Research And Development - R&D
Categories: Company Management
What is it? Well, most boringly, it's work directed toward the innovation, introduction, and improvement of products and processes.
Why is this important? Well, if you don't innovate, if you play it safe, especially in tech, you end up the laughing stock of the world. Like Nokia and Yahoo and AOL. Long-term great companies spend a lot on R&D in different areas. For Disney, it's about not being afraid to fail in producing creative product. For Coke, it's about trying new marketing spins on addictive caffeine drinks that are proven to deliver liver, stomach, and kidney cancer to the masses. Same deal, more or less, for McDonald's.
R&D doesn't have to be about reinventing a product that already works well...but that helps. Think about how slow and clunky the original iPhones were versus those coming out today. And guess where they'll be in a decade.
R&D is an interesting spend for already profitable companies, in that the costs of R&D are totally tax-deductible. So the government essentially splits a big part of the costs of that spend when hugely profitable companies research to make their products better. It sorta lets the haves have more, favoring the already established.
And the have nots...well, they'd better have amazing insight into the future, or that R&D money is very expensive in not being tax-deductible (i.e. they don't pay taxes because they have no profits).
