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R&D 101

This article is written by Mohammad Eslim, a Contributor Author at Startup Istanbul.

“R&D”, I have seen this abbreviation before once or twice as a student, but I never thought it was of any importance. Days come and go and here I am the one getting people to know of its significance. As if meeting new friends, the first step on the way to know each other is to know the name.

What is R&D?

Research and Development, known as R&D, is a department refers to the work a business conducts for the innovation, introduction and improvement of its products and procedures. It is a series of investigative activities to improve existing products and procedures or to lead to the development of new products and procedures.

Why is R&D necessary?

Through utilizing this department, companies improve their product line, and corporations’ experience grow these improvement and through the development of new goods and services. R&D differ from one company to the next, but standard primary models have been identified.

R&D is working differently from most activities performed by a corporation in the process of operation. The research and/or development is typically not performed with the expectation or goal of immediate profit. Instead, it is focused on long-term profitability for a company.

Which way? Choose your model

Exactly two models stand as standards for the R&D department. One that is staffed primarily by engineers who develop new products, a task that typically involves extensive research. Two, involves a department composed of industrial scientists or researchers, all tasked with applied research in technical, scientific or industrial fields, which is aimed at the facilitation of the development of future products or the improvement of current products and/or operating procedures.

A tad bit expensive, why?!

Companies can spend billions of dollars on R&D in order to produce the newest, most sought-after products. According to the statistics, the following ten companies spent the most on research and development in 2018 (in billion U.S. dollars) [4]:

1.  Amazon                             22.6

2.  Alphabet                            16.2

3.  Volkswagen                        15.8

4.  Samsung                            15.3

5.  Intel Co                              13.1

6.  Microsoft                           12.3

7.  Apple                                 11.6

8.  Roche                                10.8

9.  Johnson & Johnson        10.6

10. Merck                               10.2

R&Ds have expenses, these expenses can be relatively minor, or they can easily run into billions of dollars for large corporations. R&D expenses are usually the highest for industrial, technological, health care and pharmaceutical firms. Some companies reinvest a significant portion of their profits back into R&D, as is the case with technology companies, since they see it as an investment in their continued growth.

Demanded means to meet the ends

Businesses conduct R&D for many reasons, the first and foremost is the progress of new product research and development. Before any new product is released into the market, it goes through a considerable research phase and development phase. Research is conducted into a product’s market opportunity, study of cost and production timeline. After sufficient research, the new product goes through the development phase, where it is finally created from the idea processed and planned thoroughly during the research phase.

Some companies use R&D to update their already existing, in-market products or conduct quality inspections. When this happens, a business evaluates a product to ensure it is still adequate, and additional improvement ideas are posed. If the improvements are cost-effective, they’re implemented during the development phase.

─ June 22, 2020