The quality of the R&D department of a company highlights the strength of its intellectual capital, its market differentiation and ability to sustain growth. A stronger IP portfolio can ensure better investments and healthy returns. One should conduct timely evaluation and valuation of a firm’s IP portfolio for better investment decisions.
Understand its IP portfolio and its legal defensibility
A strong IP portfolio shows the commitment of a company to R&D as an investment strategy. Examining its appetite to stay on top of technologies’ market pulse plus a vision of the industry’s future course can help shape investments. The strength of a company’s IP portfolio lies in its legal defensibility. At various development stages, defenses to fulfil licensing demands and protect against probable lawsuits are a must.
Review the company’s product roadmap
Product roadmap is a long-term, agile, and dynamically evolving product development compass. It requires regular reviews throughout the product life cycle to ascertain the company’s strategic advantage. Product roadmap mirrors company’s business goals, corporate and functional strategies. Reviewing it gives a fair estimation to investors and the board of future revenues and costs of the company, also allowing the legal team to draft contracts to monetize the IP portfolio.
Understand the drivers for product differentiation in different segments
Product differentiation (PD) is an industrywide strategic competitive advantage perceived by customers as attributes of value. PD makes customers less sensitive to changes in price, it increases margins, and brand loyalty. By studying PD drivers of a company across segments, investors can identify and evaluate its potential to influence the entire market vis-a-vis competitor investment behavior.
Review company’s R&D investment roadmap
Review a company’s R&D roadmap to know about a company’s innovation appetite (plus commercial ambitions) and its potential to generate a high-yield (via inventing new critical technology) on its R&D investments. Assess its capability to develop new products, services, or business models. These must be geared towards developing differentiated offerings to capture strategic options in priority markets.
Investigate the relationship between the company’s R&D and that of other partners; who does the innovation?
Depending solely on the firm’s own resources and capabilities for innovation isn’t always possible (feasible) today. R&D partners’ (tacit) alliances can at times be risky as transfer and communication of technological knowledge (tough to codify and protect) occurs. Potential hazards exist if innovation is an external activity, requiring to be identified and considered to avoid the instances of inter-organizational learning crises. Investigate if core R&D (innovation) activities are internalized, gauge potential risks when facing decisions of sharing and protecting knowledge.
Explore who makes the production equipment for manufacturing the products
Identifying the efficiency levels of production equipment manufacturers’ machines can go a long way in determining the company’s production output quality. This can seal the fate of the R&D investment’s ROI. Superior manufacturing equipment can offer the company a competitive advantage in the market.
Understand the revenue impact of company’s R&D investments
Ensure the R&D function of a firm garners genuine value by delivering on and shaping the corporate strategy. Note that new machine purchases impact P&L statements (and/or subsequently the income statement). Evaluating the operational efficiency parameters of the manufacturing equipment would help in understanding its financial (revenue) impacts. Research states companies spending more on R&D tend to generate higher revenues. The income generating firms’ income statement shows details of its R&D’s future benefits.
Review the materials science impact on tape media development
Outputs from material R&D lead to new processes, new materials, new material systems, enhancements in current know-how, and fundamental research in developing new machines, instruments, equipment, and production techniques. Through these activities, new commercial activities and entirely new consumer industries are established, e.g., artificial fiber, synthetic plastics, solid-state electronics, electrostatic photocopying surfaces, and tape-recording industry. Developing new material capabilities (e.g., tape media development) transformed the music world (e.g., radio transmission), home reproduction systems, computer systems, and the television industry. So, reviewing the impact of materials science on tape media development is vital for efficient R&D.
R&D leads to invention of new products and services via innovation, giving financial advantages via new income streams and investors. Assess a company’s techno-commercial benefits’ R&D intensity to ascertain investment potential.