The world is undergoing a form of innovation age where entrepreneurs are increasingly relying on research and development (R & D) as a source of competitive advantage. Different companies take different approaches towards the development of new products. Some companies such as Adobe Systems Incorporated focus on an internal mechanism for innovation and product development. Conversely, the Coca-Cola Company focuses on outsourcing innovation in the development of most of its new products. The different approaches towards R & D affect the development, manufacturing, and even marketing regimens of the two respective companies (Damanpour & Gopalakrishnan, 2001). The amount of money spent in the R & D, the level of confidence that the company has on the developed product, marketing issues, and fears of intellectual property infringements are among the primary differences that separate the two companies based on their approach to R & D. An understanding of how the two products handle their respective R & D processes, therefore, can enable an evaluation of which of the two processes is superior to the other (Lee, Min & Lee, 2016). Since both companies are successful global players in their respective product and market niches, a joint research about them can elicit an understanding on how to perfect each process or even combine them into a more refined R & D process.
Overview of the two R & D Regimens
Adobe
Almost anyone across the world who has ever made use of a computerized device including a smartphone is either aware of or has used an Adobe product such as Adobe’s PDF or Photoshop. Adobe is an American company with its head offices located in San Jose, California. Its core business is the development of computer software programs that are compatible in almost all currently available forms of Operating Systems (Cao, 2018). As part of their marketing approach, Adobe offers free products to computer users then sells to them the upgrades necessary for making the products more effective. For example, an ordinary PDF program is available online for free. However, if a user wants to be able to convert PDF format documents to editable programs, an update is available at a fee (Cao, 2018). With regard to R & D, Adobe focuses on internal research and product development, mainly in the San Jose offices where more than 40% of the company’s operations are located. Through their internal R & D process, Adobe has developed tens of different products all with various levels of adjustments and most of which have not been replicated in the market.
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Coca - Cola
Just like Adobe, Coca-Cola is one of the most recognizable brands across the globe as a giant within the beverage industry. Coca-Cola is a manufacturer and marketer of beverages based in Atlanta Georgia and has subsidiaries all over the world. The company began with a single product, Coke which is currently still its flagship product. However, over and above, Coke, the company has developed hundreds of other products mainly within the beverage industry spanning from soft drinks, alcoholic drinks, and natural fresh juices (Elmore, 2014). Most of Coca-Cola products are based on highly specialized and sophisticated recipes and formulas that have been carefully patented and in many cases kept a closely guarded secret. However, unlike Coke, most of these recipes and formulas have not been developed by the company. Instead, the company scours the entire world looking for ideas, recipes, and formulas that would be marketable under the Coca-Cola brand. When the good product is found, Coca-Cola will purchase and patent the idea then begin marketing the product under its brand. Some of the company’s products are so decentralized that they are marketed by specific subsidiaries within specific geographical locations (Elmore, 2014). The R & D approach at Coca-Cola is thus primarily based on external technology while that of Adobe is based on internal innovation.
Comparison and Contrasting of the Two Approaches
Implementation
Adobe begins its R & D process with an idea within the company that the world needs while Coca-Cola begins with an idea that is out in the world that the company needs. The two processes are, therefore, exponentially different with each having an elaborate pro et contra (Adams et al., 2016). For a start, it is possible for Adobe to invest fortunes in the development of products or processes that may never work, or by the time the ideas are fully developed, they are already overtaken by events. However, any ideas that Adobe develops successfully belongs to the company thus it can derive maximum marketing, sales, and profit advantages from it. Coca Cola’s outsourcing approach mitigates implementation risks since, by the time the company becomes involved, the idea has already been developed and has been tried and tested (Damanpour & Gopalakrishnan, 2001). However, these ideas never fully belong to the company and it has to consult and share when benefiting from the products (Lee, Min & Lee, 2016). Adobe, therefore, bears higher implementation risks that Coca-Cola but the former also derives a larger expense than the latter.
