How much company profit should be plowed back into a business? How much of the plowed back profit should be invested in research and development towards company growth? The answers to these questions are determined by the vision of the leaders of the business.
Research and development for business growth is the financial, capital, and physical input, removed from company’s net profit, to understand better, products, services, modes of operation, marketing, distribution, storage, production, products…
It’s easy to get stuck in the status quo. It’s easy to still use the same technology used thirty years ago for production. When a company realizes profit, it begins to feel it has reached the maximum yield-when it can still do so much more.
Relevance is essential to the growth of any firm within an industry—because, just as a breakthrough in production rate is recorded, competition hears news of it and begins to plan its own breakthrough—which will be bigger than the first.
To stay relevant, a company must stay atop of trend, technology, and general information. They do this in two major ways: First, they make heavy investments into product or marketing or distribution or production process research—depending on their decisions; second, they buy start-ups that seem to have a technology that will either; be a competition to their brand, or complement their brand.
Staying atop can be expensive. Professionals do not come cheap but a breakthrough can increase profit of a company by as much as a billion dollars every year.
Innovative start-ups—especially tech, food, drug, bio-product, industries, are usually more research oriented. This is because their products are exposed to more risks. Mistakes can prove fatal consequences and the public generally expects nothing less than high standards in their production process (from the beginning to the end); they are usually heavily regulated and since their products can alter the lives of billions, they take crucial steps to protect themselves and their products from external violation.
For the lean entrepreneur, the market is the same—only smaller, and the competition can be just as stiff. The lean entrepreneur, who has a vision to grow in the industry, and perhaps become a shark in the market, has to sacrifice a portion of income to proper research. The market can never be judged from a distance. With trade and trend, things are never as they seem, until they become completely conspicuous—and at this moment, there really isn’t much an entrepreneur will be able to do. It takes proper research to stay atop of trends. Existing trends may soon fade away and products that are built to satisfy such trends soon become irrelevant.
Research is the backbone of the first world as billions are invested every single year on technology advancement. Both private and government sectors of the first world welcome innovations—even if they are yet to become breakthrough. Even in thirties, over forty million dollars was invested in the Xerox machine. They might have gotten it wrong—as it surely happens with some products, but they got it right and today, the Xerox machine has become one of the most significant home and office appliances in the 21st century.
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