Why Invest In R and D?
Investing in R&D is investing in creativity, but why then invest in creativity? The Royal Society points out to invest in R and D is to ultimately increase the stock of knowledge.
But if this sounds too general, you can narrow the benefits of R&D down to helping businesses gain or maintain a competitive foothold by inventing new products and processes or enhancing existing ones. This comes through using an accumulated stock of knowledge.
In this context, research and development is a means of improving the economic wellbeing of individual businesses and of the economy as a whole.
How Important is Research and Development?
Knowledge is useful. It adds value to businesses because it is the basis for change and innovation. For companies looking to compete more effectively, having a strategy that allows them to move away from competing purely on price can help to transform their fortunes.
A focus on price can leave businesses vulnerable to competition and to an erosion of their markets, whereas product and process innovation can instead give them a means of differentiating themselves.
However, to do this, they must first gather the necessary knowledge. This is why R&D is so important. Investing in R&D is a practical means of gaining knowledge and harnessing its potential for business objectives.
R&D enables the innovation that is pivotal for delivering gains in productivity and profitability. Research drives breakthroughs and is a source of fresh concepts and new discoveries.
For many companies, it offer the opportunity to compete in a race to the top, rather than a race to the bottom.
What is the ROI on R&D?
The return on investment from R&D is not immediate. It takes time to build. However, if a business achieves success through R&D, it may well see significant financial returns.
In certain key sectors, such as pharmaceutical, technological and retail, companies invest huge amounts of capital expenditure in R&D because they are driven to be ahead of their competitors on their learning curve.
A PwC Global Innovation study shows that Amazon spent $22.6 billion on innovation and improvements in 2018.
Being a technology leader rather than a follower offers up huge advantages. Any number of commonly used, modern consumer appliances are the result of successful R&D. Think of the growth of digital and now smart technology, for example.
The massive expansion in the use of apps through mobile devices is another, daily reminder of the kind of positive business returns that R&D can yield.
In the automotive sector, the ongoing evolution of the electric car is a successful outcome of innovation, as increased refinements and improvements lead to increased market appeal.
R&D can also be a considerable revenue earner for businesses licensing their technology.
Research and development is not, however, confined to the big players in the economy. SMEs can benefit from investing in R&D too.
R and D Investment for SMEs
Smaller companies may not have the big financial resources to sustain their own, in-house R&D resources, or to invest millions in R&D, but this does not mean they cannot reap the benefits of R&D.
Firstly, there are various routes to establishing R&D for SMEs, including Knowledge Transfer Partnerships and R&D tax relief.
Secondly, the principle of innovation benefitting business applies across the board, whatever the size of business.
This is because R&D covers many different areas and is not confined to technological product innovation. It can, for instance, apply to processes, increasing efficiencies, productivity and profit.
It is also a strength of many SMEs that they can work out the right niche to appeal to and develop their unique selling proposition. The foundation for this activity is good, sound research and development.
- By investing in and using R&D, SMEs can:
- Gain or sustain a competitive advantage and develop a USP
- Create intellectual property
- Increase income and decrease costs
- Attract investors
- Build and enhance their brand.
Does it matter if SMEs do not have in-house R&D resources of their own? Not if they outsource this work, through a trusted R&D partner.
Outsourcing R and D
A lack of dedicated, internal R&D resources need not a be barrier to reaping the benefits from research and development. Ultimately, the value of an R&D department lies in the knowledge it can gain, analyse and develop for practical business objectives. There is no reason why an external R&D partner cannot achieve these things.
What should SMEs look for in an R&D partner?
They want to be sure they can align the activities and capabilities of this partner with their own business objectives. The R&D partner should be able to clearly set out the following:
- Decision-making processes
- Applying technology
- Project management
- Customer relationships
- R&D culture and values.
A business should be looking at R&D as knowledge acquisition, and an R&D partner as an effective means of achieving this.
It must also have a clear idea of what the business benefits of this knowledge acquisition will be, whether this is product development or enhancement, or process-based improvements and changes.
Could You be Conducting R and D?
If you are interested in exploring the potential of R&D for your business, then please phone us now on +44 20 8520 2248, email email@example.com, or complete our online enquiry form. We’ll get back to you as soon as possible.