The different meanings of R&D

Research and devel­op­ment (R&D) is some­thing that almost all com­pan­ies with­in the tech­no­logy sphere do. But what it means var­ies widely. For some, R&D is driv­en by the mar­ket­ing team, research­ing cus­tom­er pref­er­ences to help design­ers tweak exist­ing products or cre­ate new ones that align with mar­ket demands. For oth­ers, R&D is about sci­entif­ic research, aim­ing to solve engin­eer­ing chal­lenges or devel­op new found­a­tions for tech­no­logy break­throughs. Most com­pan­ies that devel­op new products lie some­where between these two extremes. From the out­side, it is dif­fi­cult for stake­hold­ers to judge the true nature and qual­ity of a company’s R&D. How­ever, by using simple mod­els, it’s pos­sible to gain insights into how qual­i­fied a company’s R&D efforts truly are. This art­icle presents such a mod­el that is straight­for­ward to use.

R&D Evaluation Matrix

We intro­duce the R&D Eval­u­ation Mat­rix to bet­ter under­stand and eval­u­ate a company’s R&D efforts. This 2×2 mod­el cat­egor­izes R&D activ­it­ies along two key dimen­sions: the type of innov­a­tion and the driv­ing force behind it.

Innovations

The hori­zont­al axis of the R&D Eval­u­ation Mat­rix rep­res­ents the out­come of the R&D, dis­tin­guish­ing between two types of innovations:

Incre­ment­al Innov­a­tion (left side) involves small, con­tinu­ous improve­ments to exist­ing products, pro­cesses, or ser­vices. This type of innov­a­tion focuses on refin­ing what already exists to optim­ize per­form­ance, reduce costs, or enhance user exper­i­ence. It is about mak­ing steady advance­ments that provide imme­di­ate, tan­gible bene­fits to the cur­rent offerings.

Dis­rupt­ive Innov­a­tion (right side) focuses on ground­break­ing changes that can redefine mar­kets or cre­ate entirely new ones. This innov­a­tion emerges from explor­ing new ideas, tech­no­lo­gies, or approaches that break away from con­ven­tion­al meth­ods and chal­lenge exist­ing paradigms, often res­ult­ing in revolu­tion­ary products or ser­vices that trans­form the mar­ket landscape.

Driving forces

The ver­tic­al axis of the R&D Eval­u­ation Mat­rix reflects the motiv­a­tion behind R&D activ­it­ies, dis­tin­guish­ing between two fun­da­ment­al driv­ing forces:

Mar­ket-driv­en (top half) is not primar­ily sci­entif­ic but is focused on invest­ig­at­ing to gain know­ledge about mar­ket demand, product-mar­ket fit, and com­pet­it­ive pos­i­tion­ing. This know­ledge comes from sources such as ana­lyt­ic­al reports, cus­tom­er sur­veys, and data from exist­ing cus­tom­ers. The object­ive is to align product devel­op­ment with expli­cit mar­ket needs, solve cus­tom­er prob­lems, or anti­cip­ate future trends based on mar­ket signals.

Tech­no­logy-driv­en (bot­tom half) aligns more closely with sci­entif­ic research. This involves applied research to acquire new know­ledge and solve spe­cif­ic tech­no­lo­gic­al prob­lems or exper­i­ment­al devel­op­ment to cre­ate or improve products and pro­cesses. This approach is often a sys­tem­at­ic effort, build­ing on pri­or research and prac­tic­al exper­i­ence to expand tech­nic­al cap­ab­il­it­ies and push the bound­ar­ies of what is pos­sible, regard­less of imme­di­ate mar­ket demand.

Strategic archetypes

Com­bin­ing these two dimen­sions – the type of innov­a­tion and the driv­ing force – the mat­rix defines four dis­tinct stra­tegic arche­types rep­res­ent­ing com­pan­ies’ dif­fer­ent approaches toward their R&D efforts.

Sat­is­fier: In the top-left quad­rant, Sat­is­fier focuses on incre­ment­al innov­a­tions driv­en by mar­ket needs. Com­pan­ies in this quad­rant con­cen­trate on con­tinu­ous improve­ments to exist­ing products, guided by mar­ket research, cus­tom­er feed­back, and com­pet­it­ive ana­lys­is. The aim is to enhance cur­rent offer­ings, such as refin­ing design, func­tion­al­ity, or redu­cing costs, to meet present cus­tom­er demands better.

