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Cycle of research and development

The phrase research and development (also known as R and D or R&D), according to the OECD, refers to "creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications".^[1]

Research and development is often scientific or toward the development of particular technologies and is frequently carried out as corporate or governmental activity.

Background[link]

New product design and development is more often than not a crucial factor in the survival of a company. In an industry that is changing fast, firms must continually revise their design and range of products. This is necessary due to continuous technology change and development as well as other competitors and the changing preference of customers. Without an R&D program, a firm must rely on strategic alliances, acquisitions, and networks to tap into the innovations of others.

A system driven by marketing is one that puts the customer needs first, and only produces goods that are known to sell. Market research is carried out, which establishes what is needed. If the development is technology driven then it is a matter of selling what it is possible to make. The product range is developed so that production processes are as efficient as possible and the products are technically superior, hence possessing a natural advantage in the market place.

In general, R&D activities are conducted by specialized units or centers belonging to companies, universities and state agencies. In the context of commerce, "research and development" normally refers to future-oriented, longer-term activities in science or technology, using similar techniques to scientific research without predetermined outcomes and with broad forecasts of commercial yield.

Statistics on organizations devoted to "R&D" may express the state of an industry, the degree of competition or the lure of progress. Some common measures include: budgets, numbers of patents or on rates of peer-reviewed publications. Bank ratios are one of the best measures, because they are continuously maintained, public and reflect risk.

In the U.S., a typical ratio of research and development for an industrial company is about 3.5% of revenues. A high technology company such as a computer manufacturer might spend 7%. Although Allergan (a biotech company) tops the spending table with 43.4% investment, anything over 15% is remarkable and usually gains a reputation for being a high technology company. Companies in this category include pharmaceutical companies such as Merck & Co. (14.1%) or Novartis (15.1%), and engineering companies like Ericsson (24.9%).^[2] Such companies are often seen as credit risks because their spending ratios are so unusual.

Generally such firms prosper only in markets whose customers have extreme needs, such as medicine, scientific instruments, safety-critical mechanisms (aircraft) or high technology military armaments. The extreme needs justify the high risk of failure and consequently high gross margins from 60% to 90% of revenues. That is, gross profits will be as much as 90% of the sales cost, with manufacturing costing only 10% of the product price, because so many individual projects yield no exploitable product. Most industrial companies get only 40% revenues.

On a technical level, high tech organizations explore ways to re-purpose and repackage advanced technologies as a way of amortizing the high overhead. They often reuse advanced manufacturing processes, expensive safety certifications, specialized embedded software, computer-aided design software, electronic designs and mechanical subsystems.

Research has shown that firms with a persistent R&D strategy outperform those with an irregular or no R&D investment programme.^[3]

Research[link]

The US Federal government spent more than $25 billion in health-related R&D in 2005. Much of this spending is devoted to basic research on the mechanisms of disease, which acts as a supporter or the foundation for the pharmaceutical industry’s research. Both students and postdoctoral researchers form the R&D workforce. The Federal government supports graduate students and postdoctoral researchers in academic labs, where basic research is conducted. Pharmaceutical also hired students as interns while they are still at University. Government and private R&D efforts have sometimes overlapped - as in finishing the mapping the human genome. Identifying specific cases where direct overlapping has occurred is difficult, but it is probably most likely to happen when the government funds research, where potential profitable commercial applications has been identified by the pharmaceutical companies. In the United States, universities are the main provider of research level products. Development is concerned with proof of concept, safety testing, and determining ideal levels and delivery mechanisms. Development often occurs in phases that are defined by drug safety regulators in the country of interest. In the United States, approximately one in ten compounds identified by basic research pass all development phases and reach market. Pharmaceuticals market, however are extremely complex in many respects. Large public sector investments in biomedical R & D influence private companies' choices about what is important and how intensely to invest. The returns on private sector R & D are attractive, on average but they vary considerably from one drug to the next. Consumer demand for prescription drug is often indirect, mediated by doctors and health insurers. New drug must undergo costly and time consuming testing before they are sold.

Business[link]

Present-day Research and development is of great importance in business as the level of competition, production processes and methods are rapidly increasing. It is of special importance in the field of marketing where companies keep an eagle eye on competitors and customers in order to keep pace with modern trends and analyze the needs, demands and desires of their customers.

Unfortunately, research and development are very difficult to manage, since the defining feature of research is that the researchers do not know in advance exactly how to accomplish the desired result. As a result, higher R&D spending does not guarantee "more creativity, higher profit or a greater market share".^[4]

R&D alliance[link]

An R&D alliance is a mutually beneficial formal relationship between two or more parties to pursue a set of agreed goals while remaining independent organisations, where acquiring new knowledge is a goal by itself. The different parties agree to combine their knowledge to create new innovative products. Thanks to funding from government organizations, like the European Union's Seventh Framework Programme (FP7), and modern advances in technology, R&D alliances have now become more efficient. Every company has their own research and develop department.

See also[link]

• Basic research
• ERD3 (Energy research, development, demonstration and deployment)
• Demonstration
• Deployment
• Innovation
• List of countries by research and development spending
• List of business and finance abbreviations
• Research
• R&D 100 Awards
• Science of science policy
• Science policy
• Technology Life Cycle
• Neglected Tropical Disease Research and Development

Notes[link]

External links[link]

• U.S. Federal Investments in Energy R&D: 1961-2008
• R&D Magazine:
  • R&D 100 Awards.
• DOE Funded Research Projects Win 30 R&D Awards for 2008
• USA Today May 2008 Q&A with Texas Instruments CEO about Bayh-Dole Act
• OECD Science, Technology and Industry Outlook 2008
• 2010 Science and Engineering Indicators – Research and Development: National Trends and International Linkages
• Scientific Grant Awards Database Contains details of over 2,000,000 scientific research projects conducted over the past 25 years.
• [1] RAND R&D Methods Used by Federal Agencies in USA.
• Crossing the Border to the Future of Education