What Goes In To Planning An Effective R&D Process?
Businesses will often spend a large amount of time and money on developing new products, services or processes, or enhancing existing ones. This work is generally considered to be Research and Development (R&D).
R&D is vital for future growth and in ensuring a product does well in the marketplace going forward. It’s commonly (mistakenly) thought that R&D is the preserve of pharmaceutical firms or big technology conglomerates, but this actually isn’t the case. In fact, just about all consumer goods companies put a lot of resource behind developing new versions of products or updating existing designs, and R&D Tax Credits are available for helping towards the cost.
Types of R&D research
When it comes to claiming R&D Tax Credits, the Revenue is only interested in two main types of research:
Basic research essentially looks to understand a subject matter in more depth and build on the body of knowledge related to it. This research doesn’t have a lot in the way of commercial or practical application however the findings that result are generally of great interest to the company.
Applied research is concerned with specific and more directed objectives and works towards addressing a particular industry/customer requirement. It’s about focussing on specific commercial goals regarding processes or products.
Getting to grips with the terminology
It’s easy to confuse the terminology here, and although there’s a lot of overlap there are still substantial differences. This is why it’s important to highlight these differences and understand them.
R&D is when a new body of knowledge is created about existing products, services or processes, or about something which is entirely new. It’s creative and systematic work, and the knowledge that results can then be used to formulate new materials or whole new products as well as in altering and improving ones already out there.
Design occurs when an idea is transformed into information which then leads to a new product or service. The term is interpreted slightly differently between countries and marketing approaches can also vary.
Innovation is when one of two events occur, or a combination of both. This could either be the development (and subsequent marketing) of a technical invention or the move into a new market that’s just opening up. If a product, process or service is invented in the absence of demand, then it can’t be classed as an innovation.
Many people think of product design as the superficial appearance of a product, however this is not entirely true; product design is actually about far more. It’s a process that’s cross-functional and includes market research, design of a concept, technical research, creating prototypes, and finally creating the product for launch. Typically, it’s the refining of a product that already exists, rather than a newly created product.
New product development
This is a management term where there is no new invention, however some change in the materials, appearance or marketing of a product has occurred. In basic terms, it’s the conversion of an opportunity or particular market need into a new product or an upgraded one.
So what is the basic R&D process?
Generally speaking, the R&D process flows something like this:
Coming up with ideas
This is the first stage where the research team will come together to brainstorm. Discussions are likely to start with an understanding and itemisation of issues being faced in that specific industry before being whittled down to core areas of concern or opportunity.
Focussing on specific ideas
The initial ideas that come about are probably pretty random, general and rather broad. At this stage, the team will work to sift through them and ring fence ideas that have potential - or at least are not totally out of left field. This is also now the chance to look into products that already exist consider whether the ideas are truly original. The team will also consider how well the best ideas could be developed.
Once an idea has gone through a thorough research process, it can then be combined with a market survey for the purposes of assessing market readiness. Ideas that have true potential are again narrowed down and the conversion of research into a marketable commodity can now begin.
Creating prototypes and carrying out trials
At this stage, researchers are likely to collaborate closely with product developers to work out how a particular idea can be turned into an actual product. As the process continues, the prototype may begin to become more complex and issues such as how to mass product it - and market it - will become more pressing.
Bringing it to market
The product is now taking shape and the process that began with R&D splits into relevant areas required to bring it to the marketplace. Regulatory aspects are considered and work starts on meeting all the criteria for approval and launch. The marketing function starts to develop strategies and prepare their materials while sales, pricing and distribution also begin to take shape.
What started life as just a research question is now ready for its toughest test yet: the big launch. Even at this late stage the product is still being regularly evaluated and this will continue indefinitely. There may well still be re-designs long after launch if required, or the whole thing could even still be abandoned. This has been known to happen if, for example, the research didn’t reveal what the company needed to know or the product’s feasibility is called into question. This is what makes it so important not to get too emotionally invested in the project, and to analyse each idea in detail throughout the process.
Obviously what happens at each stage depends on the company and what work is being carried out, but in our experience we’ve found clients follow roughly these same process steps.
Talk to the experts at Tax Cloud
Expertly put together by the skilled team of accountants and consultants at Myriad Associates, the Tax Cloud calculator can help you to navigate the application process for R&D Tax Credits easily and quickly. It will help you make the most comprehensive case possible, offering the maximum chance of success.
If your company is based in Ireland and you would like an informal discussion about any aspect of R&D Tax Credits, feel free to get in touch with us today on +353 1 556 2001 or use our contact page.
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