65

Section B
Organising for an Innovative Environment

The environment in which research operates has changed over the last few decades
with an increasing speed. The mid–20th century saw the high point of the strong,
functional, stand alone R&D with influential membership on the board of directors
of a company. It was the era when R&D in the chemical industry produced major in-
novations, exemplified by polymers and man-made fibres, ready to be received by an
expectant company for launch onto a receptive consumer. By the late 1960s, when
every major company had such an R&D function, the consumer had become more
selective and hence the marketing of products became the key differentiator. At this
point research was put under greater control by the board of directors. It was set spe-
cific business targets by marketing and the process began to be managed using proj-
ect management techniques. In the 1980s the perceived needs of the customer be-
came all important, the businesses became “customer-focused”. The role of R&D
needed to be clearly defined within an overall strategic plan for each business and in-
novation managed by a team from the breadth of the organisation. To differentiate it
from the two described above, this methodology was called third-generation R&D [B-
1]. Whilst this was fine for driving research along perceived customer needs it was
deficient in dealing with step-change innovations. The importance of knowledge to
any company was formalised in the 1990s by the discipline of knowledge manage-
ment. R&D, being a key knowledge resource in the company, needed to be much
more involved in sharing this knowledge [B-2]. Developments have become much
more collaborative with both other companies and customers, especially when test-
ing out discontinuous innovations coming from R&D. This knowledge-based
methodology has been called fourth-generation R&D [B-3]. Increasingly R&D in
major companies is operated on a global basis requiring Managers to be responsive
to a new set of skills.
Managers are rarely free agents when they are considering the best way to organ-
ise their particular area of the R&D working environment. Many factors need to be
considered, a number of which are beyond their direct control, the simplest and most
obvious being the size of the R&D function or group. Whilst the functional Man-
ager’s views will be sought on the size of the research team needed to work on a de-
sired portfolio of projects, in the end an expenditure limit will be set by the execu-
tives of the company. The amount of money allocated for research will depend on the
nature of the business, the sector in which it operates, its size and current or pro-
Research and Development Management in the Chemical and Pharmaceutical Industry:
Second, Completely Revised and Extended Edition. Peter Bamfield
© 2003 WILEY-VCH Verlag GmbH & Co. KGaA, Weinheim
ISBN 3-527-30667-6
66 Section B Organising for an Innovative Environment

jected profitability. Even allowing for this limiting parameter of scale, there are still
a variety of ways in which R&D can be organised internally, each of which has its own
positive and negative features. New R&D Managers, in particular, must understand
the various forms the organisation of R&D can take, so they can adapt their man-
agement styles to suit the environment and culture in which they find themselves.
In this Section, four of the main organisational structures are considered. These
range, at one extreme, from the one based purely on the stand alone R&D function,
to the other extreme where Research is carried out independently within each Strate-
gic Business Unit with little or no functional organisation outside these Units. The
middle ground is where the R&D function contributes to a fully integrated, cross-
functional matrix or as a contractor to a Strategic Business Unit (SBU). The internal
organisation of the R&D discipline will vary from one company to another and, in
the large corporations, in the different segments of the business.
Organising the provision of the support services required by research staff is an-
other key task for an R&D Manager. Crucially the decision needs to be made as to
whether this support will be provided by an internal resource or contracted out to an
outside agency, outsourcing, as it is known. Outsourcing of non-core activities is very
common but, as with all activities, there are pros and cons and making the wrong de-
cision in a particular area could lead to a competitive disadvantage. The most signif-
icant support areas to be considered in R&D for outsourcing are analytical services,
intellectual property, covering patents, licensing, etc., information and library serv-
ices, IT such as office technology, environmental services, toxicology and regulatory
affairs. Drug development in major pharmaceutical companies now relies heavily on
outsourcing to get a product through the regulatory hurdles.
Analytical laboratories have absorbed developments in the automation of labora-
tory equipment that has markedly influenced the way that they are managed for over
thirty years. In the last ten years, automation has spread to the synthetic laboratories
of chemical companies and is also making a big impact on the way both product re-
search and process development are carried out. These developments have conse-
quences for R&D Managers, which are discussed in this Section.
An R&D line Manager’s personal working environment will normally include
some form of financial responsibility, usually the control of internal budgets and
manpower costs of research plans. Since in any R&D organisation the budget will be
dominated by payroll costs a very important element in exercising control is the ef-
ficient utilisation of staff. Some guidelines are provided on this topic. Financial as-
pects are clearly important in an industrial environment but, from legal, moral and
ethical standpoints, those relating to health and safety should be as equally high on
the agenda. Whilst some regulations affecting R&D laboratories and chemical plants
are voluntary others are statutory and an understanding of these is essential. The op-
eration of a quality R&D Group should be the goal of every R&D Manager. The for-
mal aspects involved in operating under quality procedures, and how this fits in as
part of Total Quality Management methodology, is outlined in the last part of this Sec-
tion.
 Section B Organising for an Innovative Environment 67

Overview
Adoption of management styles to suit the environment and culture of the company
requires an understanding of the different organisational structures. Functional,
strategic business unit, R&D contractor or matrix, they all have a place. Corporate
laboratories are reappearing, but with a new role. Being part of a business unit in-
creases your influence on its strategy. A matrix is most effective in the time man-
agement of cross-functional projects. Team Leaders play an important role in up-
holding the reputation of the function in the company. The globalisation of R&D
means that an additional set of managerial competencies is required. Outsourcing is
now an essential component of business strategy having implications for the man-
agement of R&D. A manager must ensure that the quality of any outsourced services
is of the right quality and especially that scientists have access to the widest range of
high quality information that is affordable. Developing a strategy for automation in
the laboratory involves making sure that it meets the needs and objectives of both the
laboratory and the company. The working environment must be financially sound,
healthy, safe and organised in a quality manner. All members of staff have a general
responsibility in health and safety legislation but R&D management have specific re-
sponsibilities. Regulations covering the operation of a laboratory and in manufac-
turing are mandatory in the pharmaceutical and food industries. TQM in no way con-
flicts with the long-standing goals of an effective R&D Group.