Further, Adobe has full confidence both in their products and the inability of the rest of the world in replicating these products since they have been developed in-house. Because of this confidence, Adobe uses premium pricing when marketing its products, more so internationally. Coca-Cola , however, does not have the advantage of absolute confidence in their innovations since they have come externally. The propensity for the competition is higher thus inhibiting premium pricing approaches. Among the advantages of outsourcing enjoyed by Coca-Cola is that their R & D scope is only limited by their ability to find and buy developed ideas (Damanpour & Gopalakrishnan, 2001). The company can be able to launch a large number of products contemporaneously as their products have been developed at different places and at different paces (Lee, Min & Lee, 2016). Adobe, on the other hand, is limited to the scope and capacity of talent that it can attract into its team. Whereas Adobe may benefit more from every product designed, Coca-Cola has near infinite options in the sheer number of products it can roll out. Over and above the advantage of sheer numbers, Coca-Cola also has the advantage of variety as it can market an Australian product in Australia and an Indian product in India while Adobe only markets different versions of American products to the world.
Evaluation
Product evaluation is the process through which a producer assesses a product to ensure that it meets the expectation of the eventual customer and regulators both from a perspective of value and safety (Adams et al., 2016). The process of evaluation will differ exponentially between companies that develop products internally and those that outsource R & D. The first primary difference that would manifest between Adobe and Coca-Cola is bias. Adobe develops its own products by investing its monies. It is easy for the company to be biased in favor of its product, more so due to the cost implications involved. Conversely, when Coca-Cola is seeking to invest in a product idea that has been externally developed, the company plays the role of a customer. It is thus able to make a balanced evaluation akin to the one made by a customer under the concept of caveat emptor . The evaluation process at Adobe is also continuous and last throughout the product development process. The company is thus able to make a more in-depth analysis of the product and also adjust it accordingly (Lee, Min & Lee, 2016). However, Coca-Cola has no say when outsourced products are being developed and will only make an eventual evaluation at the end. The eventual evaluation is mainly on a take it or leaves it basis as the product has already been developed and in most cases patented (Damanpour & Gopalakrishnan, 2001). Coca-Cola will thus have a higher propensity for accenting very marketable products with a few flaws and also rejecting viable products because of flaws that might affect marketing. In a similar situation, Adobe would be able to adjust both products because the research and patents are internally owned. The two evaluation processes have similar goals but vary exponentially. Based on the comparison above, none is superior to the other and each can be improved by borrowing ideas from the other.
Control
Control in the instant study relates to the ability to influence the process of product research and development and have a say over the outcomes thereof (Eflin & Zenger, 2014). Control begins at the research part where the basic idea behind a product is conceived. At this initial stage, Adobe has absolute control since those who create their products have been hired and inducted by the company to think in a certain dimension. Based on the company’s strategic plan, it might instruct its developers to think outside the box, or do things conservatively (Lee, Min & Lee, 2016). Conversely, Coca-Cola may not even be aware that a product that it will be marketing is 2030 may be in its development stage somewhere in Africa, or Asia. Instead, by 2025, Coca-Cola will be researching on the 2030 market then looking for developing products that would suit that market. An internally innovating company thus has more control than an externally innovating company. However, when it comes to marketing, the roles may change as Coca-Cola will have the ability to develop an innovative and creative market mix for the product. On the other hand, Adobe, which already has a close relationship with an externally developed product will have made the product to suit their pre-established market mix (Eflin & Zenger, 2014). It is on the basis of the differences in control that almost all Adobe products fall within a specific type while Coca-Cola has such as wide variety that some of the products have almost no correlation with its other products. Indeed, in some markets, Coca-Cola competes with itself by selling different products targeted at the same customers. Adobe controls the production process while Coca-Cola gets products it had no control in making then models a brand identity for them.
