Recovering Japan's Corporate Strategy : Why R&D Investment Isn't Leading to Corporate Revenue

ABSTRACT

The low efficiency of corporate investments into R&D has become a subject of concern. Though there is a tendency, in regard to this problem, to focus on the lack of connection between investment and product, the more precise problem is that such investments do lead to products but that these products do not lead to profits.

There are several causes for the scarcity of profits brought about by R&D investment. As the need for speed in product commercialization grows, companies find it increasingly difficult to develop their own core technologies. Particularly in the IT industry, more and more companies are now buying their key devices from outside as a result. Furthermore, because companies often give little importance to the establishment of new business models, it becomes difficult for managers to pay much attention to the best means toward corporate revenue as a whole.

More than any problem in R&D management, the lack of a clear corporate identity and the weaknesses in the core technology are the main reasons why R&D investments have trouble leading to profits. The results of the survey conducted for this report shows that the real problem lies in management strategy and technology strategy; and ultimately in the lack of synchronization between all three schemes.

The following actions are necessary in order to improve the efficiency of R&D investment. First, production must be specialized and trimmed down into synergistic products lines. At the same time, it is important to use integration in one's product technologies as a basis for differentiation. Another important means of differentiation is the utilization of stored up in-house technologies, a process that must be bolstered by heightened confidentiality and the development of individual production methods. Finally, it necessary that companies avoid being too susceptible to the demand for speed, and maintain their own key devices through the building up of their core technology. But be this all as it may, it is ultimately the top level of management - the company's CEOs and CTOs - that will begin to play the most crucial role in creating a stronger link between R&D investment and profitability.