, in particular we pointed out that the profession of researcher produces a mental outlook in which:
Table 1. Structures and typical roles for the R & D integration
within the structure of the enterprise
Model
Role
Requirements
Organization
A. Person responsible for research member of the Board
Create reciprocal and continuous collaboration between research and top level decision makers (Board)
Research coordinator must have great professional competence and prestige; Board members must have thorough knowledge of company
autonomously as a ‘profit centre’ and possesses its own research structure
B. Committee composed by members of the Board and the divisional research directors
Direct divisional research activities; establish priority projects and consider technological problems inherent in basic business decisions
Contracting between divisions and central research; business knowledge on the part of Board members
Each division
Strategic planning
operates
and operational mechanism
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Long Range Planning Vol. 16
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all evaluation and judgment must be based on impersonal, objective criteria (objectivity and universalism of science) ;
down as a fundamental within the company;
the sense of professional responsibility toward researchers as a group and toward the company (principle of corporate loyalty);
the advancement of knowledge is far more important than the benefit of individuals and thus the company (social value of science);
the personal disinterest of the man of science (who on the ethical level is only interested in acquiring and communicating knowledge) and the authority retribution and status symbols which increase with the attaining of higher posts in the corporate hierarchical structure;
the work performed by a researcher may only be evaluated by other researchers with the same or a higher level of knowledge and not by an organization (like the company) the ultimate goal of which is not scientific (mistrust of the economic-productive system);
socialization and continuous exchange of notions (as essential methodological requirements for the advancement of knowledge) and the ‘asset’ value of knowledge obtained by the company as a means of competition (know-how value).
researchers must be completely free to choose their fields of work (researcher’s freedom of action).
loyalty towards the company; observation procedures;
of
the
established
policies
and
hierarchical structure with its corresponding distribution of power (of decision and command) ; economic retribution in relation to the level of responsibility and position reached in the corporate hierarchy; professional progress, seen as a refinement and further acquiring of knowledge, takes place in the context of the company and thus is limited by the corporate sphere. Thus the company on one hand (considered as an organization), and economic/productive the researcher on the other, are motivated by sets of values which are very different, if not antithetic. The difference is immediately obvious between: *
the independence asserted by the researcher and the respect for the policies and procedures laid
principle of behaviour
the principle of peer association and the formal, hierarchical structure (of the company);
one may not pretend property rights on basic knowledge acquired, which on the other hand must be shared (community emphasis of science) ;
On the other hand membership of an industrial organization requires the acceptance and respect of certain fundamental rules such as:
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The table which follows summarizes the conflicting sets of values which tend to motivate professional researchers and middle management (that is those who are more directly and strictly subject to the company’s ‘code of behaviour’) : A-from
the researcher’s point of view;
B-from
the company’s point of view.
The outworking of these different sets of ‘values’ are not lacking in the day-to-day administration of human resources in the research field. Later the principal models of organization and administration of these resources in western industry will be described. First, three typical problems facing those who are responsible for organizing industrial research should be mentioned: (a) If, as has just been mentioned, the task of industrial research is to produce technical and scientific innovations to provide the company with further doses of competitivity (innovation at the service of the corporate productive system and of its product-market relationship) it is normal for research programmes to undergo modifications (of content, methods, length, etc.). These modifications may be justified by various economic and
Table 2. Conflict between value systems of researchers and the enterprise Sense of the scientific community (socializing of knowledge)
Priority of social value of scientific
B. Individual roles; evaluation of contribution and potential; individual retribution and career
Scientific and technical knowledge is a basic asset of the company and an essential condition for business competition
Prime goal of scientific/technological innovation is production-marketing
A. Scientific community
Independence
of researcher
Value system and behaviour researchers
Determination projects
and completion
A. Objectivity (impersonal,
B. Corporate hierarchically
and universalism objective
organization
structure
of science
judgments)
as a peer
organized
of research
Corporate
progress
code of
value system and behaviour
code
Strategic