Overall Portfolio Management
As reflected by the totality of the above, whereas both companies manufacture and market consumer products, their portfolios and how they are managed differ exponentially. Adobes portfolio is based on a combination of the needs of their target market and the development capacities of the human talent that has been retained by the company. Adobe thus has full control of its portfolio, and its management regimen envisages the entire R & D process. Coca-Cola ’ portfolio combines the needs of the company’s target market and the ability to create a product that can meet that need (Dunning, 2015). Further, if Coca-Cola finds a viable and relatable product, it can also actively seek for a market for the product. Coca Cola’s portfolio management is thus mainly focused on the marketing aspect. The company will invest in the ideas that have already been developed instead of limiting itself to those that it can develop internally (Adams et al., 2016). Based on the above, the portfolio management approach of Adobe is extremely conservative when compared to that of Coca-Cola . Even when Adobe takes an approach of thinking outside the box, this approach is extremely limited as the company cannot over-exert its R & D resources. For a company like Coca-Cola , the sky is the limit for just how expanded its portfolio can be, since the primary cost of R & D is money (Lee, Min & Lee, 2016). As long as the company can be able to market a product profitably without interfering with the marketing of its other products, Coca-Cola can expand its portfolio. It is on this basis that some products within the Coca-Cola Portfolio have no correlation with one another while Adobe products are closely intertwined.
Discussion: Application and Recommendation
Two American companies, pursuing different approaches to the research and development of their products have both managed to rise into global leaders in their respective industries. Based on the above, it is evident that both processes can be profitable when carried out correctly and also that each of the two companies has a lot to learn from one another in order to improve their production processes (Dunning, 2015). In the modern economic dispensations, macroeconomic factors have shifted from national considerations to global considerations. R & D approaches and processes must be expanded to envisage a global market without leaning too hard on national considerations as Adobe has. The global market also presents augmented competiveness where a slight flaw in the entire marketing process can make a massive difference in the success or failure of a product, or even a company (Dunning, 2015).
Adobe can learn a major lesson from Coca-Cola that its product portfolio does not have to be limited in its abilities to design and develop products. Developing new products to meet the ever-changing market needs, more so in the technology industry can be a challenge. Whereas Adobe has been doing well when limited to entirely internally developed products, it can diversify by adopting suitable externally developed innovations (Mitkova, 2014). Doing the same will also enable Adobe to cast a wider marketing net, leading to larger revenue streams. Conversely, Coca Cola’s most successful brand remains the brand that it created internally, being Coke. Whereas the company has succeeded globally to some extent because of relying on different products developed in different markets, the company can enhance stability in earnings by having more internally designed products. On the other hand, the two companies can eliminate or mitigate some of the adversities of each approach even as they augment their benefits by combining the two approaches (Mitkova, 2014). For example, Adobe which prefers developing its products can consider hiring experts with viable ideas so that they can develop those ideas into products while under the employ of Adobe. In so doing, Abode will benefit from variety while still maintaining close monitoring and control over the development process. Both Coca-Cola and Adobe can adopt this hybrid R & D process to their respective benefit.
References
Adams, R., Jeanrenaud, S., Bessant, J., Denyer, D., & Overy, P. (2016). Sustainability‐oriented innovation: a systematic review. International Journal of Management Reviews , 18 (2), 180-205.
Cao, D. (2018). Adobe Systems Inc. strategic analysis and recommendation. Honors Theses, University of Nebraska-Lincoln
Damanpour, F., & Gopalakrishnan, S. (2001). The dynamics of the adoption of product and process innovations in organizations. Journal of Management Studies , 38 (1), 45-65.
Dunning, J. H. (2015). Reappraising the eclectic paradigm in an age of alliance capitalism. In The Eclectic Paradigm (pp. 111-142). Palgrave Macmillan, London
Elmore, B. (2014, November 25). How Coca-Cola built a sugary empire, by outsourcing as much as possible. Retrieved from http://fortune.com/2014/11/25/coca-cola-capitalism/
Felin, T., & Zenger, T. (2014). Closed or open innovation? Problem solving and the governance choice. Research Policy , 43 (5), 914-925. doi: 10.1016/j.respol.2013.09.006
Lee, J., Min, J., & Lee, H. (2016). The effect of organizational structure on open innovation: A quadratic equation. Procedia Computer Science , 91 , 492-501. doi: 10.1016/j.procs.2016.07.128
Mitkova, L. (2014). Implementation of open innovation model: Organizational approach. Review of Integrated Business Economics, 2 (1), 77-87
