Understanding the Difference Between R&D and NPD

Understanding the Difference Between R&D and NPD


Research and development (R&D) can have positive effects on your business and industry. Despite this, some organisations use the terms R&D and new product development (NPD) interchangeably and incorrectly.

These two terms have vastly different meanings. In fact, the two acronyms and project types are complementary in nature. If you’re working on an NPD project, you need to understand how it differs from R&D. This can reduce your risk for errors when you apply for any grants and support, especially if you’re considering applying for an R&D incentive – a common error you can make if you aren’t aware of the distinct nature of NPD projects.

In this blog, we examine the difference between NPD and R&D, and how this can impact your chances to claim the R&D tax incentive.

What is NPD?

NPD uses known technologies to create something new that meets customer needs, which can be easily reproduced and distributed. The NPD process differs from company to company, but there are some key features that make NPD distinct from R&D, no matter the organisation or industry.

Generating Ideas

Planning strategic brainstorming sessions is paramount to successful idea generation. It empowers all staff to contribute ideas and ways to combat customer problems or what they think the customer needs to have a better experience with your business. These ideas aren’t ready to be rolled out – they are raw, unfiltered, ready for refining and development in later stages.

Screening Ideas

During this phase of the NPD project, you should choose the idea with the strongest chance to achieve good outcomes. Once again, this section encourages staff to pitch their idea – everything from the strengths to its weaknesses.

Developing and Testing Concepts

Once the idea has been determined, you can now begin developing and testing various product concepts that coincide with the chosen idea. This can incorporate analysing customer behaviours, studying competitors, and testing the concepts with a selection of consumers.

Establishing Business and Market Strategy

This stage of the NPD project is when you will determine how your organisation will reach out to your intended audience. It’s also a chance for your business to work out if this NPD is worth the investment. Creating a sound business and marketing strategy are key to a successful NPD project.

Product Development and Deployment

Once the marketing and business strategies have been finalised, you can progress to the product development stage. It is here that your organisation can create a prototype, focusing on how to make the product as user-friendly and practical as possible.

After the prototypes have been made, you can deploy the product to various audiences for testing before distributing out on a larger scale for public consumption.

Marketing the Product

Now that the product is publicly available, marketing the product is integral to boosting sales and maximising your products’ prospects and overall outcomes.

Setting R&D Apart From NPD?

To be eligible for the R&D tax incentive, your R&D project must generate knowledge and the outcome of said project mustn’t be known or determined in advance. Additionally, your R&D project must follow a logical and linear order of operations that mimic scientific methods, even if your work isn’t scientific in nature.

While there is a chance that some elements of your NPD project might cross over into R&D territory, it might not be enough to fully qualify. 

For example, developing new mobile phone products via an NPD project might have some overlap with R&D, but there won’t be enough R&D specifics for the project to be fully eligible. 

But if, for instance, you worked on a robotics R&D project and produced a new product as part of your research, then you might be qualified for the R&D tax.

So while you might be able to claim some aspects of your NPD on the R&D tax, it must have elements of an R&D project in order for it to qualify – specifically the scientific methodology that is the core component of all R&D projects.

Want to Learn More?

Understanding the difference between R&D and NPD is vital for claiming an R&D tax incentive in your country.

If you’re still unsure if your NPD project grants you eligibility for the R&D tax incentive, or if you want to learn how to streamline your research processes, you can sign up to one of our workshops today. Our team will provide unmatched expertise in all matters pertaining to R&D.


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