It might seem like a basic question, but in order to understand the role of R&D and its usefulness in business, we must first understand what it really is.
R&D, or Research and Development, is typically defined as:
a set of activities undertaken to innovate and deliver new products and services (or improving existing ones) and is often the earliest stage in the development process.
And its purpose:
to allow a business to challenge the competition and to stay aligned with the evolving preferences of consumers by refining and improving its product offering.
Essentially, it helps to maintain and improve market share by ensuring products stay relevant, innovative and profitable. I think most would agree that gaining market share and increasing consumer appeal are compelling reasons to be interested in R&D, and yet, many businesses don't engage in R&D at all - why?
At it's core, R&D involves investing time and effort in order to develop an idea into a marketable and profitable product or service. It is a process of expanding knowledge and understanding, and assessing and validating new ideas. As such, early phases of R&D are fundamentally exploratory, and can often be summarised as a series of questions; Will this feature work? Can this performance level be reached? Can this process be faster? The most challenging questions take the most time and effort to answer, but often lead to the most innovative solutions.
This unknown nature of early R&D is what can easily become a barrier for business to start, as they don’t have the tools to assess the risk and budget.
Fortunately, there are some simple practices that can help select strategic projects, identify appropriate risk vs. reward, and help with project planning and monitoring to mitigate risk and ensure things stay under control and within budget. These are the basic steps to access the benefits of R&D while keeping it under control.
Who gets involved in R&D?
There are a handful of industries in which R&D is very evident, such as Technology, Software and Apps, Automotive, Pharmaceuticals and Engineering. This would lead you to think that R&D is reserved for hi-tech products and devices but this is far from the truth. When you consider that R&D can be applied to any product, service or process, then I would argue that virtually every business has an opportunity to innovate and engage in R&D in at least one of those categories. Note - some developments, particularly process development, could be more accurately described as a form of Continuous Improvement, but this certainly still counts as R&D and follows the same process.
Why should I undertake R&D?
Its easy point out products that wouldn't exist with out R&D - without it, you wouldn't be able to read this on a smartphone or a laptop, just as I wouldn't be able to type it with a Bluetooth keyboard. In fact, everything from the idea to make the first wheel to the latest IoT smart home device has gone through a process that is effectively R&D.
Ok, great, but what does it actually mean for businesses?
Growth, stability and profit.
Growth
Growth can be achieved through generating income from new product lines and new markets. Innovative designs attract new markets, investors, potential collaborations and partnerships, and new employees. Marketing can be boosted too, with fresh material for advertising and opportunities through design awards and publications.
Stability
Diversifying product lines and markets can help businesses mitigate risk of market crashes, or reduce such outcomes to a smaller proportion of the business. R&D can generate new products and can create proprietary knowledge in the form of registered designs, patents, trademarks or other breakthrough knowledge. Developing Intellectual Property (IP) gives your products good standing in their markets and can assist with income in other ways, such as licencing, and in some cases can provide income streams well after the original product life cycle has ended.
Profit
As a result of innovative designs, new markets and developing an IP portfolio, profit opportunities will follow. R&D can also deliver competitive products which help keep you on par or ahead of competition and therefore able to maintain margins. R&D doesn't have to be focused on new features and adding products; it can be extremely effective as a cost reduction exercise on materials, labour, transport, packaging or a number of other categories. Many great innovations are born from cost reduction R&D projects.
Hopefully this article has helped to clarify what R&D is and to understand it's potential benefit to business. Coming soon - How to start R&D
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