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The Importance of R&D in Business

the importance of rd in business

How Does R&D Fit into Business

Research and development, commonly abbreviated as R&D, is defined as the activities undertaken by a business in order to create new products or develop existing products. R&D can also consist of creating new services or developing existing services.

Research development includes capacity building, catalytic, proactive, and strategic activities. Employees that perform research development range from engineers to faculty members.

The primary objectives of R&D are to secure a competitive edge and increase bottom line profitability. R&D is not generally undertaken in order to generate an instant profit but instead for long term benefits.

R&D can be performed in house at a company by a dedicated full time staffed department. Alternatively, R&D can be outsourced to a third party provider due to the cost incurred or a lack of staffing or space capabilities.

R&D can require massive initial and long term investment costs with an insecure return on investment guarantee. However, the rewards that can result from R&D make it well worth the investment for some businesses.

The execution of R&D can result in trademarks, copyrights, patents, and industry innovations. R&D occurs across a wide range of industries and is most prevalent amongst high tech companies and pharmaceutical businesses.

An important distinction for business professionals to make is between applied research and R&D. While the first step of R&D generally consists of basic research performance, there may not be specific objectives set.

Alternatively, applied research seeks to procure new knowledge for a specific objective. Objectives for applied research can range from improving existing products to developing new operational processes.

Basic research is widely acknowledged for the extensive amount of time that it requires. Applied research is even more time consuming and expensive due to the high tech research required.

Importance of R&D

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R&D is not only valuable to a company but it is essential for continual growth. There are various benefits that R&D offers businesses, both in the short term and long term.

One noteworthy benefit of R&D is that it allows businesses to gain and maintain a competitive edge. In an increasingly competitive global marketplace, competition cannot be ignored or undervalued.

Business growth is consistently facilitated by R&D through the development of new products and services. Not only does research development assist with obtaining a competitive edge, but it can also increase long term productivity and profitability.

The new knowledge that research development generates can optimize employee engagement and morale levels. Instead of working on the same procedures, processes, and methods, development research challenges employees to constantly learn and grow.

R&D is also essential for market research and identifying customer needs and wants. Applied research is invaluable for developing new products and improving existing products in accordance with customer wants and needs.

Types of R&D

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There are three primary models of research and development that business professionals should be aware of. The first model consists of a department that is staffed by engineers that focus on developing new products.

For the first R&D model, research is conducted without a specific objective established. Basically, this model consists of both high tech and basic research performance on a long term basis with no pre-established applicative purpose.

The second R&D model, like the first R&D model, also consists of a staffed department. However, instead of engineers primarily making up the departmental staff, industrial researchers and scientists do.

The main responsibility of these industrial scientists and researchers is to conduct applied research in scientific, technical, or industrial fields. Instead of conducting research with no specific objective, the second R&D model aims to improve existing products and develop new products.

Sometimes, the second R&D model will additionally focus on improving existing operating procedures or developing new operating procedures. The third R&D model occurs when businesses invest in research with the objective of benefiting from the results gathered.

For the third R&D model, a corporation may invest heavily in a small business or start up to conduct research. Alternatively, partnerships with high tech established corporations can be invested in for the same purposes.

Finally, it should be noted that mergers and acquisitions can also be useful for new knowledge development. The combination of talent, experience, and expertise can result in long term business success and profitability.

Key Takeaways

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  • Research and development, commonly abbreviated as R&D are essential for gaining and maintaining a competitive edge, business growth, and increased long term bottom line profitability.
  • There are three main models of research and development, each performed for a specific objective.
  • The heavy costs of research development can be offset by tax credit application or outsourcing.