Research and development (R & D) service providers perform original investigation or apply research findings to gain new knowledge; they use this knowledge to create new or improved technologies intended to provide a competitive advantage for the business or organization which has requested their services. Industrial R & D is specifically defined as the process of obtaining new knowledge that will eventually result in new or improved products, processes, systems, or services that will benefit the company's sales or growth.

A general R & D process.

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Research and development is similar to engineering but is a distinct process with unique goals. R & D creates knowledge, develops designs, and moves on to creating — and proving the feasibility of — prototypes and samples. Engineering, which follows R & D, converts these samples into marketable or economically feasible products or processes.

R & D may be defined as three separate sub-processes: basic research, applied research, and development. Each of these may be more or less prominently involved in the research and development process, depending upon the scope and type of project.

• Basic research attempts to attain a fuller knowledge or understanding of the research subject. In an industrial sense, basic research is used to further knowledge about a subject without a specific commercial objective.
• Applied research involves investigation aimed at discovering new knowledge related to a specific commercial objective involving products, processes, or services.
• Development is the application of obtained research to the production of useful or commercially viable materials, products, devices, systems, or methods. This also includes the production of prototypes and sample processes.

Internal vs. External vs. Joint R & D

Research and development service providers are a form of external R & D, meaning they specialize in contracting with manufacturers and businesses to provide specialized research and development. This is in contrast to internal research and development which is performed in-house at a company laboratory or test facility. Joint R & D, a third type, is performed between various companies or organizations acting as a consortium to further a specific industry or technology.

The table below compares the advantages and disadvantages of these three types.

Project Considerations

Industrial research and development is typically performed as a part of a large project with specific technical or business goals, assigned personnel, and time and money constraints. Project managers must determine whether contracting a research and development house will contribute to their long-term investment and probability of success.

In many instances, unique technology required to undertake a project or produce a product is available on the marketplace, albeit for a price. For this reason, corporate management or project managers should perform a "make or buy" analysis when justifying the time and resources necessary for an R & D service, as opposed to simply finding and purchasing the technology. Four factors must be considered as part of this analysis:

• Proprietariness: if the technology can be safeguarded as proprietary and eventually patented, its value to the company will be much higher and R & D resources can easily be justified.
• Timing and growth rates: if market growth is slow, R & D is probably the best option for obtaining new technology. If market growth is faster, the R & D process will likely be too long and costly to benefit the company or project.
• Risk: investing in any R & D work is inherently risky. Careful forecasting and monitoring must be performed to maximize decision-making accuracy.
• Cost: R & D involves a substantial up-front investment and longer periods of negative cash flow than simply purchasing the rights to a technology. The project should be analyzed with this fact in mind.

The rewards associated with research and development work are very high, but the process itself is costly and risky. While many companies use R & D processes to stay ahead of and gain a commercial advantage over competitors, failed projects — like successful ones — consume large amounts of resources regardless of their success rates.

Capabilities

Dedicated R & D houses typically specialize in a certain type of engineering or industrial market. These can include:

• Aerospace
• Biomedical (BME)
• Chemicals/materials
• Electrical/electronic
• Environmental
• Geotechnical
• General industrial
• Mechanical
• Nuclear

• Petroleum

• Software/systems

Specific R & D Services

In addition to specializing in niche markets, research and development service providers may also offer specific R & D services, some of which are described below.

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Standards

Research and development houses may comply with — or base their services on — one or many R & D standards. These documents may outline the entire R & D process, or pertain to a specific element of research and development work, such as budgeting, testing, or the use of live subjects. A few examples of these standards are listed below.

• AFR 80-3 -- R & D management in Air Force labs
• DIN EN 12741 -- Biotechnology labs for research, development, and analysis
• SECNAVI 3900.13 -- Management of Navy R & D labs

Service Provider Location

Users searching for R & D houses on IHS GlobalSpec may specify the service provider's location. Selecting a location close to the contracting company has several advantages, including reduced lag time, lower shipping costs, and potential ease of communication. Location is also important to consider when planning technology transfer as described above.

References

Gale Small Business Encyclopedia - Research and Development

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