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social factors such as a sudden unforeseen increase in the price of raw materials, market trends and greater awareness of pollution problems with resultant greater strictness of legislation. It is therefore comprehensible (from the standpoint of an industrial enterprise) that it may be necessary to use research resources (principally human) in new projects or ones with different goals, abandoning, perhaps only temporarily, the work already in hand. However, when it comes to this type of change there is usually strong resistance on the part of researchers who tend to justify their attitude by the risk of losing (or not exploiting) their professionalism and knowledge acquired. In other words taking on the responsibility for another research project different from that on which one has worked over a period of time makes the researcher fear an inadequate capitalization of knowledge as this is the main factor in gratification or the recognition by the international scientific community of which he feels a member. From this standpoint involvement in new research projects which do not necessarily (given the particular requirements of an industrial enterprise) provide scope for the development of all the knowledge and experience acquired previously, also risks interrupting the reciprocal contracts of the researcher with the scientific community and tarnish professional prestige. (b) All the organizations (industrial enterprises, organizations, public administrations) service which have undertaken human resources develophave adopted methods and ment programmes instruments which differ greatly from those normally used in other parts of the company (or other organizations) where the hierarchical model is more pronounced. For example, instead of the evaluation of performance by a manager there is self-assessment. Training is the result of an independent and conscious choice on the part of the researchers, as is the composition of the various fringe benefits (such as participation in congresses, publication of articles, career development etc.). This tends to reconcile the requirements of a productive organization and the value of progress of knowledge and the social significance of science, which, as has been seen earlier, are researchers’ professional ideals. At one of the largest laboratories of the U.S. Navy near Dahlgren (Washington), where about 2000 researchers work, research activity is characterized by three fundamental factors: b Extremely high investments in training and a vast range of opportunities are offered to researchers who have systematic access to the most advanced experiments in the area of their scientific and professional interest. It is well known, by now, that Dahlgren offers exceptional prospects of professional advancement and thus of acquiring experience and knowledge even though salaries are in the medium-low bracket.
*
we Integrate Them?
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The researchers are free to choose their research projects from a wide and varied list after not less than 2 or 3 years of constant dedication to a specific project.
fi The organizational (and consequently economic and financial) structure of the research centre revolves around contract work. These contracts come not only from the U.S. Army but also from other organizations, both public and private, industrial and otherwise. The availability of funds, which come in the form of an annual budget, depend on the results obtained and this is well known by all the centre’s researchers. It cannot be overlooked that this model tends to motivate researchers to attain specific research targets (on which the survival of the institution depends) using as factors of motivation the natural aspiration of researchers to acquire and exchange ever more advanced knowledge and the independence (within certain limits) of their own professional obligation. The participation of researchers in trade union activities gives us an interesting insight into their ethical and professional principles. The emphasis of their claims is on social issues (safeguarding of worker’s health, consumer protection, ecology, etc.) and the contribution of the company to the development of the community it is located in (education, socialization of knowledge as a factor in democratic development, full employment, etc.). Thus, the researcher tends to emphasize the interests of society (production of knowledge for the service of others, contributing to the progress of the community) boundaries of the company with its individual and competitive emphasis.
Value System of Researchers and Other Professional Groups: Their Relevance to the Relationship Between Invention and Innovation The distinction is certainly arbitrary but when people speak of innovation in the context of an industrial enterprise they refer exclusively to Research and Development. However, one should remember that there is a substantial difference between invention and innovation as the latter is the result of a process which involves other areas in addition to Research and Development. Often, in practice, the invention does not reach the production stage (that is it does not become an innovation) due to a lack of integration between Research and Development and marketing or production. This problem, according to A. D. Biller and E. Shanley,6 is due mainly to the different cultural systems of the various groups (researchers,
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Range
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February
marketing personnel, production staff etc.). This creates large industrial organizations, professional families whose cohesion is the result of sharing a specific social and professional code of behaviour. The different degree of risk in the attainment of professional success (very high in the case of researchers), the different time spans allotted for producing results (much shorter for marketing but even more so for research), the different range of alternatives (certainly wider, but also more uncertain in the case of researchers), the analytical, critical approach to problems (typical of researchers and not always compatible with the ‘rules of the game’ characteristic of other professions) are factors of social and professional differentiation of no mean importance according to these authors. Therefore for Biller and Shanley it is not so much the contrasting system of values of researchers with that of the company but different ‘value systems’ with social and professional roots, which represent the major obstacle to the development of innovations within a company.
