Research, Development & Innovation (DP IB Business Management): Revision Note

The importance of research and development

• Research and Development (R&D) involves scientific and technological research to identify new materials, innovate new products and improve processes

  • Its aim is to improve customer satisfaction by providing products that meet their changing needs in a profitable way

  • R&D can involve the development of prototypes, carrying out product trials and safety testing

Benefits of research and development

• Competitiveness

  • Research and development (R&D) helps businesses create new and improved products, giving them a competitive edge or first-mover advantage

  • Innovation allows companies to stay ahead of rivals and adapt quickly to market changes

    • E.g. IBM has moved away from hardware to focus on high-impact innovation. Its R&D efforts have made it a leader in hybrid cloud computing, artificial intelligence (AI), and quantum computing

• Market expansion

  • R&D supports the development of new products or changes to existing ones to reach new customer groups or enter new markets

  • This helps businesses grow and appeal to different market segments

    • E.g. Johnson & Johnson spent £11.87 billion on R&D in 2022, leading to growth in markets like China and Japan through new therapies and AI technology

• Improved profits

  • R&D can help businesses discover more efficient production methods or create sustainable materials, reducing costs

  • It can also result in innovative products that can be sold at higher prices

    • E.g. Thanks to R&D, the cost of producing solar panels has dropped by nearly 99% over 40 years. Panels are now made in larger quantities, with better quality and lower production costs

• Intellectual property

  • R&D often leads to the creation of patents, trademarks and copyrights

  • These provide legal protection and help stop competitors from copying ideas, creating barriers to entry

    • E.g. In 2022, Apple invested over £23 billion in R&D. It held nearly 80,000 patents and listed £1.84 trillion in intangible assets, helping protect its innovations from being copied

• Staff recruitment and retention

  • Innovative businesses attract highly skilled employees who want to work in creative and forward-thinking environments

  • Hiring top talent improves competitiveness and supports long-term success

    • E.g. Lego promotes its workplace as exciting and inspiring to attract applicants. The company encourages creativity and innovation in its team environment

Drawbacks of research and development

• It is often expensive, as it requires specialist staff, financial resources and facilities to conduct

• A high failure rate - only around one in ten ideas researched achieves market success

The importance of innovation

• Innovation brings new products to customers and new processes that can lead to greater business efficiency

• It also also plays a vital role in economic growth

  • It drives societies forward, can improve quality of life and can address some of the world's most significant challenges

Examples of innovations that seek to solve global challenges

Innovation	Description
JustOne Africa's water filter	This gravity-operated water filter is distributed by the charity across Kenya The filter kit provides up to 20 litres of clean water in about 30 minutes Developed from technology used in kidney dialysis machines, it removes all harmful bacteria and pollutants This improves health and reduces instances of preventable disease In turn, levels of school attendance are improved, helping to improve Kenya's long-term economic development
Armco's carbon capture technology	Armco, one of the world's largest energy and chemicals companies, is developing carbon capture technologies that draw out CO2 emissions at source or directly from the air These emissions are then transported away, stored deep underground or turned into useful products The International Monetary Fund emphasises the importance of this technology for tackling climate change

The importance of meeting unsatisfied needs

• R&D helps businesses to meet customers' unsatisfied needs

  • Market research identifies needs of which customers are already aware

  • Innovative products can meet needs of which customers are not yet aware

  • New processes can improve product quality that satisfy customer needs more fully

• Successfully meeting customer needs is likely to lead to business success

  • Customer loyalty should grow

    • Loyal customers continue purchasing a brand over time

    • Reduced need to constantly attract new customers 

  • Competitive advantage

    • Meeting customer needs better than rivals is a key differentiator

    • Customers are more likely to choose a business that consistently meets their needs

  • Adaptability

    • Meeting customer needs requires staying alert to changes in trends

    • This positions a business to predict and address future needs 
      

Intellectual property protection

• Intellectual property rights (IPRs) protect inventions, creative works and some specialised processes from being copied

  • This protection encourages spending on research and development 

  • Possessing important IPRs can provide a valuable competitive advantage 

• There are three main types of IPRs

  • Copyrights

  • Patents

  • Trademarks

Comparison of intellectual property rights

Incremental and disruptive innovation

• Innovation can be incremental or disruptive

  • Incremental innovation is the gradual, small-scale improvement of products, services or processes over time

    • The design and components of Proctor & Gamble's Ariel laundry detergent has changed gradually over time

    • New features and upgrades are added to each new Apple iPhone release such as improved camera performance and security features

  • Disruptive innovation involves developing a significant changed or entirely new product which disrupts the existing market

    • Amazon's Kindle was the first affordable e-reader which changed the market for books

    • The revolutionary design and function of Dyson's bagless cylinder vacuum has led to rapid growth for the business