How To Build a Research & Development Strategy For Modern Times

The years of an unusual R&D organization are over. To function as the company's innovative engine, R&D strategy needs to be equipped with today's fast-paced world.

The global investment in research and development (R&D) is staggering. In 2019 alone, organizations worldwide spent $ 2.3 billion on R&D — about 2 percent of global GDP — about half of which came from industry and the rest from government and educational institutions. Moreover, that annual investment has been growing at about 4 percent a year over the past decade.1

Although the medical sector is attracting attention due to its high R&D use as a percentage of revenue, industry-based comparisons show that few industries, from high technology to automotive to consumers, place more than 20 percent of pre-interest income, tax, depreciation, and amortization (EBITDA) back to a new study (Exhibit 1).

What do organizations expect to achieve? In fact, they hope that their R&D investment will bring valuable technologies where they can develop new products, services, and business models. But for R&D to bring real value, its role must be embedded within the organization's purpose. R&D should assist in both delivering and shaping business strategies, develop the company's diverse offerings of leading markets and highlight strategic options, highlighting promising ways to restructure business through innovative platforms and disruptive successes.

However many businesses do not have an R&D strategy with the necessary clarity, speed, and certainty to meet the organization's goals. Instead of acting as the company's innovative engine, R&D ends up being separated from the company's priorities, cut off from market development, and no longer aligned with business speed. Between the growing gap in performance between successful and non-innovative start-ups, companies wishing to move forward and stay ahead of their competitors need a solid R&D strategy that makes huge profits from their innovative investment. Developing such a strategy takes three steps: understanding the challenges that often serve as obstacles to the success of R&D, choosing the right ingredients for your strategy, and pressing to test it before hitting it.

Overcoming the barriers to successful R&D

The first step to building an R&D strategy is to understand the four main challenges that modern R&D organizations face:

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