An Overview Of Research And Development In Business

What is Research and Development?

In the business world, Research and Development (R&D) is defined as the process of acquiring new knowledge which can be used to develop or improve products, technologies and services. It is often the earliest stage of product development, beginning with theories and ideas.

There is a common misconception that Research and Development (R&D) is only dominant across technology firms and large pharmaceutical companies, however most companies dedicate time and resources to developing new versions of products. Research and development (R&D) is a fundamental aspect of business across a number of industries, from software and technology to food and drink.

Types of Research and Development

When a company identifies a new opportunity or discovers an issue with an existing product, the Research and Development (R&D) process begins with a designated team exploring ideas to see what can be achieved. There are three main type of research within R&D – basic research, applied research and development.

Basic Research aims to gain a complete understanding of a subject matter and to build on existing knowledge. There is no practical application when conducting basic research. The findings of this research can be used for further Research and Development (R&D) projects.

Applied Research is more specific with the direct objectives that need to be achieved. The focus of applied research is to determine what is required to address specific needs or requirements of consumers. This type of research focuses on specific objectives in relation to products and services.

Development is the stage in which research findings are utilised for the production of products, services or systems. Development converts the knowledge from earlier research into a prototype. Prototypes allows researchers to plan the production of a commercial product.

Research and Development in Business

Research and Development (R&D) is important for businesses because it identifies areas of improvement for existing products, expands company knowledge and identifies consumer needs which in turn can reduce costs and make a company more efficient. It is an essential function for allowing businesses to succeed in competitive markets.

The way Research and Development (R&D) is implemented varies across the business sectors and can differ between companies. Some businesses may not be capable of maintaining a Research and Development (R&D) team and choose to outsource, whereas others have a designated R&D departments.

An R&D department consists of a range of professionals, from engineers to managers. The main role of an R&D department is to provide updated insights into the target market, understanding consumer needs and developing new products.

Businesses that choose to outsource have the opportunity to collaborate with different organisations to complete a project. This is useful for complex projects that can require lab facilities or university research.

Advantages of Research and Development

Although it may not be easy to incorporate Research and Development (R&D) into a company, there are a number of ways that it can benefit an organisation. This may include the following.

Costs

Research allows companies to identify the most cost-effective way of manufacturing products. Reducing the cost of manufacturing means companies can provide products that are more reasonably priced to consumers or can help to increase profit margins.

Tax Breaks

Expenses of Research and Development (R&D) are tax deductible. Companies across the UK are able to claim R&D tax credits across Research and Development projects.

Investments

Having an effective Research and Development (R&D) function can draw the attention of potential investors. Investors wish to finance companies that are innovative and strive to be industry leaders. R&D shows investors that companies are taking a proactive approach to maintain their business and to increase their profit margin.

Challenges of Research and Development

There are some challenges that are associated with R&D. This may include the following.

Costs

Setup costs and continued investments to keep research updated and relevant can sometimes be high. In this case companies may find it is not feasible to follow through with a project.

Timescales

It can sometimes take several years of research before a product or service becomes available to consumers. As consumer needs continue to change overtime, a product may need to be revised many times before it is fit for purpose. In some cases, competitors can release a product that meet the consumers’ needs and become the front runners for the consumer’s business.

Uncertain results

Not all research projects produce results. Sometimes ideas can be scrapped because they are not feasible for a number of different reasons including cost, design and target market needs.

Research and Development (R&D) can benefit entire businesses sectors and can have a positive impact on the economy. When businesses actively invest in R&D they provide real life benefits. Globally, spending on Research and Development (R&D) has been recorded to be as high as US$ 1.7 trillion. The benefits of this can been seen when advances are made to improve lives particularly for those most in need.