Benjamin Franklin once said, “By failing to prepare, you are preparing to fail.” The same is true when you invest in R&D without a clear strategy in place.
In simple terms, building an R&D strategy means setting clear goals, defining roles, and putting in place the right processes to make your R&D projects successful. With a solid strategy, you align your research efforts with your business objectives, instead of pouring resources into projects that won’t move the needle.
- Define the Purpose of Your R&D Department
The purpose of your R&D department is a cornerstone of your overall R&D strategy. To clarify this purpose, start by answering these questions:
- What is your company’s broader strategy, and how will the R&D department support it?
When you connect your R&D strategy to your company’s overall direction, your R&D team becomes an engine for growth—not a silo. It will help drive your company’s main objectives.
- How will the R&D department help you better serve your customers?
Take the time to understand the challenges your customers face. Involve teams like sales and customer success to get a detailed picture of customer needs—this will help you focus your R&D efforts where they matter most.
- Will your R&D department focus on new product development or on incremental improvements?
On average, companies put over half their R&D budget into incremental projects, but it’s the bold, innovative bets that often deliver the biggest wins. As you shape your R&D strategy, consider how much you’re investing in incremental improvements versus breakthrough innovation—and whether that balance supports your long-term growth.
As your market and business evolve, it’s essential to revisit the purpose of your R&D department to ensure it still aligns with your company’s goals.
Once you’ve answered these questions, you can dive into the practical details of your R&D strategy—starting with the people and resources you’ll need to make it happen.
- Decide Who and What You Need to Execute the Strategy
A strong strategy needs a strong team. In R&D, that means both the right people and the right technology.
Start by setting your budget—including salaries, equipment, software, and any other R&D essentials. Next, define your team’s structure and roles. R&D teams often include engineers, scientists, and R&D managers, but your lineup should reflect your company’s unique needs. Clearly outline responsibilities and decision-making processes so everyone knows who owns what.
Your technology choices can also give you a competitive edge. Advanced tools like artificial intelligence can speed up and enhance your R&D work. At Meta, for example, the R&D team uses AI to tackle ambitious projects while still delivering practical results. “Applied AI is creating a dual-track system: one for long-term, moonshot projects, and another that channels research into real-world products,” says Yann LeCun, Meta’s chief AI scientist.
The technology you invest in should match the products you’re developing. But every R&D department benefits from a careful review of its development process—and a clear plan for where advanced technology can make the biggest impact.
- Explore External Partnerships
Many companies partner with universities and other organizations to strengthen their R&D strategy.
The goal of these partnerships is to keep your business connected to cutting-edge research, which you can then turn into new products. For example, Coca-Cola is funding university research to help develop greener manufacturing solutions. Lululemon is supporting research on biomaterials, health, and wellness at the University of British Columbia. Some companies even fund PhD students whose research aligns with their business.
Partnering with startups is another way to boost innovation. “Startups benefit from corporate funding, resources, and access to customers, while corporations get fresh ideas, new technology, and a way to stay ahead of the competition,” explains Tawanda Sibanda, a partner at Leap by McKinsey.
- Define the Processes That Will Support Your Strategy
Think of processes as the backbone of your R&D strategy—they keep your projects running smoothly and on track. Putting the right processes in place helps you stick to your strategy and avoid costly detours.
Processes might include digital project management tools to help managers track progress and spot roadblocks before they become expensive problems. Your processes should also cover workflows for efficient project delivery and the metrics you’ll use to measure success.
These processes can be more rigid or more flexible—there’s no one-size-fits-all answer. Some industries need strict processes, while others benefit from more freedom.
“An R&D team working on highly innovative (and uncertain) technologies may need much more flexibility to explore and iterate. On the other hand, if R&D needs to be closely coordinated with other functions—like manufacturing—a more structured process may be necessary to keep everyone aligned,” says Gary P. Pisano, professor of business administration at Harvard Business School.
- Test Your Strategy
This step ensures you’re investing in the right people, technology, processes, and partners to fuel your business growth and make your solutions indispensable to your customers.
Testing your R&D strategy means making sure you’re building on capabilities that are truly strategic for your business. According to McKinsey, “R&D teams often confuse technical requirements (what’s needed to build a solution) with strategic priorities (unique strengths that let you deliver better solutions than your competitors).”
Distinctive capabilities could be drug patents, proprietary technology, or anything your company does exceptionally well—like innovation or stakeholder management. In short, your strategy should leverage the capabilities that are “critical to a company’s profits and exist in abundance within it while being scarce outside.”
Another way to test your strategy: try summarizing it clearly on a single page. If you can’t, some parts of your strategy may still need work.
Boost Your R&D Strategy with Tax Credits
Whether you’re a fast-growing startup or an industry leader, unlocking more R&D funding helps you develop products faster, invest in new technologies, and attract top talent.
In the US and Canada, companies that invest in R&D can benefit from the R&D and SR&ED tax credit programs. These programs let you recover a percentage of your R&D spending and reinvest it in further innovation.
Book a call with a tax expert to find out how you can claim your tax credit.
