Innovation and Research and Development are often addressed as interchangeable concepts and having causal relationships. The definition of Research and development (R&D) as “comprising creative and systematic work undertaken in order to increase knowledge and to devise new applications of already available knowledge” by the Organization of Economic Cooperation and Development (OECD 2015) may espouse an impression that Innovation is invariably a corollary to R&D.
However, authors have endeavoured to correct the longstanding misconception of R&D and Innovation and also challenge the assumption that having a huge R&D investment automatically translates to a breakthrough with innovation or market success.
In a article, titled; The Quest for Innovation: Addressing User Needs and Value Creation found in a collection by Hugo Campos Editor focussed in agricultural innovation and revolution, authors admitted the difference between R&D and Innovation could actually be a cause of misunderstandings, as well as conceptual, practical, and very expensive mistakes. They gave the following remarks:
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
“Though in theory, corporate R&D spending relates to increased innovation and the growth of revenues and profits, that’s not always the case. The magnitude of R&D expenditures is only moderately related to the number of innovative products/services launched or even those that gain high market share and profits.
The authors also stated this; “to some extent, confusing R&D and innovation arises from a narrow, technology-driven stance on innovation”. According to them:
“Innovation, by default, encompasses a much wider scope than R&D…Innovation involves three diverse capabilities which includes; discovery, incubation, and acceleration.
“In many cases, the resources, investments, and time required during the incubation and acceleration stages far exceed those needed to develop technologies in the first place.
“Indeed, within profit-seeking firms, R&D and market success are two different things” the authors further noted, citing evidences from a previous study.
Strategy& – a business unit within PricewaterhouseCoopers – was unable to find a statistically significant relationship between R&D spending and sustained financial success when it analyzed the top 1,000 most innovative companies over 12 years.
Spending on R&D was also found to be unrelated to growth in sales or profits. Moreover, the top 10 most innovative companies are rarely the top 10 spenders on R&D.
The table below depicts innovative companies in relation to their R&D spending:
Regarding the characteristics that separate the most innovative companies from less innovative ones, the article enumerate the following aspects of more innovative companies:
• Close alignment between innovation and business strategy
• Company-wide cultural support for innovation
• Close involvement by leadership with innovation programs
• Deep understanding of insights from end-users.