For a new business initiative it is essential to recognize the development stages through which the enterprise is likely to pass, and prepare for the issues and challenges which will be faced. For a business unit within a corporate it is important to recognize that the same development process applies — often with the same challenges! However, these challenges are sometimes eased by the protection of an established corporate parent able to soften the impact of negative cash flow and poor profitability at the relevant stages. Creativity becomes the responsibility of Research and Development (R&D), which is staffed by specialists in visualizing and realizing marginal or major product changes.
Ever since companies such as Dupont and Bell Labs first took, and successfully traveled along, this road, setting up a separate R&D group has been a popular way to enhance value at the concept stage. There are many ways of distinguishing innovations. These are based on degree of importance, breadth of application, and impact. The introduction of absolutely new products, variations of products, extension of new services, new packages, new advertising campaigns, and different pricing arrangements are all innovations. A continuum of innovation exists, ranging from very slight modification to radically new, important developments that give rise to new industries.
Viewed from the consumer’s perspective, three types of product innovations may be delineated: fundamental, functional, and adaptive. Fundamental innovations create totally new products that have much greater impact than adaptive innovations. Where totally new products are developed, new industries are created. As a result, fundamental innovation may create a monopoly position within an industry for a period of time. For such new products, the creation of primary demand is more important than for products that are adaptations. Examples of fundamental innovations are television, airplanes, air conditioners, dehumidifiers etc.
Importance of R&D in Businesses
The business environment continues to witness numerous changes that affect the way organisations operate. In the wake of the inevitable wave of globalization, changing consumer demographic factors, and technological advancement, it has become vital for firms to commit resources to proactive Research & Development (R&D). Moreover, research indicates that competition has intensified and the aforementioned changes can easily put organisations out of place in the modern business environment. As such, R&D plays a crucial role in helping businesses to remain competitive and relevant in a changing arena.
Company’s growth and competitiveness in a changing environment have become impossible without committing resources to research and development. To this end, organisations must undertake whatever methods will enable them to thrive ahead of the competitors and keep up with the changing environment.
Research endeavors to make discoveries and unravel new facts and perspectives that are presently unrecognized in the market. On the other hand, development embodies the utilization of the most economically feasible methods that together with the discovered facts and/or principles help in the production process. The benefits of research and development might not be realized in the short-term. However, it is important for organisations to allocate resources in R&D for tomorrow’s profits. The future of organisations, especially those technologically based largely depends on R&D.
The commonest areas of research for business organisations include fundamental research, applied research, product research, manufacturing research, materials research, market research, and operations research. Each of these key areas of research has its strengths that contribute to the survival and competitiveness of organisations. First, the fundamental research seeks to provide basic knowledge. This research undertaking does not consider commercial benefits. Rather, research efforts endeavor to gain knowledge of the detailed study of various theories regarding knowledge development. Pure research has been correlated with significant breakthroughs for many organisations. Mega companies such as BMW, Castrol, General Electric, IBM, the Google Inc., and Amazon.com owe their unmatched success to pure research. Second, applied research is employed when an organisation intends to solve practical problems that correspond to practical purpose. Applied research enables organisations to identify practical problems affecting the different consumers and develop products offer practical solutions. Third, product research attempts to uncover new product ideas that target serving prevalent customer needs. As consumption keeps changing, organisations ought to invest R&D to uncover these changes and develop products that correspond to the present needs. Product research can lead organisations to come up with new commodities that provide a revolution in consumption. For example, the birth of the iPad and the iPhone revolutionised the smartphone use around the world. The Apple Inc., through its robust R&D techniques, managed to position itself well above its rivals in the market.
Moreover, for manufacturing companies research towards the development of tools and equipment, handling devices, and manufacturing techniques can help in costs reduction and increase productivity. Manufacturing research compliments product research and has been utilized by many technology companies such as Fibre Optics, Robotics, and Just in Time (JIT) manufacturing as they seek to reap the benefits of R&D. In addition, market research is another area where R&D plays a vital role.
It is a systematic, objective-oriented collection and analysis of data regarding specific markets and the competitive environment with a view of providing insight for strategic marketing decisions. The primary purpose of market research is to provide information regarding the target market to help the internal environment to reorganize through manufacturing and production. It helps the organisation to make products that serve the current needs while offering the most competitive value relative to their competitors. Market analysis is worth investing in if the organisation intends to remain relevant and beat the increasing challenges in the modern business environment.
