Universal Luxury Group - When R&D Priorities Clash

In late 2003, the R&D centre of Universal Luxury Group's high-end perfume and cosmetics division was juggling demands for greater productivity with a tighter budget. In these two cases, Assistant Professor of Technology and Operations Management Manuel Sosa considers the challenges imposed upon the centre in an industry so dependent on innovation as a market share driver. They also provide a basis for considering the tactical implications of portfolio management decisions typically faced by large R&D organizations that serve diverse markerting requirements across many different brands.

by Manuel Sosa
Last Updated: 23 Jul 2013

By late 2003, the R&D centre of Universal Luxury Group's perfume and cosmetics division was faced with some daunting challenges. A criticial issue became how the selection of products for 2004 might impact the R&D centre's ability to meet the very different requirements of the company's three high-end brands. While the total number of R&D projects had risen 24% annually over the past three years, budget increases had not come close to keeping pace.

Could the R&D centre feasibly juggle all the projects being demanded of it? Assistant Professor of Technology and Operations Management Manuel Sosa considers the challenges inflicted upon the research and development centre in an industry so heavily dependent on product innovation as a market share driver.

The cases illustrate the perhaps inevitable clashes between technical and commercial needs when various groups' priorities differ so greatly. The company was also aggressively targeting the Asian market, meaning that orders and counter-orders were coming from separate operational and marketing teams in Tokyo and Paris, usually with little or no coordination. Perhaps inevitably, resentments about perceived favouritism towards the top-performing brand were being expressed more often by the other two.

At the same time, a central requirement at the heart of the firm's new overall harmonisation development concept was increased formula standardisation. This would hopefully permit the reuseage of core formulas of major products as the matrixes for developing new products. This was to be critical in simultaneously boosting productivity, while helping to meet the demands of new products.

The "A" case illustrates the complexities of the product development chain, and the processes involved in each marketing department within Universal Luxury Group while negotiating their R&D spending with the research centre individually. However, in September 2003, the R&D centre's financial controller was presented with a considerable change in overall product mix complexity, which he attributed to more intense market competition.

Each brand was asking for more technical innovation than in the past. There were major concerns as to whether the technicians had either the time, or the capacity to cope with the new demands. The financial controller felt forced to either propose limiting the overall number of projects, or pleading to reduce the overall project complexity to ease the R&D workload. However, positive results were beginning to appear due to the harmonisation initiatives. And it was difficult for a number of reasons to argue which project was more critical for which brand.

The "B" case details the situation at Universal Luxury Group, four months after the negotiation of the annual R&D budget. The R&D centre now needed to create an action plan capable of helping to fulfil ambitious business objectives within tighter budget constraints. The latter case also illustrate the dynamic nature of marketing requirements and the need to implement mechanisms to handle the effects of such dynamics in research and development.

Both cases serve to illustrate the substantial challenges often associated with managing and coordinating innovation and marketing priorities, especially in such a highly R&D-intensive industry. They allow the reader to better appreciate the tactical implications of portfolio management decisions typically faced by large R&D organizations that serve diverse markerting requirements across many different brands.

INSEAD 2005

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