Business research and development (R&D) refers to the process of developing and testing new products that eventually may be put on the market. This process is especially important to pharmaceutical companies, technology companies, and some types of industrial companies, but has implications for many other kinds of businesses as well. Those who are able to keep customers in the marketplace happy with fresh innovations and new ideas often find they have a leg up on the competition.
The importance of business research and development is difficult to overstate. Even during times when the economy is struggling, businesses understand that a good research and development strategy is vital to the continued success of the operation. Though it may seem easy to cut back on business research and development when sales slow, some CEOs believe that this is the very best time to spend more. New products mean new opportunities and more customers.
The innovation process is especially crucial in the pharmaceutical field, where business research and development is responsible for producing new drugs to fight cancer, heart disease and other ailments that threaten the lives or health of individuals. Millions of dollars may be spent on this research until a suitable drug is created. If one is found, the patent may last approximately 20 years, after which generics can be produced. The companies producing these generics have an advantage because all the research and development has been done by others. Thus, the name brand company has more incentive for further research and development, as it eventually loses market share, and must come up with new products.
This is not only true of pharmaceutical companies, but of many industrial companies as well. If Henry Ford had stopped his innovation with the Model T, there is very little chance that his company would have survived to present times. As the competition continues to build faster, more reliable, and more comfortable cars, others must follow suit or risk being left behind.
Though car companies, as one example, self fund the majority of their business research and development, there may be other sources of money available for some industries. Research and development funding may be offered by a government or private groups. For example, a government may offer grants for researching cancer drugs, cars that run on alternative fuels, and cheaper ways to explore outer space. In each case, while there may be a benefit to the company, the government may also feel that there is a benefit to society at large.
Technology companies also invest heavily in research and development. Take, for example, the constant tug of war between the two major software and computer giants, Microsoft® and Apple®. Both must continually offer customers new products, more stable platforms and higher computing speeds. To do this, research must be done into new software as well as new hardware to power the software.