Dis­ruptor: In the top-right quad­rant, Dis­ruptor focuses R&D efforts on dis­rupt­ive innov­a­tions that are still driv­en by mar­ket needs. Com­pan­ies here seek to cre­ate new products or ser­vices that redefine or expand exist­ing mar­kets. They are highly respons­ive to mar­ket sig­nals, like shift­ing con­sumer beha­vi­ors, emer­ging trends, or unmet needs.

Optim­izer: In the bot­tom-left quad­rant, Optim­izer engages in incre­ment­al innov­a­tion driv­en by tech­no­lo­gic­al needs. Com­pan­ies in this quad­rant focus on enhan­cing exist­ing tech­no­lo­gies or refin­ing pro­cesses to solve spe­cif­ic engin­eer­ing prob­lems or optim­ize pro­duc­tion meth­ods. The goal is to improve tech­nic­al found­a­tions for great­er effi­ciency, scalab­il­ity, or robust­ness. This approach is vital in com­pet­it­ive envir­on­ments where tech­no­lo­gic­al superi­or­ity and cost-effect­ive­ness provide sig­ni­fic­ant advantages.

Explorer: In the bot­tom-right quad­rant, Explorer is focus­ing on dis­rupt­ive innov­a­tions driv­en by tech­no­lo­gic­al needs. Com­pan­ies in this cat­egory pur­sue break­throughs that could trans­form entire indus­tries or cre­ate new ones. Their efforts are highly explor­at­ory, driv­en by curi­os­ity and sci­entif­ic inquiry into unknown ter­rit­or­ies. They are less focused on imme­di­ate mar­ket needs and more on the poten­tial for new tech­no­lo­gies to revo­lu­tion­ize the future.

Interpreting the R&D landscape

By plot­ting a company’s R&D activ­it­ies on this mat­rix, stakeholders—such as investors, board mem­bers, and stra­tegic partners—can bet­ter under­stand the company’s innov­a­tion focus. Are they pri­or­it­iz­ing incre­ment­al improve­ments or aim­ing for dis­rupt­ive break­throughs? Are their efforts primar­ily guided by mar­ket demands or driv­en by tech­no­lo­gic­al advance­ments? This frame­work cla­ri­fies the company’s stra­tegic dir­ec­tion, risk pro­file, and growth potential.

For example, a com­pany that falls primar­ily with­in the Sat­is­fier quad­rant may be per­ceived as risk-averse but highly attuned to cus­tom­er needs and com­pet­it­ive pres­sures. This can be ideal for busi­nesses oper­at­ing in mature mar­kets where dif­fer­en­ti­ation comes from per­fect­ing exist­ing offer­ings rather than cre­at­ing new ones. On the oth­er hand, a com­pany heav­ily posi­tioned in the Explorer quad­rant might be viewed as a high-risk, high-reward entity. These com­pan­ies often bet on future tech­no­lo­gic­al break­throughs that could pay off enormously.

Strategic reflection and alignment

Moreover, the mat­rix can help com­pan­ies reflect on their cur­rent R&D strategies. Examin­ing which quad­rants their activ­it­ies fall into, they can ask them­selves wheth­er their cur­rent focus aligns with their long-term goals. Should they be invest­ing more in dis­rupt­ive innov­a­tions to ensure future growth? Are they too focused on short-term mar­ket needs at the expense of long-term tech­no­lo­gic­al explor­a­tion? The mat­rix offers a frame­work for such stra­tegic introspection.

Conclusion

In con­clu­sion, the R&D Eval­u­ation Mat­rix enables share­hold­ers, investors and oth­er stake­hold­ers to eval­u­ate com­pan­ies by cla­ri­fy­ing their innov­a­tion strategies, dis­tin­guish­ing between incre­ment­al and dis­rupt­ive innov­a­tion, and determ­in­ing wheth­er these are mar­ket- or technology-driven.

Try the mat­rix your­self by fig­ur­ing out where Smol­tek belongs. Then com­pare your con­clu­sion with Smoltek’s own view.