(508c) Can Outsourcing R&D Balance Myopic Business Management?

When Ford Motor Co.’s CEO, Jim Hacket, announced plans in April 2018 to reduce spending by $25.5 billion over the next four years [1], Ford staff were concerned about how the pending cuts would impact R&D investments [2]. Similarly, DowDuPont Inc.’s CEO, Ed Breen, announced the elimination of R&D spending on “moonshots” to focus on projects that cost less than $30 million to complete and, perhaps most importantly, carry a lower risk profile [3]. From one perspective, these announcements are merely part of normal operations, as business leaders make decisions to increase, reduce, or cut spending every day. On the other hand, these announcements raise a few questions:

• Were these part of a trend in R&D spending?
• What are some of the factors that affect CEO decision-making?
• What are some consequences of myopic decision-making?
• Can outsourcing R&D balance myopic business management?

After briefly addressing these questions, this presentation will disclose a relevant case study in which MATRIC, a contract R&D organization, successfully helped a client to develop and commercialize a new technology.

References

[1] A.Levine-Weinberg, “Ford Reveals More Details on its Massive Cost-Cutting Plan,” Fox Business, August 13, 2018 (https://www.foxbusiness.com/markets/ford-reveals-more-details-on-its-massive-cost-cutting-plan).

[2] L.Brooke, “Underway on Nuclear Power,” Automotive Engineering, June 2018, p. 18 (http://www.nxtbook.com/nxtbooks/sae/18AUTP06/index.php#/22).

[3] J.Kaskey, “DowDuPont CEO Kills Off R&D ‘Moonshots’ in Bid for Higher Profit,” Bloomberg, May 31, 2018 (https://www.bloomberg.com/news/articles/2018-05-31/dowdupont-s-new-profit-formula-killing-more-research-projects).