Might Doing Pure R&D Be Wothwhile in Some Companies?

A new study by MIT finds the United States falling behind in pure R&D (research and development), while other countries put increasing emphasis on it. This was discussed in the April 28, 2015 Wall Street Journal article “U.S. Faulted for Risking Edge in R&D” by Robert McMillan. The article explains that lack of R&D spending applies not just to our country, but also to corporations. According to the Wall Street Journal article, “the MIT authors say basic research–the study of core scientific concepts that may or may not have commercial applications–has essentially vanished from corporate laboratories.”

As I see it, this raises an interesting question about pure R&D (the term pure R&D used here means the same as basic research–both describe research that may or may not pay off commercially). The question is: to what extent, if at all, does eliminating spending for pure R&D parallel the kind of cost reduction that occurred long ago when railroads decreased track maintenance? Decades ago, railroads were cutting down on track maintenance and poor track conditions contributed to further weakness in their no longer booming business. Can lack of pure R&D weaken a business in that way?

Granted, reducing track maintenance has consequences because good track is an essential component in the railroad business. And, unlike much track maintenance, pure R&D is not essential for doing business. In fact, pure R&D may even yield nothing for the business because, by definition, pure R&D does not look for commercially applicable knowledge. Yet eventually, pure R&D might potentially discover something with business value. And, if that kind of value could have materialized, then avoiding pure R&D might actually leave a business weaker, a bit like deferring track maintenance can weaken a railroad.

Yet, this does not mean that all companies should spend on R&D not aimed at useful discoveries. Pure R&D is costly. Many companies cannot afford it. But, those companies that can and do spend on pure R&D might find that it eventually yields useful knowledge. Then, again it might not.

Nonetheless, companies do need to think about whether to invest in some version of pure R&D. The R&D doesn’t have to be as ambitious as some of the moonshot projects that Google is known for. And, it can be restricted to certain areas of research, while still not expecting commercial payoff.

Even if they could afford to do so, however, companies might hesitate to spend on pure R&D because its potential contribution to the business is uncertain. Yet, many of these same companies do invest in other areas that might be well-intentioned, but ultimately do not contribute to the business, and might even harm it. For example, they may invest in major change initiatives that don’t pan out, in forays into new markets where they have little chance of success, and in acquisitions that could never work well. Furthermore, sometimes these kinds of corporate missteps can be extremely costly, both in terms of damage to the bottom line as well as in the cost of attempting to reverse that damage. Might these companies have been better off if they had instead chosen to spend on pure R&D that may or may not yield discoveries useful to the business?

In fact, allocating some funds to pure R&D might actually help foster evolutionary steps that can lead to successful innovation, and I have written often about how success comes from evolution not revolution. Of course, due to its very nature, pure R&D may yield nothing. Still, companies need to consider whether there is potential benefit in supporting at least some version of pure R&D. Since pure R&D is an exploratory endeavor, companies considering it must recognize that, for the most part, it should entail allocating funds the business can afford to spend even if there is no payoff. This is not the same, however, as no-payoff spending for research specifically directed toward making a major change in business direction that fits the company poorly, requires seemingly endless funding, will likely never make money, and may harm the company financially.

Finally, since I have written about benefits of older technologies, some readers of this blog may wonder why someone who points to value in older technology also sees pure R&D, with its potential for entirely new technologies, as beneficial. But, because companies vary, both older technology and pure R&D can have their place.

Companies can differ in their strengths, their business models, their strategies, their corporate cultures, and the markets served, for example. To attain success, companies must pursue what fits them. For some companies, this can mean continuing to emphasize older technologies, while for others it will mean introducing the latest new technology. Many will fall somewhere in between.

Regardless of their characteristics, however, companies should embrace technology in a way that fits their own particular situation. Thus, just as not all companies should be embracing older technology, many companies will find that pure R&D–or even a limited version of it–is not for them. Success comes from finding a path that fits a company well. But, some companies that can afford it should be considering whether there is benefit in pursuing some form of pure R&D.

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