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The difference
between innovation and R&D is a principal matter to consider. A lot of
companies nowadays confuse innovation with research and development.
Such a mix-up
is risky despite R&D and innovation being complementary. Well-versed brands
in the R&D and innovation community can recognize the difference, and being
able to do so has helped the business in ways more than one.
What is
R&D all about?
Research and
development, commonly known as R&D, encompasses every activity that
businesses take on to innovate and instigate new products and services. It is
commonly the first step in the entire development process, done with the intent
to establish new offerings under the company’s sleeve.
In essence, the
absence of a research and development program may cause a business to
eventually fail and fall out of the competition. Its survival may have to
depend on other methods to develop, like partnerships, mergers, and
acquisitions. As R&D contributes to the development of knowledge and
technology, companies invest in it to obtain useful data that can help in
surging revenue growth.
Furthermore,
this bundle of knowledge is also utilized to improve the brand’s products and
services, pushing the business ahead of its rivals.However, despite its
substantial price, research and development is not to be conducted with an
assumption that it will pay off immediately. Rather, R&D must be performed
with the idea that the results will contribute to the company’s long-term profitability.
This is because R&D may steer the findings on copyrights, patents, and
trademarks upon the development of products and services, as well as that of
the data gathered especially if they are to be commercialized.
What is the
definition of innovation?
People have the
tendency to confuse innovation with the conception of an entirely new
technology or product. But the truth is that innovations are actually present
in other areas too.
innovation
Innovation is
found in every field. It is the process of realizing new products, processes,
propositions, or business models to create added value for customers and/or
employees.Note that a major fragment of this definition that needs emphasis is
the fact that in order for innovation to happen, the new idea must add value
for other parties aside from the business itself.This part basically reiterates
the significance of taking into consideration the end-users from the beginning
of the innovation process. Including them in the equation guarantees
satisfaction on their part, which in turn increases the idea’s chances of success.
Investing in
Innovation
For companies,
innovation must produce added value.Proper execution of the innovation process
can yield an enormous amount of value to the business. In addition, the kind of
innovation implemented determines the length of time where the process can
provide a return on investment.
Focus on
building an innovation engine
Businesses can
encourage innovation in the following ways:
1.
Motivating staff to contribute creative ideas
2.
Setting up innovation challenges
3.
Obtaining customer feedback
4.
Investing in resources that contribute to
speeding up the process
5.
Innovation also takes future risks into
consideration when formulating ways to change and discover opportunities. It
keeps organizations relevant and profitable.
Fundamentally,
innovation is about performing things differently for the improvement of the
organization. This may be done in various ways like updating or developing
products. In other words, innovation brings a competitive advantage.
Differentiating from the competition means ingeniously incorporating innovation
into the brand’s business model. However, this doesn’t insinuate that
innovation is the only key to success.It reiterates the fact that companies
must have a clear understanding of what cost-effective methods to apply in
bringing innovation to life.
What is the
difference between innovation and R&D?
Technically,
innovation is larger than research and development as it includes three
definite parts — discovery, incubation, and acceleration. Predominantly,
R&D is only a fragment of the first stage.
Moreover,
businesses should understand that making business applications, developing
revenue models, and venturing into new markets for new products all need time
and resources. It warrants a company’s utmost attention just as creating
technologies.The lack of calculated innovation measures leads brands to
stockpile undeveloped inventions which do not guarantee a sizable return on
investment. Furthermore, innovation needs companies to think bigger because
R&D spending is not going to foster innovation.
Strengthening
innovation capacity would.
Strengthening
the Innovation Capacity
Brands have to
learn from previously existing companies that failed to make a change to thrive
in the competition. Investing a huge amount of cash with little commercial
payoff won’t do. Innovation has to be done.Unfortunately, most companies that
focus on product leadership, operational excellence, and even customer intimacy
concentrate on R&D too much, even when R&D is in fact, only a fraction
of innovation’s first stage.
