Imagine a scenario like this:

A business leader and Head of R&D discuss potential product development:

Business leader: Our market research indicates a strong interest in a smart home security system. Potential customers have budgets of around $500. What would development entail?

‍Head of R&D: Well… we're looking at approximately $2 million in research & development costs and a two-year timeline.

What is the next step? At Strategyzer, we advocate for "Business R&D". This concept works alongside or independently of traditional R&D. Let’s examine just how these two methods differ and how businesses can use them to foster long-term growth.

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Traditional R&D: an outdated innovation model

Traditional R&D, once the cornerstone of innovation, focused on long-term exploration and experimentation across various fields. While responsible for significant advancements, this model is now insufficient for modern innovation needs. Its limitations include:

• High investment requirements
• Isolation from market demands
• Extended development cycles
• Emphasis on feasibility over desirability and viability

These factors contribute to diminishing returns on R&D investment today. While not obsolete, traditional R&D must evolve to meet contemporary innovation challenges.

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What is “Business R&D?”

Business R&D is a more modern approach to innovation. It integrates innovation with corporate strategy and market demands. It focuses on value propositions and business models, considering multiple innovation risks (desirability, feasibility, viability, and environmental fitness). This approach:

• Aligns closely with business strategy and customer needs
• Employs customer development, lean startup, and design thinking principles
• Emphasizes rapid prototyping and iterative development
• Ensures innovations are market-ready and strategically aligned
• Drives competitive advantage through relevant and timely research efforts

By integrating with business units, Business R&D creates value-driven innovations that directly support company objectives.

Business R&D integrates innovation with corporate strategy and market demands. It focuses on value propositions and business models, considering multiple innovation risks (desirability, feasibility, viability, and environmental fitness).”

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What are the key differences between traditional R&D and Business R&D?

The following table outlines the primary distinctions between traditional and business R&D approaches. While some overlap may exist in practice, these differences highlight the general tendencies in each domain.

A complementary approach

Business R&D offers speed and market relevance, while traditional R&D provides depth for groundbreaking innovations. Industries like pharmaceuticals demonstrate the need for both: traditional R&D for molecular breakthroughs, and Business R&D to develop sustainable revenue models for new treatments.

Just look at how revolutionary AI as a technology has been, yet over 85% of AI startups will be out of business in 3 years because they have not found a sustainable business model.

Optimal innovation strategies integrate both approaches: leveraging traditional R&D for scientific advancements and Business R&D for market-driven innovation and sustainable business models. The most successful companies foster synergy between these two R&D methodologies.

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Now imagine a different scenario

A Business leader (BL) and Head of R&D (R&D) discuss potential product development:

BL: Our market research indicates a strong interest in a smart home security system. Potential customers have budgets of around $500. What would development entail?

R&D: Well, we're looking at approximately $2 million in development costs and a two-year timeline.

BL: I see. That's longer than ideal, given market volatility. We also identified interest in smart thermostats, voice-controlled lighting, and water leak detection systems. Are there any quicker options?

R&D: Hmm… We could develop the smart thermostat using existing technology much faster and cost-effectively.

BL: Interesting. Let’s conduct further research to determine which features customers value most.

BL: Sounds good. Let us know if you need a prototype.

BL: Not yet. First, let’s use storyboards to gather initial feedback, then return with more specific requests.

BL: You’re right, that would be a safer approach. I’m looking forward to those insights!

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Innovating for the future with Business R&D

As the pace of business accelerates, integrating R&D with business strategy will become increasingly important. Business R&D is not about replacing traditional R&D but rather complementing it. By understanding the strengths and limitations of each approach, companies can build a robust innovation strategy that drives immediate and sustainable growth.

The future of innovation lies in this hybrid model, where traditional R&D provides the deep, foundational insights needed for breakthrough science and technologies, and business R&D ensures that these innovations are closely aligned with market needs and can be commercialized. Together, they form a powerful engine for growth in an increasingly competitive and dynamic business environment.

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_{This article has been edited from the original published on Alex's Linkedin.}