Technology Value Program is a tool to enhance the effectiveness of R&D by providing a framework for selecting a small number of appropriate metrics.
These metrics can provide a basis for:
- Assessing the creation of shareholder value
- Assessing probability of business success
- Selection of R&D projects
- Managing a portfolio of projects
- Increasing the productivity of your R&D processes
- Assessing the effectiveness of your decisions
- Assessing the value of your technical assets
The flow of the program is presented in the Innovation Process screen, which shows three different perspectives - Business Success Criteria, the Technology Value Pyramid, and the Practice of R&D - by which R&D metrics can be selected.
The Program Contents screen can be regarded as the TVP Home Page, and provides links to detailed information about each of the metrics in the program. A simple list of all metrics can then be selected, followed by a detailed description of each metric.
The Technology Value Pyramid
The goals of the Technology Value Program are to improve the quality of decision making and the "practice of R&D". Clicking on the underlined Program Contents moves to the next screen which lists the subjects that are covered. This subject list covers three different approaches for investigating the effectiveness of R&D. The first is the "Technology Value Pyramid."
The Technology Value Pyramid (TVP) is a hierarchy of metrics that evaluate the fundamental elements of R&D and their relationships with business results in the short and long term.
This segment provides a description of each of the components of the TVP, their interrelationship with one another and implications for their use. The segment continues with a continued list of subjects of interest, a description of the stage-gate process and the use of the Merrifield Criteria for project selection. The segment concludes with a list of the 50 metrics ranked in order of importance by IRI membership.
If one is interested in hard financial type metrics which directly demonstrate the value of R&D activities to the positioning, profitability and growth of the corporation and creation of shareholder value, select this category. A list of metrics pertinent to this category appears. To select a specific metric click on the underlined metric and a detailed description of the metric will appear. The description contains a definition, advantages and limitations of use, how to use the metric as well as different options for use. References for the metric may also be included if you need more information.
To review metrics which communicate the total R&D program and which allow optimization of the total R&D program for the corporation's benefit choose this category and follow the detailed steps outlined above.
Integration with Business
This category has metrics which indicate the degree of integration, the commitment of the business to the R&D process and program, teamwork, and ability to exploit technology across the organization.
Value of Assets
Metrics which indicate the technology strength of the corporation and relate to the probability of success versus competitors for the opportunities which have been selected by the firm are contained in this category. This is an indicator of the potential for the creation of future value.
Practice of R&D
This subject deals with a wide range of metrics associated with the operation of the R&D organization. Metrics covered include decision making, project generation and selection, use of information technology, environmental policy, personnel development and intellectual property. To review metrics in the TVP which may be of interest to Stakeholders in the R&D process such as business management, finance, and the CEO, select this category.
The TVP Categories imply a sequence of questions that can be used to evaluate a project or a portfolio of projects. The Technology Value Pyramid categories and the associated questions are:
5) Value of Technical Assets - Do you have all of the personnel, capital facilities, intellectual property, and other elements of the infrastructure in place to carry out your portfolio of your R&D projects? The Merrifield Criteria (discussed in this section) for business success go beyond the technical aspects to encompass other dimensions of the business.
4) Practice of R&D - Do you have all of the processes and business practices necessary to accomplish the goals of your portfolio of projects?
3) Integration with Business - Is your proposed portfolio of R&D projects strategically aligned to all of the elements of your business?
2) Portfolio Investment - Is your portfolio of projects balanced in terms of investment between near term, long term, low and high risk projects?
1) Value Creation - Will your portfolio of R&D projects create value for the shareholder?
Note that these questions start with the value of the company's present technical assets and lead to the creation of value and future technical assets.
The R&D Process
The second option for measuring the effectiveness of R&D is to examine the R&D process.
The process for taking a product from an idea stage to commercialization is one of the essential business processes of a corporation. In order to obtain the best returns for the R&D investment, this process must be carried out efficiently. To diagnose and improve the process, metrics for measuring the effectiveness and the efficiency of the process are needed to support technical and business decision making. A simple model has been developed and is widely used to describe the product development process. This model is referred to as the Stage-Gate or "Funnel Process".
Selecting Stage Gate Model from the Program Contents screen followed by clicking on the Images button provides an image of the model.
Selecting Description provides a discussion of the overall concept and the gate criteria and activities for each of the subprocesses.
For more detailed information regarding each of the individual gates and subprocesses return to Process of R&D. Select a Gate by clicking on the capitalized A, B, C, D or a subprocess by clicking on a Roman Numeral I, II, III, IV.
On the screen will be a Description which provides a detailed verbal discussion of the Gate or Subprocess. The screen also contains a list of metrics appropriate for the selection.
To review metrics associated with the overall process, return to Process of R&D and select Overall Process.
An alternate approach to management decisions for funding of R&D projects is discussed in the segment entitled Financial Investment Regimes. To access this topic return to Program Contents and the "Images."
Under Descriptions the proposal is made to evaluate the financial aspects of R&D using different criteria depending upon the degree of maturity or position in the stage-gate process.
The third option for measuring R&D effectiveness is the Merrifield Criteria for selecting successful R&D projects which is reviewed under the subject Business Success Criteria.
Selecting this subject provides a description of the factors considered to be important in choosing projects based on the parameters of Business Attractiveness and Business Fit. Selecting Description provides a discussion of this process.
Metrics for Business Attractiveness and Business Fit are accessed under Supporting R&D Metrics topics on the Program Contents screen.
Finally, the list of the 50 metrics can be accessed by selecting the All Metrics segment. The metrics are listed in priority according to the ranking developed by attendees at the IRI Meeting in Williamsburg, VA, in 1994.
Several of the listed metrics do not have an IRI ranking since these were added by the committee after the Williamsburg Meeting.
Each metric can be accessed by clicking on the topic of choice.
Each of the metrics is presented in the following format:
- Metric definition - A short description of the metric.
- Advantages and limitations - Benefits of the metric, areas of concern when using the metric.
- How to use the metric - Examples of how the metric can be applied. Parameters for measurement.
- Options and variations - Different ways to apply the metric.
- References - Literature references pertaining to the metric for further investigation.
Questions or Comments?
If you have any questions or comments about the use of the Technology Value Program, we would like to hear them. Please send correspondence to firstname.lastname@example.org. Modifications that will improve the usefulness of the Program will be incorporated into future updates.