The Question of the ‘Creativity’ Scientific Personnel
of
Another source of potential friction between researchers and the industrial organization of which they form part is the phenomenon of ‘creativity fall-off. It has been established, using empirical methods, that after a certain age the creativity of researchers tends to diminish until it disappears completely. It is our aim to show the consequences that this phenomenon can have in an efficient industrial research organization, and thus we will avoid going into the details of a very complex question. However, for even a basic understanding of the question it is necessary to mention certain empirical concepts. First of all, one must remember that the capacity of an industrial research centre to produce innovations depends on the quantity of the financial resources available, the adequacy of the instruments and equipment, the level of knowledge of the researchers, their capacity to work together (and thus their openness to an interdisciplinary approach), their motivation, the temporal continuity of their labour, the constancy of financial resources, etc. These factors, which are certainly not new to experts in the field, demolish the romantic myth of the research genius capable of extraordinary and sudden invention. On the other hand, it is fully realized that the constancy of effort, the establishing of a tradition and a ‘school’ and the capacity to overcome the frustration caused by failure represent the real seedbed of industrial innovation. During recent years, breaks of continuity have been becoming ever more rare (that is the discovery and acquiring of new knowledge which constitutes a radical alternative). In practice, the progress of knowledge, although rapid, is the fruit of a cohesive and continuous process based on additions and developments of previous dis-
1983 coveries. In the more’ specific field of industrial research, as mentioned earlier, the last 5 years have seen a more consistent output on the side of improvement research than on the border between improvement and new product research. One merely has to consider the fact that many research projects designed to invent a new product end up in contributing new knowledge and experience which are particularly useful for improving existing products. These introductory remarks are needed to clarify that by ‘inventive capacity’ we mean (with a good dose of empiricism, as mentioned above) the quantity and quality of knowledge and experience a researcher (all things being equal) attains in a certain period of time. It isjust this quantity which tends to diminish after the age of 32-35. Even before this concept had been fully developed, many industrial companies had incorporated its implications into their research organization. The major German chemical companies, for example, have a long tradition of graduate turnover amounting to about 10 per cent per year, at different periods from their arrival (that if after 2-3-5-6 year etc.). Many researchers, after the initial experience in research, progress into other departments such as technical assistance, commercial, production, planning etc. Therefore if every 5 years the research establishment, on average, undergoes a 50 per cent turnover the aim is to maintain a permanently young structure in which there are career prospects only for those with particular motivation. On the other hand, with the passing of time the researcher’s experience increases and thus his professional worth. There is thus a ‘critical age’ for the researcher (about 35-40) when there is a high degree of specific competence which is certainly necessary but not sufficient to obtain a high level of innovation. The maintaining of a permanently young personnel, mentioned earlier, has the aim of meeting a structural need of research i.e. a body in which managers (organizers of research activities), specialists (scientists) of a high professional standard, operate together with young researchers capable of a notable creative contribution. To obtain this balance it is necessary to adopt a programme of human resources development in the research field (examples will be given later on). In this way there can be a high marginal exploitation of these resources within the industrial organization.
As will be shown in detail later on, the main aim of these development programmes is to prevent the researcher arriving at the ‘critical age’ without a continuing role to play in the strategy of the company. In fact, it often happens that the researcher, who has built his career in a specific area, reaches the critical age without a real ‘slot’ in the new research developments and does not possess the
Strategic
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experience or the personality required to perform a managerial role outside the research department. In these cases, there is a strong psychological resistance against accepting positions which take him away from the ground in which his professional fertilization and growth has taken place. This ‘marginality’ of the researcher is rather frequent in industrial organizations and obviously the source of considerable conflict with the corporate organization. Models designed to programme and develop human resources in industrial research, as will be shown analytically later on, if they are to avoid these situations of potential ‘break-up’, must integrate, first and foremost, personnel recruitment and selection. It is impossible, for example, to have a satisfactory ‘turnover’ from research to other areas of the company (roles which are often of the managerial type and thus requiring the organization and administration of resources) without a clear recruitment and selection strategy which sets out to ascertain not only whether the candidate has an adequate level of experience and knowledge, but also certain fundamental personality characteristics such as: leadership, co-ordination, flexibility, sensitivity, perseverance etc.). Finally, it should be pointed out that the model of professional growth, the control of turnover from and to other departments of the company, the reward system, and the need for professional status, depend on research development objectives, which are linked to the other strategic goals of the company.