Best
Innovation Management Tips for Businesses
Additionally,
R&D is not only costly but a lot riskier. With R&D, businesses are
exposed to errors, inaccuracies, and a lesser chance of success that come along
while developing something new and groundbreaking.This leaves investments to
waste — scaling things only to discover that little to no customers are willing
to purchase them.
This is a risk
that cannot be ignored if a return on investment must be secured. New
technological areas must be studied, and efforts must be conducted to penetrate
both new and existing markets.
Innovation, on
the other hand, enhances existing strengths and focuses on expanding
capabilities to incubate and accelerate favorable and beneficial products. This
pushes sales to grow tremendously, resulting in increased profits.There’s also
a process called innovation portfolio management, which is considered a risk
management tool. Innovation projects may not have the guarantee to always yield
favorable results, but managing lots of initiatives could minimize the risk
factor associated.
Why do
people confuse them?
Definitions of
the two are almost similar, so the confusion still stands today. Moreover, the
boundaries of where the one starts and where the other ends are often not
emphasized in articles.
Firms create
new products and services and present them as the ultimate solution that meets
the needs of their potential customers. Businesses have their best foot forward
in enhancing commercial performance by applying innovation to their existing
offers. This reiterates the need for brands to focus on innovative activities
to effectively appeal to the market.
Select Key
Performance Indicators
But the
confusion between R&D and innovation happens as there is actually a direct
link between the two…
When a
systematic and scientific study is performed with fundamental research and
development techniques, ideas are produced, information is gathered, and
discoveries are revealed.
All in all, it
sparks the beginning of innovation. Meaning, the results obtained from a firm’s
R&D efforts signal the innovation process, with commercialization as its
primal outcome.
Businesses have
zeroed in on growing their demands on the needs of their consumers. Customers,
on the other hand, have begun to variegate and modify their wishes at the same
time.
Standing by for
various features in the products that they utilize to provide for their needs
and preferences has increased demand. This led companies to innovate their
products and develop new features that will capture the interest of the market.
In addition,
this amplifies businesses to double their efforts in enhancing brand perception
to foster customer loyalty.
Why is
R&D spending not a measure of innovation?
With all the
risks it entails, concentrating on R&D spending might not be the best thing
to do. Such a practice does not measure how innovative a business is.
Fundamentally, having a systematic R&D process is great, but it does not
equate to market success.
To reiterate
this point, The Global Innovation 1000 report has written the world’s top 1000
most innovative companies for more than a decade and has statistically shown
the absence of a remarkable relationship between R&D spending and sustained
financial performance.
Interestingly,
its findings entail overall R&D spending and percentage of revenues. This
study has outlined that R&D spending does not correlate to profit growth,
nor is it linked to a surge in market capitalization and shareholder returns.
Furthermore,
the report clearly shows that the top ten most innovative companies hardly ever
spent that much on research and development, which thereby elucidates that the
bulk of cash you spend on R&D does not really matter in terms of a
company’s innovation success.This only means that R&D spending is not a
measure of innovation.
R&D
Spending
To understand
this further, R&D labs have regularly just focused on working out a firm’s
ability to develop new technologies. Innovation solves both this and the risk
of whether the market will even purchase and utilize the product despite its
features and usability. Focusing on the first may increase a company’s number
of patentable products, and it does warrant the success of those products and
services in the market. To ensure that both of these things happen, companies
have to establish innovation plans and methodologies for sustainable business
models. Innovation also needs businesses to arrive at a thorough perception of
customer needs to conceive products that the market would want.
Such capacity
to generate products and services that truly solves the market’s problems
establishes the footing of a successful innovation process. Moreover, companies
also have to create superior business models to sustain the implementation and
distribution of their products.
Their efforts
have to result in delivering customer value that’s both maintainable and
revenue-generating. In the end, a successful innovation process has nothing to
do with the amount of money that you invest in research and development.
However, this doesn’t mean letting R&D labs die out of the lack of
resources and funding. Speaking of R&D and innovation, you are likely
looking at idea management. If you want to learn more, we got an ultimate guide
to idea management that you can download for free. Check out and dive deeper
into idea management.