Research and development a strategic silver bullet

Andrea Tucker, Business Application Head (R&D) at e4.

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It is said that there is no such thing as a new idea, but rapidly evolving technology, demand for new products and services and the growth of start-up businesses across industrial and geographical sectors means that keeping up with research and development is imperative for businesses large and small, says Andrea Tucker, Business Application Head (R&D) at e4.

In 2019, around 2% of global GDP was ploughed into research and development (R&D) by industry, governments and research and academic institutions. Most realise that they are playing a long game and that ROI may take time to materialise, which is why organisations apply their resources with consistency and continuity.

Traditionally, R&D spend was predominantly in the manufacturing and production sectors – think pharmaceuticals, which historically have invested a large proportion of turnover back into new product development. Today, it is common to see equivalent percentages spent by tech companies and new entrants keen to innovate and scale their platforms and processes.

There are a number of challenges, not just for South African tech companies, which lag behind in R&D spend of countries like Japan, China, USA, South Korea and Germany. Irrespective of budget, anywhere in the world, integrating R&D thinking through company structures requires both budget and big-picture thinking on the part of company leadership.

R&D no longer means consigning eccentric professor types to a backroom and waiting for a ‘eureka’ moment. Today’s most successful R&D departments are fully integrated into a company’s operations and open to inputs from all employees who may have a good idea that can be developed to benefit the company.

The most successful R&D departments are also those that are well-resourced financially, with relevant skills, and are able to protect their intellectual property when a new idea flows out of the creative process, and this is often beyond the capacity of SMEs. But what large companies have in terms of these resources, they often lack in agility, and can be slow to adapt and implement new products and services. There is room for collaboration here.

If a large corporation is not thinking strategically and is allowing R&D to happen in isolation, or if they outsource this service to a company that does not have its finger firmly on the current pulse of the company, it runs the risk of developing in the wrong direction and losing sight of the customer, wasting time and money in the process on a product that was never wanted in the first place. R&D goes firmly hand in hand with market research.

This is not to say, however, that R&D should focus only on the core activities of a business. Failing to plan for the future is planning to fail. Kodak is a great example of a company that did not invest in forward-thinking R&D projects, or at least not in time enough to save the company from extinction.

Strategically applied, R&D can be a silver bullet solution to maintaining a competitive advantage in an extremely competitive world. Companies’ R&D progress is generally a closely guarded secret. Until a product or service is ready to launch publicly and commercially, it is often kept closely under wraps, for obvious reasons. There is a case, however, for sharing resources between large and small companies. The dynamism within small business structures can be leveraged by large juggernauts to pilot projects for eventual roll-out. This is a ‘win-win’ scenario that can benefit many parties.

With a potentially low or at least long-time-coming ROI on many R&D projects, it is not surprising that in lean times, companies see fit to trim their budgets, but we contend that this is short-sighted and can damage a company’s growth potential.

Failing to invest in R&D in virtually any industry sector, but most especially within tech companies, is to be running a business without a vision for a future. There may be a degree of trial and error that businesses must be prepared to accept – not all new ideas will land and work for the business – but if a company never tries, it will never find out.