Matrix Structure Research
in Industrial
The commonest organizational model in research centres (industrial and otherwise) defines areas of professional responsibility which together constitute the basic grid of the structure. These areas of scientific and professional enquiry which require the continuous and stable investment of resources (human, technical, financial) are generally termed ‘Departments’ (e.g. Physics Dept., Inorganic Chemistry Dept. etc.). The Department is then divided into organizational sub-divisions, also defined according to specific scientific-professional field (e.g. spectrography laboratory or section). The section is further divided into units called Research Groups made up of 2-4 persons one of whom normally possesses academic qualifications (group leader) and the others, being technical assistants. This basic structure is developed horizontally into ‘research projects’ which are characterized by dynamic organization (projects change objective and content rapidly), temporary nature (research projects come and go, especially in an industrial context) and linked to specific objectives (often practical problems). In other words, the Department-the global unit of the research establishment-will pursue the general and permanent aim of producing and acquiring knowledge, for example, in the area of solid-state physics.
we Integrate Them?
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Certain of its members will contribute by participating in research projects which are generally aimed at solving specific problems with direct practical implications (e.g. the corrosion of plant X, the treatment of waste from plant Y or the use of polymers produced by plant Z etc.). Such an organizational model (which, as stated earlier, is the most common in industrial research centres) is termed the ‘Matrix Organization’ of research (see Figure 1). This model, which seems to be fully justified from the logical and rational standpoint (a permanent structure produces and acquires knowledge in a certain area to be utilized when needed in projects aimed at reaching specific temporary targets), in fact poses notable practical problems as it is the structural source of conflicts which may be attributed mainly to a functional root (that is, connected with the organization and planning of research work) and to sharing of the decision process (who decides what, who is responsible for what, who has the authority to . . . ). It is worthwhile to explore this area further and focus on one of the greatest problems facing those who wish to give industrial research an efficient organizational order. In an industrial enterprise, which, as mentioned above, often identifies technical innovation as the critical factor of its success, the development of new products and processes (or their substantial improvement, making them cheaper or more competitive) implies a continuous examination of activity undertaken, and consequently a systematic review of research objectives. The rapid obsolescence of technical and scientific knowledge, the stiff competition and the growing sophistication of the buying public, impose a high ‘birthrate’ but at the same time, a high rate of death at an early age of research projects. It is therefore obvious that matrix organization can be the cause of acute problems for those involved in industrial research. The following detailed observations may be made:* (a) As far as management of research work is concerned (planning, practical organization and control), the goal of the project is always the attainment of results. Those responsible for research projects are always concerned about obtaining an output after a certain predetermined time (even though the period may not be rigidly prescribed) and using certain budgeted funds. On the other hand, for the Department that normally supplies equipment and specialized data to the various research projects, the main concern of a manager is that of obtaining a high marginal exploitation of
*Some of these comments were inspired by an unpublished work dated 1976 prepared by Urwick International of London, a research and consultancy company, on behalf of TNO, the important Dutch technological research establishment mainly financed by the state.
