5.6 Research & development

Innovation: practical application of new inventions into marketable products.

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 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.

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