How your business can lead your industry with R&D

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Google, Tesla, Apple … These are all companies that we associate with innovation and technological advancement. Of course, we know that the developments that they make in the world of business come down to tons of research and development (R&D). With all the resources at their disposal, they have the groundwork to make innovation a breeze.

Since many small business owners are focused on their day-to-day survival in a competitive marketplace, many do not believe that R&D is possible for them, or, that even if they were to invest in research, the advances that they make would not be significant enough to achieve any real results.

This could not be further from the truth. Business owners will do well to remember that in competitive spaces, individuation is the only way to set them apart. If they are able to invest in processes, products or services that accomplish the same tasks as their competitors in a faster, more efficient way, an increased market share is sure to follow.

With effective R&D, businesses may even develop new processes, products, or services that open up a world of clients that their competitors have no access to.

Five reasons why you should invest in R&D as a business owner

  1. It provides you with a unique selling point: If you can deliver, in part or in whole, a different product/service/experience from your competitor, you will be able to use that as a platform to engage with clients that they cannot. Unique selling points are essential in setting yourself apart from others in your industry.
  2. They broaden your scope and expertise: When you invest in R&D, you gain insight into market gaps, new technologies, better materials, cost-effective methods, etc. These, in turn, will allow you to expand your range of services/products to provide clients with something that is better and more innovative than that of your competitors.
  3. You can make your innovation tax-deductible: With approval from the Department of Science and Technology (DST), the expenses you incur in R&D activities can result in a 150% tax deduction on the costs directly related to the innovation. The tax incentive is outlined in Section 11D of the Income Tax Act (No. 58 of 1962). Many businesses are wasting the opportunity to capitalise on their passion for innovation. Be sure to speak to your tax adviser on how to make use of the incentive.
  4. It has long-term benefits: Nobody ever tends to remember second place; people are much more likely to recognise the name Lance Armstrong than Buzz Aldrin. Investing in R&D can turn you into an industry leader known for firsts (rather than the company that just follows the trend). Bringing something new to the table also gives you ownership over new intellectual property, which, by law, can be protected.
  5. Collaboration and funding are easier: Finding external funding from investors for your business can be difficult if you have nothing to set you apart from others in your industry. If you can prove that investors’ money will be put to good use and that they have something to gain by investing in your business’s R&D, securing funds becomes that much easier. Not only can innovative ideas give you access to capital resources, but also human resources. If you are able to collaborate with a scientific/academic institution to develop your products and services, it can make the R&D that much easier.

Taking the time to develop a strategy for innovation can be difficult. How then can you, as a small or medium-sized business, approach R&D in a way that doesn’t waste time or money, but puts you in the driving seat of your future growth with a high return on investment (ROI)? Essentially, R&D for small and medium-sized businesses can be broken down into two paths: learning-about, and learning-by-doing.

Learning-about is about taking time to read, research and discover new ways of doing things and finding gaps that need to be filled (gaps that others have either not noticed yet, or have failed to address adequately). Learning-by-doing is all about experimentation. For instance, by attempting new approaches to your processes or services, or integrating new materials into your product to make it more efficient or environmentally conscious, you are learning-by-doing.

However, developing a strategy for knowing at which point to abandon certain avenues of research will be vital in keeping your costs and time-expenditure at a minimum. With a good strategy and focused financial advice in place, businesses of any size can reap the rewards of R&D. At the end of the day, R&D rests on progress and innovation. And so, business owners must also be willing to take on the risk of R&D to reap the rewards it holds. They must also understand that failing to invest in R&D might be the greater risk.


This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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