In order to create new product or innovate new services, companies need to go through the process of research and development, or R&D. As one of the preliminary stages of innovation, R&D allows companies to develop new ways to enter the market and, ultimately, improve the overall bottom line for the brand.

Whether a large corporation or a small brand operated by a solo entrepreneur, research and development happens across sectors and industries. Without R&D, it would be impossible for brands to stay ahead of the curve — and their competition. If a company fails to create a R&D strategy, it will have to find a new way to survive, which is most likely through mergers and acquisitions (M&A). This strategy, however, relies on hefty investments and on the work of others; R&D, on the other hand, places all of the responsibility squarely within the realm of your business, for better or for worse.

What are the different types of R&D?

Generally speaking, there are two main types of research and development: Basic and Applied. Basic research is when a company obtains new information, without a specific goal in mind for applying that knowledge. On the other end of the spectrum, applied research also sets out to obtain information, but does so with a specific goal in mind, such as a new use or product.

Who’s in charge of the research and development?

Depending on the size of the company, the type of R&D, and the overall budget, R&D can take place in a variety of different settings. Most commonly, R&D happens internally within a company. However, it’s becoming more and more common for R&D to be outsourced to industry experts, universities, and major developers. In some cases, R&D happens both within a company and externally, leveraging the widest talent pool possible in order to get the best results.

For small businesses, R&D is almost always outsourced simply because there isn’t a big enough team within the business to produce exciting results.

When should R&D take place?

Timing R&D ultimately depends on your company’s end-goal. If the market is growing slowly or even at an average rate, then there isn’t necessarily a rush to get a new product or service to the market as fast as possible, which means you can spend time doing R&D in-house or through contractors. If, however, your market is booming and more and more competitors are entering the arena, then your best bet might to be skipping the R&D process altogether and going the acquired route instead.

Is there risk involved with research and development?

Like any business endeavor, there’s always an inherent risk with R&D, mainly because you don’t know what the results will be. Acquisition, on the other hand, gives you a much more accurate picture of what you’ll be investing in. But, while the risk is lower with acquisition, so is the potential reward. When you’re at the winning end of R&D, that means you’ve developed something that no one else has, giving you the competitive advantage of every business’s dreams.