R and D: types and benefits of research and development

By Indeed Editorial Team

Published 25 May 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Research and development is important to many companies and organisations, as it helps them grow, launch new products and expand to new markets. Using impressive research methods, companies can find new ways to increase customer satisfaction and their overall revenue. If you're hoping to help a company increase its operations, it's necessary to understand how to conduct powerful research and development. In this article, we define R and D, explore its benefits and explore the three key approaches to research and development.

What is R and D?

R and D (R&D) is the abbreviation form of the term 'research and development', also known as research and technological development (RTD). R&D is the process that organisations undertake to develop new processes, services or products and improve the existing ones. Many organisations that invest the most in research and development are large corporations and governments, making R&D a universal business strategy for both the private and public sectors. As a part of research and development, they test out what ideas are feasible, based on the resources that they have, including technologies, finances and human talent.

Related: A brief guide on how to become a research scientist

Types of R&D

Reviewing the different types of research and development can help you better understand how this process helps companies grow and develop. The three key types of R&D include:

1. Basic research

When companies engage in basic research, also known as fundamental research, their main goal is to understand the theory related to a specific topic, phenomenon, subject area or customer group. This type of R&D concentrates on technological and scientific advancement but often has no specific commercial goal. To be effective, basic research usually requires a lot of resources and data. In most instances, it's usually an ongoing process, as it also requires continuous testing and involves 'why', 'how' and 'what' questions to explain occurrences.

Related: How to write a methodology in 8 steps (definition and types)

2. Applied research

Applied research, sometimes referred to as contractual research or a scientific method of inquiry, aims to find practical solutions for existing everyday problems affecting an individual, group or society. For this type of research, the R&D department starts by identifying a problem and identifying a research hypothesis. Then, they design and conduct a series of experiments to test their solutions. There are three types of applied research:

  • Evaluation research: This is one of the most common types of business research, which helps organisations analyse existing information to determine what solutions might help the organisation make better business decisions. For instance, this can be a helpful method for identifying the best strategy to decrease the overhead costs of a company.

  • Action research: Action research helps organisations find practical solutions to business problems, for example, how they can reach a specific customer group with their products. It's usually reflective in nature, thanks to which it guides the organisation in the right direction.

  • Research and development: Research and development focus on creating new products, processes or services to meet a target market's needs. On a day-to-day basis, R&D teams concentrate on gathering information and data that helps them improve product concepts.

Related: Research skills: definition and examples

3. Experimental development

This type of R&D combines elements of basic and applied research. Experimental development requires that organisations focus on creative and systematic work, which allows them to improve their knowledge of humankind, culture and society. It then allows the R&D team to use that knowledge to develop new prototypes. Typically, experimental development comprises the following factors:

  • Creativity: The team develops solutions based on original concepts and ideas.

  • Uncertainty: In most instances, the R&D is uncertain about their final outcomes. This is what makes this process truly experimental.

  • Systematic: To make sure the organisation has the resources that the experimental development requires, create a plan and a budget first.

  • Transferable: This means that the aim of experimental development is to come up with solutions that the company can easily reproduce to maximise the product's or service's earning potential.

Activities that count as R&D

Based on the size and nature of the business, organisations can approach research and development differently. Despite this, there are some universal activities that one can consider R&D. These include:

  • conducting lab research that aims to discover new knowledge

  • determining the best uses of new findings of knowledge

  • designing and testing alternatives to existing products, services or processes

  • modifying designs and formulations of existing goods

  • engaging in engineering activities that aim to help advance products, so that they meet specific technological or customer requirements

  • ensuring that conceptual designs take into consideration the organisation's manufacturing abilities

Related: 10 common types of variables in research and statistics

Benefits of R&D

Research and development can be helpful for any company that wants to invest in its growth and offer customers better products or services. Here are some key benefits of R&D:

Increased customer satisfaction

As a part of the R&D process, organisations make sure to research the current state of the market and any potential trends that they can use in their business practices. An important goal for this is to determine their customers' needs and preferences. This means that through conducting effective R&D, organisations can meet customer expectations and offer them goods that solve their everyday problems. For example, a household goods manufacturer might determine that many of their customers have pets and design a vacuum that effectively removes pet hair from surfaces.

Related: What is customer satisfaction?

More profit

One of the biggest benefits of R&D is that it simply allows companies to make more money. Through continuously investing in developing new products and services, companies also improve the quality of their existing business offering. This allows them to charge more for each item, even if it's been on the market for some time.

Related: What is a good profit margin? (Definition, types and FAQs)

Competitive advantage

Through research and development, organisations can develop more innovative products and position themselves as pioneers in the market. This helps them gain a competitive advantage and become the 'go to' brand for a specific type of product. Usually, this is possible when a brand aligns its R&D processes with its branding strategy so that it makes it easier for customers to recognise their products immediately after seeing the logo or packaging.

Marketing assistance

Research and development can give the marketing department more material to advertise and sell a business more effectively. Whenever an R&D department creates new products or new features, the marketing team can develop new ad campaigns to attract the attention of new customers or regenerate interest from old customers. Marketers can also influence the direction in which the R&D team goes, as they have great understanding of market trends and what customers might want.

Limitations of R&D

Many companies and organisations continuously engage in research and development to meet the demands of their customers and remain competitive. Although this process is mostly beneficial to them, being aware of any potential risks of R&D can help them maintain their position on the market. There are some risks and limitations related to this process, including:

  • Increase in costs: R&D can significantly increase the cost of an organisation, as most types of research require a lot of resources. To make sure a company can afford that, they analyse and plan the potential outcomes.

  • HR requirements: Because R&D is a highly conceptual process, it requires at least some form of manpower. As a result, R&D engages many layers of an organisation, including the HR team who's responsible for sourcing and hiring R&D specialists.

  • Outcomes: When an organisation engages in R&D, it's impossible to predict the outcomes or findings that the process might produce. Although results can be positive, prepare for them to come up negative or artificial.

  • Reactions to global and market events: R&D processes depend on the state of the market, which means it may be necessary to terminate research and development before it produces any results. For example, this can happen as a result of a market shift.

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