Research and Development plays a critical role in the innovation process. It’s essentially an investment in technology and future capabilities which is transformed into new products, processes, and services.
In industry and technology sectors R&D is a crucial component of innovation and a key factor in developing new competitive advantages (Heneric, Licht, and Gofka in Europe’s Automative Industry On The Move: Competitiveness In A Changing World).
One company in particular has devoted itself to R&D and as a result constantly soars ahead of its competition. If you want a great example of an innovative firm…
Look No Further Than Intel
When it comes to R&D and innovation Intel is the holy grail company. This absolutely massive company entered the market with a bang, slid back slightly in the early 2000s but from 2006 onward has been doing spectacular.
What happened in 2006? Intel greatly sped up its product lifecycle process. Through something called Tick-tock, an alternating system of innovation (http://en.wikipedia.org/wiki/Intel_Tick-Tock) which uses microarchitecture innovation and process innovation to continually drive ahead. This is fancy computer engineer speak for the fact that each year they modify one of two things that are critically important for the speed and power of microprocessors.
Intel regularly blows away their competition. The truth is that with their massive investment in R&D and never ending ability to ship new and better product other companies simply cannot keep up.
Where Intel releases products and people are delighted, competitors like AMD release theirs to not quite the same surprise.
Is R&D Really That Important?
Remember back to the article on the recipe for innovation? One of those ingredients was knowledge, another technology. R&D directly supports the development of both of these things (depending on your industry but certainly the former of the two).
When a company takes the time to invest in R&D they get a huge influx of knowledge. This is what makes Intel so amazingly successful: Their R&D all boils down to useful knowledge that the company can use to further develop its main product lines.
R&D really is that important – note that it is merely a tool (and an expensive one at that). R&D exists to gain knowledge, not as an entity in itself.
What About Small and Medium Business?
Companies like Intel have billions to spend on R&D but most smaller businesses do not have the same capabilities. That does not mean R&D is impossible. The OECD released a book called Science, Technology and Innovation: Implications for Growth. In it they mention how government funding has been increasing for R&D to small and medium enterprises and venture capitalists have also recognized the importance of these smaller entries.
While they note that the role of venture capital is not to support R&D with technology businesses in particular it often ends up where venture capital money flows into R&D of increasingly risky investments.
Additionally, do not forget that while R&D is typically internal your business can take advantage of public resources and eternal knowledge to get its hands on the knowledge because, at the end of the day, useful knowledge is the most important thing your company needs. The R&D department is worthless on its own – the knowledge is what you’re after and such knowledge can often be purchased through acquisitions, patents, hiring employees, etc.
Running A Better R&D Department For Innovation
Matheson and Matheson identified nine factors in their book The Smart Organization: Creating Value Through Strategic R&D in which best practices can be found for R&D departments.
Those 9 areas are:
- The decision basis
- Technology strategy
- Portfolio management
- Project strategy
- Proper organization and process
- Relationship with internal customers
- Relationship with external customers
- R&D culture and values
- Improving decision quality
They gathered these 9 areas through looking at companies with extraordinarily high “hit rates,” firms like Gillette and 3M which really seems to succeed more than they fail. Running a great R&D department goes beyond the scope of the site but we would invite you to check out their book. It is of extremely high quality and when it comes to management and R&D it’s hard to find a better or more comprehensive resource.
From here a great place to look is at knowledge acquisition. Is your R&D department delivering what it should be? If you don’t have an R&D department, what knowledge does your firm need to acquire and how can it obtain it?
