Introduction

• Innovation: practical application of new inventions into marketable products.

The importance of research and development

• Research and development (R&D): scientific research and technical development of new products and processes.

• Benefits of successful R&D spending to business:

  • Competitive advantage: what sets your business apart from your competition.

  • Intellectual property rights: rights given to persons over the creations of their minds.

  • Customer loyalty: the fact of a customer buying products/services from the same company over a long period of time.

  • High, premium prices

  • Publicity: media attention for your product, service or business.

  • Lower costs

• Limitations of research and development:

  • R&D does not always lead to an invention/discovery.

  • R&D is expensive and has an opportunity cost

  • Inventions do not always lead to successful innovative products

  • Competitors’ R&D spending

  • Ethical issues

Intellectual property rights

• Intellectual property refers to creations of the mind such as inventions, literary and artistic works and symbols, names, images and designs used in business.

• Intellectual property rights: legal property rights over the possession and use of intellectual property.

• Copyright: legal right to protect and be the sole beneficiary from artistic and literary works.

• Trademark: distinctive name, symbol, motto or design that identifies a business or its products - can be legally registered and cannot be copied.

Types of innovation

• 4Ps Innovation Model:

  • Product innovation: introduction of a good/service that is new or significantly improved with respect to its characteristics or intended uses.

  • Process innovation: implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.

  • Positioning innovation: repositioning, taking a product/service and offering it in a new market, or with a new slant.

    • Example: AirBNB which originally positioned around conferences before moving into the general holiday and traveller industry.

  • Paradigm innovation: shifting of an underlying mental model via a change.

    • Examples: Henry Ford and the motorcar; iPhone

• Example of a 4Ps innovation model for Aviva (European-based insurance and pension business):

  • Product innovation:

    • Providing more products that can be tailored to individual needs, e.g. additional options to basic products

    • More customer-orientated product development to suit changing customer profiles: “A product for each stage of your life”

  • Process innovation:

    • Making it easier to access information, e.g. launching phone app for updates

    • Increasing content available online, e.g. a virtual online assistant for frequently asked questions

  • Positioning innovation:

    • A traditional life insurance provider

    • Marketed as a household brand name that people can trust. Taking advantage of the history and the heritage of the firm

    • A mass-market provider as opposed to a niche provider

  • Paradigm innovation:

    • Changing public opinion of financial services

    • Becoming family-orientated

    • Educating people on financial responsibility

Factors affecting R&D practices and strategies in an organization

• Nature of the industry

• R&D and innovation spending plans of competitors

• Business expectations

• Risk profile or culture of the business

• Needed finance for effective R&D

• Ethical considerations