Research & Development: Definition, Process & Strategy

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A business relies on the special competitive edges that make their goods and services stand out, but as marketplaces and competitors evolve, it’s important that a company keeps their personal technology and products cutting-edge. While there are multiple strategies companies can apply to keep up with changing landscapes, in nearly all industries, businesses devote some portion of their budget toward research and development.

Research and Development Definition

Research and Development (R&D) is the usual name of the department tasked with coming up with and implementing innovative new ideas to improve the products offered by the company. Research usually tends to the fundamental side and is dedicated to the creation of new inventions, as well as improving the fundamental understanding of what makes certain technologies better than others.

Development, then, becomes the process of understanding how to change, make or do things differently in order to realize the full potential of these innovations. Together, they’re responsible for generating new product lines, improving existing ones and generating ideas to cut costs from current production.

Research and Development Process

The R&D process is a cycle through which new ideas move, are tested and refined, and eventually are put into practice or retired. First, academic brainstorming and fundamental understanding produce a set of theories about ways to improve the current product’s performance or new products with new opportunities. These ideas are screened and the few most likely to succeed are selected for further evaluation. The next step involves some quality testing, as well as a foray into how to scale up the technology to gain an understanding of the risks and costs involved in the implementation of the new technology.

From there, the data and results are evaluated and the concept either passes forward to a decision-making stage or cycles back for additional development and testing. The final stage requires management to decide whether the new concept represents a good investment. From there, ideas either proceed into implementation or the project is summarized and closed for future reference and a new concept is chosen for evaluation to take its place.

Strategies for Research and Development

The best strategy a company can use with its approach to research and development is to make sure the "R" and "D" departments are both properly funded for the portfolio of products the company is looking to put forward over the next few years. A company looking to highly specialize or to be known for their innovation will want to put a lot of money into their research and development department to accelerate the speed and standard at which new products are brought to market.

Companies operating in commodity markets may not need much fundamental research, but should still focus on internal process improvements and the development thereof. There are industry guidelines for percentages of operating budgets that companies can use as a starting point.

Balancing R and D

Also, it’s important that a company keep the "R” and "D" portions properly balanced. A company focusing too much on fundamental research will have a lot of wealth in patents and intellectual property, but may struggle to get a single new product on the shelves in a five-year period.

Similarly, a company that focuses on development will see small continual improvements in their products and processes, but may not have the “step change” breakthroughs that can propel smaller companies into huge success. It’s important to balance resources between the two. Overall, research and development are important tools to use to stay a few steps in front of both competitor offerings and consumer needs.