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February 1983
A
Figure 1. The matrix organization
of research
the resources entrusted to him, not in relation to objectives of the individual project (for which he has no responsibility) but with relation to other criteria (optimal use of personnel for the various projects, motivation of his collaborators, accumulation of knowledge and experience which the Department gathers as a result of participation in the various projects). In other words the person responsible for a research project is judged mainly on the basis of the results expected from that project, while the Department head is judged mainly by whether he has used the resources entrusted to him correctly, independent of the results that such use has contributed to. (b) It follows from the above that, if one takes the project as the standpoint, each operational intervention must have a clear goal and the efforts of all the researchers participating in the project are considered as contributing to the attainment of the results. From the point of view of the Department the goal is to supply an adequate and specialized service and therefore it is not concerned with organizing the various interventions in a sequential and integrated way. From the project standpoint the practical activity is more dynamic and characterized by precise interaction between the various acts, which can change, in either quantity or quality, according to the dictates of the project. From the Department’s point of view, on the other hand, the contribution of its members, being the result of specific responsibilities, is more static and
easily defined. In fact, as the development of the project is outside the sphere of responsibility of the Department there can even be an attitude of resistance or perhaps refusal as a result of the legitimate but spontaneous requests of the project leader. (c) It goes without saying that, from the project standpoint, research work is characterized mainly by an interdisciplinary approach while the Department’s contributions are specialized and monodisciplinary. (d) Finally, for the Department, the planning, distribution and execution of research work and the consequent control flow along a chain of command typical of a hierarchical organization in which role and responsibility is clearly defined. Research work, on the other hand, which is project-centred, proves to be effective only when there is a strong spirit of cohesion (normally anti-hierarchical) among the individual researchers who must be willing, independent of their role in the corporate hierarchy, to share experience, points of view, intuition etc. in order to criticize and improve them. Furthermore, in a project the distribution, execution and control of work depend on professional competence and the specific contribution of individuals which does not always coincide with the assignment of authority and responsibility typical of a hierarchical organization. In order to clarify the functional causes of strclcttrral in matrix-type organization we may refer to the following table:
conzict
Strategic Table 3. Conflicts
Planning and Research
and Development-Can
between project and functional
department
we Integrate Them?
as base units for R & D
ASPECTS OF WORK AND RESEARCH
FROM PROJECT STANDPOINT
FROM DEPARTMENTS
Practical activity
Dynamic and unique
Constant and repetitive
Work groups
Interdisciplinary approach
Single discipline approach
Drstribution and execution of work
Task oriented
Along lines of authority
Direct activity (planning, organization and control)
Result oriented
Designed to obtain high marginal exploitation of physical and human resources
(e) In the examining, be found in ambiguity)
The person responsible for a research project, in fact, finds himself in the unusual situation of having to deliver results within a certain time span and utilize human resources which depend on others (researchers, technicians etc. who form part of the departmental staff) and equipment to which he does not have exclusive access. In other words, he is limited by a d ivision between responsibility for the conducting of the project with its expected results (which are truly his) and full formal control over certain essential resources (which is not conceded to him). It is therefore obvious that a situation of this type tends to encourage and establish informal relationships which are cemented by the charismatic personality of the project leader (leadership, adaptability, sensitivity, tenacity, stress resistance etc.).
“A useful distinction is made by Kahn, R. I. (‘Organization Stress’, Wiley, New York, 1964) between rd/e conflict which occurs when an individual is subject to clear but contrasting expectations from the people he works with and ro/e ambiguity when the expectations of colleagues and superiors are vague or unclear. This role ambiguity often occurs in research centres when the matrix model is used.
STANDPOINT
analysis’ (for which the numerous works of E. Jaques, the inventor, may be consulted. The adopting of this method permits the identification of the roots of interpersonal conflict and the conquest of it by a social therapy which involves the participation of the various members of the organization, formal and informal, working on the project.
‘matrix organization’ model we are however, the main disfunctions are to the complexity (and we may even add, of the decision process.5*6,7.
Thus an essential condition for the success of the matrix model lies in the choice of a project leader with a strong managerial capacity, and a capacity for actively motivating and obtaining collaboration. In this way one can overcome, at least partially, the structural conflict situations latent in the organizational model we are examining. A useful method for identifying r61e conflicts* is what is termed ‘social
25
The main aim of this social-therapeutic approach is obviously that of reconstructing the points of convergence between responsibility and authority in the research project activity.
References (1) S. Sterpi, Un contribute alla revisione della teoria dell’impresa. Giuffre, Milan0 (1966).
(2) A. D. Biller and E. S. Stanley, Understanding the conflicts between R & D and other groups, Research Management, 22-27 (1975).
3,
(3) J. J. Smith and T. T. Szabo, The dual ladder: importance of flexibility, job content and individual temperament, Research Management, 7. 3&37 (1977). (4)
R. C. Parker, Human aspects of R & D organization, Research Management, 3, 34-38 (1977).
(5) T. Burns and 0. Stalker, Tavistock, London (1961).
The Management
of Innovation,
(6)
H. P. Gunzand A. W. Person, Introduction of matrixstructure into an R & D organization, R and D Management, 6, 3&45 (1977).
(7)
K. Knight, Responsibility and authority in the matrix organization, R and D Management, 7,33-38 (1976).