McGraw-Hill Book Company, New York, 1976

Research and Experience in Management (Page 2-3)

The long history of management has been a record of practice built on past experience. Managers learned not from books, but rather from their observations of successes and failures--- their own as well as other managers’. We expect a physician, lawyer, or engineer to have a degree in his or her field of specialization; we do not expect this of a manager. Some of today’s most successful business executives have never had a course in management; some have never graduated from college.

Managers of almost any activity make decisions about such varied problems as prices or equipment purchases or personnel motivation using very little systematically applied knowledge. Experienced managers making pricing decisions may, if they have been in finance, take projected unit volume as a given and push for higher prices. If they have been in sales, they may urge lower prices to gain more customers and hence higher unit volumes. These issues would probably be resolved in discussions with other managers who have experience or at least an opinion to add. Pricing decisions are frequently made without reference to organized information about the impact of previous pricing decisions or analyses of market segments which were most price elastic. The probable effect of a pricing decision on unit volume is often not estimated, and thus a learning experience is made more difficult because it was not possible to observe feedback from actual versus projected performance.

An experience-based manager who is assisted by research-based staff professionals, on the other hand, would reach pricing decisions on the grounds of information supplied by such procedures as analysis of historical relationships between price and quantity purchased, creation of a market test area, consumer surveys, and an analysis of competitive actions.

The training of a research-based professional allows him or her to determine what facts are needed to solve a given problem. The critical knowledge of such a professional is an understanding of the process of problem finding which is then linked to problem solving through the use of such research-based technologies as strategic planning, econometrics, systems analysis, organization development, and computer-based management information systems. Expertise in structuring procedures for the search effort and for processing information enables the research-based professional to create relevance out of unanalyzed data.

Research-based management requires the time, as well as the educational background, to do research on problems related to management decisions and practices. This work usually depends on knowledge that is learned in courses in management. Partial freedom from the urgency of line operations is also needed, because research-based management takes more time than is available to line executives, who tend to be overwhelmed with the details of managing daily activities.

It is useful to regard research-based people as those who understand what is happening around them to such an extent that changes in the environment do not upset their ability to solve problems. C. West Churchman illustrates this concept with an example from sales forecasting:

Management Innovation In Future Firm (pages 213-214)

The flow of new-management techniques which will improve corporate performance in Future Firm will be similar in many ways to the new- innovations which are now achieved each year in research-intensive companies such as IBM, General Electric, Du Pont, Procter & Gamble, and 3M. New products and more efficient production techniques are developed consistently year after year in these companies where executives have learned to manage R&D. Well-managed R&D includes only the transfer of new technology from the R&D labs into production, but also the ability to direct the efforts of scientists and engineers inward new products for which there is a profitable market.

The R&D productivity in many large companies is a direct result of a I program of technological innovation. In the past, independent inventors were a primary source of important new discoveries. Early inventions were identified with their inventors, people like Eli Whitney, the Wright brothers, Thomas Edison, and Henry Ford. But who invented Boeing 747, the IBM 370-158, telecommunication satellites, or the integrated circuit? The technology-based product of today is frequently result of a massive team effort.

Not all companies win with all R&D projects which are funded. But companies with strong R&D capabilities are able to revolutionize their products every ten to fifteen years through a planned program of R&D.

Imagine, for example, that the products produced by IBM in 1960 were placed next to the IBM products of 1975. Through managed R&D, IBM was able to create a revolutionary group of products and also develop extraordinary improvements in manufacturing productivity.

The R&D management techniques which have built the product lines of the high-technology companies can now be applied to the management of management innovations in all companies. What clearly distinguishes a Future Firm from a Present Firm is the power to produce improvements in the efficiency of management in an organized way resembling the process with which new products are developed in well-managed R&D programs.

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