What is Research & Development (R&D)?

23 May 2015 Sandeep Mehta

At InspiRD we get to visit R&D organizations across many industries. It is interesting to see that there is some confusion around what is R&D. Some firms define R&D as only scientific research. Others include New Product Development in R&D, but not sustaining product development. Yet others exclude incremental product development from R&D. Other names for R&D include Research and Engineering or Science and Technology. Even Wikipedia acknowledges that there is some variability about what is considered R&D:

The activities that are classified as R&D differ from company to company, but there are two primary models, with an R&D department being either staffed by engineers and tasked with directly developing new products, or staffed with industrial scientists and tasked with applied research in scientific or technological fields which may facilitate future product development. In either case, R&D differs from the vast majority of corporate activities in that it is not often intended to yield immediate profit, and generally carries greater risk and an uncertain return on investment.

There are many reasons why definition of R&D changes across companies: Corporate Culture, History, Organization Structure, etc. So, is there a good way to define what is R&D?

I think in its broadest sense, we should have one unified portfolio of all activities that could have an impact on the products an organization delivers to its customers. R&D is likely the best name for such a portfolio or category. Alternative tends to be call some activity projects and others R&D. This approach has a few disadvantages in getting the most value out of a companies investments.

For example, a firm has to change one of the component one of its products because of supply-chain drivers. An engineering project has to be undertaken to evaluate the impact of this change. In some firms, this project is not classified as R&D and the project is not considered in a portfolio together with related R&D projects. But the knowledge generated under this change project likely has an impact on future product design. If there are field issues relating to the product, information regarding component change will likely be disconnected from rest of the product documentation.

Furthermore, resources and skills needed for the change project likely have some overlap with other R&D. To enhance effectiveness of the portfolio, it would be beneficial to get management visibility into all related activity. This would allow organizations to see trends and balance resources across the entire portfolio. We could always have subcategories for projects within the primary category of R&D to better align activities with culture, org structure etc.

So, R&D could include projects undertaken for:

  • Scientific Research
  • Technology Development
  • Innovation Initiatives
  • New Product Development
  • Incremental Product Development
  • Sustaining Development
  • Manufacturability Improvement
  • Quality Improvement
  • Regulatory Changes
  • etc.