Monday, February 22, 2016

Company's Own Research & Development Laboratories Growing in the World - How about India?

More manufacturers  are investing in their own R & D laboratories.

 In a 2015 KPMG survey of global manufacturers, half said their strategic focus was innovation and three-quarters of the sample companies are planning to devote more than 4% of revenues to R&D over the next two years. .

Virtually all manufacturers  expect R&D activity  to give them a competitive edge. The companies  focus their efforts in several directions: Overhaul manufacturing processes to produce substantial productivity or quality gains; improve production equipment for gains in speed, accuracy or environmental efficiency; create  new products or processes; or pursue advances that improve workforce conditions.

Firms want the creation of a patent-worthy product or process that clearly distinguishes a manufacturer from its competitors, in the eyes of potential customers and the talent pool.But R&D spending is not even across geographies. US and European companies have 74% of the firms that spent over US$1bn on R&D globally in 2014.  Asian companies' share, excluding Japan ,  in the US$1bn R&D club grew from 7% in 2012 to 11% in 2014.

China is expected  to outpace that of the US in research by the mid-2020s, according to the 2016 Global R&D Funding Forecast, published by R&D Magazine and the US-based Industrial Research Institute. But, a study by PwC strategy consulting unit Strategy revealed that  “imported” R&D spending accounted for 81% of China’s total in 2015. Similarly, in India also, foreign companies largely drove the over-100% growth in corporate R&D spending in India from 2007-2015.

 KPMG’s 2015 survey found improving engineering, manufacturing and supply chain systems was a bigger spending priority for manufacturers sampled than developing customer-facing technology.

In R & D, collaborative projects,  in which companies combine capabilities can be attempted. Under the Accelerating Medicines Partnership, for example, ten pharmaceutical companies are pooling data and methods from early-stage trials to identify promising treatments for chronic diseases like Alzheimer’s and diabetes. Firms may also share facilities with partners, such as suppliers, to jointly develop intellectual property.

Companies can also tap the expertise of the public sector or academic institutions.  In the 2016 Global R&D Funding Forecast, 34% of firms selected increased collaborations, partnerships and alliances as key trends.

Cost of  R&D may be coming down.  The rise of 3D printers in particular promises to significantly reduce the cost and time associated with prototyping, traditionally one of the most fraught and expensive stages of the product R&D process. More manufacturers will likely add 3D printers to their arsenals as the technology matures.

Governments can also influence the depth and direction of R&D in the private sector, and they frequently channel funds towards nationally-significant companies or industries.

A report says,

"Future manufacturing champions are most likely to emerge from places that boast relatively open foreign investment regimes, strong intellectual property rights enforcement, education systems that produce a deep reservoir of scientific and engineering talent, and systems which allow companies to collaborate and share discoveries."

What should Indian companies do? Should they stick technology imports and allow foreign entities to do research and development?

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