The difference between innovation and R&D is a principal matter to consider. A lot of companies nowadays confuse innovation with research and development.
Such a mix-up is risky despite R&D and innovation being complementary. Well-versed brands in the R&D and innovation community can recognize the difference, and being able to do so has helped the business in ways more than one.
In this article, we will study the difference between innovation and R&D, define these terms clearly for a solid understanding, and identify what causes the confusion between them.
Let’s get started.
What is R&D all about?
Research and development, commonly known as R&D, encompasses every activity that businesses take on to innovate and instigate new products and services.
It is commonly the first step in the entire development process, done with the intent to establish new offerings under the company’s sleeve.
In essence, the absence of a research and development program may cause a business to eventually fail and fall out of the competition. Its survival may have to depend on other methods to develop, like partnerships, mergers, and acquisitions.
As R&D contributes to the development of knowledge and technology, companies invest in it to obtain useful data that can help in surging revenue growth.
Furthermore, this bundle of knowledge is also utilized to improve the brand’s products and services, pushing the business ahead of its rivals.
However, despite its substantial price, research and development is not to be conducted with an assumption that it will pay off immediately. Rather, R&D must be performed with the idea that the results will contribute to the company’s long-term profitability.
This is because R&D may steer the findings on copyrights, patents, and trademarks upon the development of products and services, as well as that of the data gathered especially if they are to be commercialized.
What is the definition of innovation?
People have the tendency to confuse innovation with the conception of an entirely new technology or product. But the truth is that innovations are actually present in other areas too.
Innovation is found in every field. It is the process of realizing new products, processes, propositions, or business models to create added value for customers and/or employees.
Note that a major fragment of this definition that needs emphasis is the fact that in order for innovation to happen, the new idea must add value for other parties aside from the business itself.
This part basically reiterates the significance of taking into consideration the end-users from the beginning of the innovation process. Including them in the equation guarantees satisfaction on their part, which in turn increases the idea’s chances of success.
Investing in Innovation
For companies, innovation must produce added value.
Proper execution of the innovation process can yield an enormous amount of value to the business. In addition, the kind of innovation implemented determines the length of time where the process can provide a return on investment.
Businesses can encourage innovation in the following ways:
Innovation also takes future risks into consideration when formulating ways to change and discover opportunities. It keeps organizations relevant and profitable.
Fundamentally, innovation is about performing things differently for the improvement of the organization. This may be done in various ways like updating or developing products.
In other words, innovation brings a competitive advantage. Differentiating from the competition means ingeniously incorporating innovation into the brand’s business model. However, this doesn’t insinuate that innovation is the only key to success.
It reiterates the fact that companies must have a clear understanding of what cost-effective methods to apply in bringing innovation to life.
By the way, we recently published a free ebook about organizing innovation. Reading it will walk you through the specific principles and steps related to innovation and some extras that can help your company. Check it out if you want to learn more.
What is the difference between innovation and R&D?
Technically, innovation is larger than research and development as it includes three definite parts — discovery, incubation, and acceleration. Predominantly, R&D is only a fragment of the first stage.
Moreover, businesses should understand that making business applications, developing revenue models, and venturing into new markets for new products all need time and resources. It warrants a company’s utmost attention just as creating technologies.
The lack of calculated innovation measures leads brands to stockpile undeveloped inventions which do not guarantee a sizable return on investment. Furthermore, innovation needs companies to think bigger because R&D spending is not going to foster innovation.
Strengthening innovation capacity would.
Strengthening the Innovation Capacity
Brands have to learn from previously existing companies that failed to make a change to thrive in the competition. Investing a huge amount of cash with little commercial payoff won’t do. Innovation has to be done.
Unfortunately, most companies that focus on product leadership, operational excellence, and even customer intimacy concentrate on R&D too much, even when R&D is in fact, only a fraction of innovation’s first stage.
Additionally, R&D is not only costly but a lot riskier. With R&D, businesses are exposed to errors, inaccuracies, and a lesser chance of success that come along while developing something new and groundbreaking.
This leaves investments to waste — scaling things only to discover that little to no customers are willing to purchase them.
This is a risk that cannot be ignored if a return on investment must be secured. New technological areas must be studied, and efforts must be conducted to penetrate both new and existing markets.
Innovation, on the other hand, enhances existing strengths and focuses on expanding capabilities to incubate and accelerate favorable and beneficial products. This pushes sales to grow tremendously, resulting in increased profits.
There’s also a process called innovation portfolio management, which is considered a risk management tool. Innovation projects may not have the guarantee to always yield favorable results, but managing lots of initiatives could minimize the risk factor associated.
Why do people confuse them?
Definitions of the two are almost similar, so the confusion still stands today. Moreover, the boundaries of where the one starts and where the other ends are often not emphasized in articles.
Firms create new products and services and present them as the ultimate solution that meets the needs of their potential customers. Businesses have their best foot forward in enhancing commercial performance by applying innovation to their existing offers.
This reiterates the need for brands to focus on innovative activities to effectively appeal to the market.
But the confusion between R&D and innovation happens as there is actually a direct link between the two…
When a systematic and scientific study is performed with fundamental research and development techniques, ideas are produced, information is gathered, and discoveries are revealed.
All in all, it sparks the beginning of innovation. Meaning, the results obtained from a firm’s R&D efforts signal the innovation process, with commercialization as its primal outcome.
Businesses have zeroed in on growing their demands on the needs of their consumers. Customers, on the other hand, have begun to variegate and modify their wishes at the same time.
Standing by for various features in the products that they utilize to provide for their needs and preferences has increased demand. This led companies to innovate their products and develop new features that will capture the interest of the market.
In addition, this amplifies businesses to double their efforts in enhancing brand perception to foster customer loyalty.
Why is R&D spending not a measure of innovation?
With all the risks it entails, concentrating on R&D spending might not be the best thing to do. Such a practice does not measure how innovative a business is. Fundamentally, having a systematic R&D process is great, but it does not equate to market success.
To reiterate this point, The Global Innovation 1000 report has written the world’s top 1000 most innovative companies for more than a decade and has statistically shown the absence of a remarkable relationship between R&D spending and sustained financial performance.
Interestingly, its findings entail overall R&D spending and percentage of revenues. This study has outlined that R&D spending does not correlate to profit growth, nor is it linked to a surge in market capitalization and shareholder returns.
Furthermore, the report clearly shows that the top ten most innovative companies hardly ever spent that much on research and development, which thereby elucidates that the bulk of cash you spend on R&D does not really matter in terms of a company’s innovation success.
This only means that R&D spending is not a measure of innovation.
To understand this further, R&D labs have regularly just focused on working out a firm’s ability to develop new technologies. Innovation solves both this and the risk of whether the market will even purchase and utilize the product despite its features and usability.
Focusing on the first may increase a company’s number of patentable products, and it does warrant the success of those products and services in the market.
To ensure that both of these things happen, companies have to establish innovation plans and methodologies for sustainable business models.
Innovation also needs businesses to arrive at a thorough perception of customer needs to conceive products that the market would want.
Such capacity to generate products and services that truly solves the market’s problems establishes the footing of a successful innovation process. Moreover, companies also have to create superior business models to sustain the implementation and distribution of their products.
Their efforts have to result in delivering customer value that’s both maintainable and revenue-generating.
In the end, a successful innovation process has nothing to do with the amount of money that you invest in research and development. However, this doesn’t mean letting R&D labs die out of the lack of resources and funding.
Speaking of R&D and innovation, you are likely looking at idea management. If you want to learn more, we got an ultimate guide to idea management that you can download for free. Check out and dive deeper into idea management.