Earlier this week, Innovate Forum posed this question: Does it matter if a firm generates fewer breakthrough-type innovations – as long as it is consistently delivers higher returns on its R&D investments? The reality is that as a result of redirecting the spending of research dollars into areas that are likely to lead to more immediate returns, like incremental improvements to existing products, there are, by definition, fewer resources available to spend on more radical forms of innovation.

While these more radical forms of innovation may be considered higher risk, they may also yield higher returns and/or unanticipated benefits. But the returns are often long in coming – and the benefits may not be immediately evident.

Indeed, it often takes years of basic research -- that classic, open-ended, university-driven type of research that typically has a much broader objective or outcome attached to it – to arrive at a marketable product idea or technology. Basic research simply doesn’t offer the kind of immediate payback that more targeted research efforts might. So, in this sense, basic research has much less appeal to R&D management that is being tasked with delivering results today – indeed, as it is increasingly being pressured to do.

Should this be a concern? For some, the answer to that question is a definite “yes.” For others, including those firms faced with shareholder or executive directives to generate more immediate returns on the company’s investment dollars, basic research doesn’t figure prominently into the equation. Indeed, investment in basic research might even be considered a liability for these firms.

And yet, without basic research, some of the most compelling scientific discoveries might never have been made. Decades of in-depth research and development went into the field of genetics, for example, long before being able to even consider fighting diseases using gene therapy.

The bottom line? How to best allocate R&D dollars is becoming an increasingly complex issue – one that many firms are struggling with today. To this end, the position that more and more firms are taking is that they must find some way to make their R&D dollars stretch further. So, stay tuned – we’ll be exploring this topic in more detail in the next segment in this series.