Relationship between Marketing and R&D
Given the diversity of external demands (competitors’ actions, governmental regulations, and technological advances, in addition to pressing customer requirements) depending upon a single group, such as the self-contained R&D, could prove to be inadequate and dangerously myopic. The team could also be informally constituted where the channels for networking are indicated but no further. To assure profitable growth, companies must add new products that are tied to different phases of market development. When some products are declining, others should be enjoying market growth. Sometimes this is achieved by a merger; sometimes it is done internally.
Regardless, the combination of the total product line as it relates to markets establishes a company’s position. Opportunity assessment, therefore, must cover a span of time, and continuously add growth opportunities to a company’s present product assortment. Technological developments and changing market environments are externally based, whereas research and development, and modifications of products, packages, marketing channels, and advertising campaigns, are internally based.
Opportunity assessment must account for both. Continued growth becomes possible by properly developing new products that fit assessed opportunities. Market opportunity considerations have resulted in the development of a new industry in the United States — an industry of discovery — the discovery of new technology, new methods, new processes and new opportunities. Expenditures on research and development have risen sharply recently and resulted in new products and processes. Opportunity assessment requires the creation of a counterpart to research and development — a function of discovery of new markets and market opportunities that can act as a generator for innovation. This is a key function in a business. It is the driver of a business — the activity by which a business renews itself.
Objectives of Research and Development (R&D)
The example of the airline industry allows to say that while individual airlines would be concerned about value construction from the time of entry into the terminal to when the passenger exits, travel agents would typically delve into how value may be enhanced by the actions of value providers all along the chain. The diverse sources of customer value would therefore be of prime importance to travel agents in selecting the respective providers (e.g., transportation to and from the airport, contractual arrangements with rental car companies, hotels, and airline reservation systems).
In product as well as service businesses conceptualization is indispensable to achieving high levels of value. After all, whether the firm provides vinyl binders or fast foods, automobiles or software, visualizing how value will be provided, how this will afford the firm a competitive advantage relative to its rivals, and constantly seeking to enhance the value concept, are critical to its continued success. Just as important, however, is making the concept come to life. A painter or sculptor or musician does not touch our sensibilities merely by his or her powers of imagination. The ability to communicate these images through sight, touch or sound counts for at least as much. Actually converting an idea, therefore, into a form by which others can realize value lies at the heart of value creation.
Designing the product so that variations can be incorporated to meet local needs is one of the keys to transnational functioning. The use of modules or platforms from which product variety can be launched to satisfy local needs epitomizes the product flexibility/resource efficiency that is the hallmark of transnational firms. They are added on. While value communication is best left to local discretion, the transfer of design and development information will typically be accompanied by information that can be passed on to customers or, equally important, received from them. Caterpillar’s ability to acquire a transnational coloring has been an essential feature of its strategy to take back market share from Komatsu.
Types of Research and Development (R&D)
There are three types of R&D activities: basic research, applied research and experimental development. Basic research is often used in healthcare and computer technology industries. Applied research is popular in medicine and manufacturing. Experimental development is used by all industries as a continuous process of knowledge acquisition and product development. The need to speed up introduction of the new product and to increase promotional efforts to counter the unforeseen challenge might be some of the concerns that would involve most, if not all, the members of the team.
The transfer of resources (primarily information in this instance) takes place in an essentially unpredictable fashion. Activities could be sources and recipients of resources depending on the stage of the project and the nature of external developments. Products gradually come to represent the results of the firm’s activities and not the essence of customer need satisfaction. Elevating the concept of efficiency-through isolation to the level of a doctrine hurts the firm’s integrity and prevents adoption of a coordinated program of action. In general, therefore, inventory strongly hinders the achievement of customer value both by reducing product worth and raising its cost. At the same time, it works toward destroying the unity of an organization that seeks to deliver value.
The overriding purpose in targeting inventories for reduction is symbolic-the realization that inter-dependencies have to be accepted and managed rather than eliminated. While “action plans” for banishing inventory from the shop floor may meet with early success, the success is likely to be short-lived unless it is preceded, accompanied or followed by a change of heart. Others in manufacturing, as well as in those other departments, must be viewed as essential partners in fulfilling the firm’s mission of value to its customers.
In functional innovations, the product or service remains essentially the same, but the method of performing the function is new. Examples are power brakes, electric knives, and gas and electric dryers. Such innovations may require considerable adjustment on the part of consumers. Adaptive innovations are the least complex and refer to such minor alterations in an existing product as package, color, design, shape, trim, and size variations. The adoptive innovation does not perform new functions for the user and does not require changes in consumer-use skills or behavior patterns .