InnovateWise

What is Innovation?

Innovation is the process of taking ideas from inception to impact. It is the successful implementation of a new idea or method that creates value by solving a problem, improving a product or service, or developing a new business model. It involves more than just a creative idea; it requires transforming that idea into a tangible outcome that has a positive and significant impact, often providing a competitive advantage and driving progress in an industry.

What is Business Innovation?

Business innovation is the process of introducing new ideas, workflows, products, services, or business models that enhance a company’s value, improve efficiency, and support strategic growth. At its core, innovation is about finding better ways to solve problems, meet customer needs, and stay ahead of the competition.

Business innovation can take many forms—from launching breakthrough products to optimizing existing operations or creating entirely new ways of delivering value. Whether it’s developing a cutting-edge technology or streamlining internal processes, the goal is the same: to generate measurable improvements and drive sustainable success.

Why Business Innovation Matters?

In today's fast-changing market, business innovation is no longer optional—it's essential. It can (i) improve customer satisfaction through better solutions, (ii) increase revenue and reduce operational costs, (iii) enable faster decision-making and adaptability, (iv) differentiate a brand in crowded markets, (v) fuel long-term growth and resilience

What are Types of Business Innovation?

Each type of business innovation is focusing on different aspects of an organization:

1. Product innovation involves creating or improving products. It may include introducing new features, enhancing performance, improving quality, or developing entirely new offerings to meet customer needs and preferences.

2. Process innovation focuses on improving the efficiency, effectiveness, or sustainability of internal business operations. It involves reimagining and optimizing workflows, implementing new technologies, streamlining processes, and eliminating bottlenecks to enhance productivity, reduce costs, or minimize waste.

3. Business model innovation refers to creating or redesigning the fundamental way a company creates, delivers, and captures value. It involves rethinking revenue streams, cost structures, distribution channels, customer relationships, or the overall value proposition to gain a competitive edge in the market.

4. Service innovation entails developing new or improved services to better meet customer needs or enhance the customer experience. It may involve offering additional services, personalization, customization, or finding innovative ways to deliver services through digital platforms.

5. Marketing innovation focuses on finding creative and effective ways to promote products or services, reach target audiences, and engage customers. It may involve adopting new marketing channels, utilizing social media strategies, implementing influencer marketing, or developing innovative advertising campaigns.

6. Organizational innovation involves redesigning the internal structure, processes, or management practices of an organization. It may include adopting new decision-making models, implementing agile methodologies, fostering a culture of innovation, or promoting collaboration and knowledge sharing across teams.

7. Technological innovation refers to the development or adoption of new technologies to drive business growth and transformation. It may involve leveraging emerging technologies, such as artificial intelligence, machine learning, blockchain, augmented reality, or the Internet of Things (IoT), to enhance products, services, or operations.

What are Development Methods?

What are Evaluation Methods?

How to Finance Business Innovation?

Tax subsidy on R&D expenditures is available for both large firms and SMEs in all EU countries with rates up to 50%. In Ireland the RDTC rate is 30%. Considering 12.5% tax rate, the subsity effectively amounts to 42.5%.

When considering making an R&D tax credit claim in Ireland, it is important that R&D can happen not only in a R&D department but in any part of the business. For example, any activity that generates new scientific or technological knowledge might be eligible.

Common examples of R&D activity include: developing a new or improved product; redesigning a production process; experimenting with a new material. 

Overview of the R&D tax credit

The tax credit operates on a group basis and is available to companies, within the charge to Irish tax, that undertake R&D activities in the European Economic Area (EEA) or the UK. 

Key facts for Ireland

1. The R&D tax credit amounts to 30% of qualifying expenditure. 
2. Considering the trading deduction for R&D spend a net subsidy increases to 42.5% (i.e. 12.5% is corporation tax deduction). 
3. Eligible expenditure includes expenses such as salaries, materials consumed, overheads etc. 
4. Expenditure incurred on R&D activities outsourced to a third-party can be included in an R&D tax credit claim by one of the parties. 
5. Expenditure incurred on Plant and Machinery (P&M) can be classed as qualifying R&D spend if P&M is eligible for wear and tear capital allowances and is used for R&D. 
6. Expenditure on construction or refurbishment of a building used for qualifying R&D activity may also be classed as qualifying R&D spend. It is required that the R&D activities carried on in that building over a period of 4 years represent at least 35% of all activities carried on in the building. 
7. Expenditure met by grant assistance received from the State, the EU, or EEA is not eligible for RDTC. 
8. Companies have 12 months from the end of the relevant accounting period in which to make a claim while Revenue may commence an audit within 4 years. 

Outsourcing R&D

Expenditure incurred on R&D activities outsourced to a third party such as InnovateWise can be included in an R&D tax credit claim, subject to certain rules: 

• The company must notify the third party provider in writing that it cannot also claim the R&D tax credit for the work it has been contracted to carry out. From 22 December 2019, this notification must be made in advance of making the payment or on the date the payment is made. Where the outsourced activity is undertaken by a person who could not claim the R&D tax credit (for example, an individual, or by a non-resident 3rd party which does not have a branch in the State) then Revenue will accept that a notification is not required in these cases. 
• Payment to a third party is limited to the greater of 15% of the company’s overall R&D spend or €100,000. 
• Payment to a third level institution is limited to the greater of 15% of the company’s overall R&D spend or €100,000. For accounting periods ending before 22 December 2019, the relief is restricted to 5%. 
• The total amount claimed must not exceed the qualifying expenditure incurred by the company itself in the period. 

What fields of science or technology qualify for the credit?

Industries regularly carrying out R&D include: 

• Software development 
• Fintech 
• Heavy and light engineering 
• Food and drink production, Pharmaceutical, Medical device 

Examples of activities that typically qualify for the R&D tax credit

• Design and development of new production processes. 
• Acceptance and optimisation of new technologies transferred from parent organisations. 
• Development of new test methods. 
• Design and development of plastic moulding solutions or new coating techniques or novel electronics. 
• Development of a new process for recycling plastics or the treatment of waste oil products. 
• Development of software, technology, media, telecommunications. 
• Development of new communication protocols. 
• Internet security and content delivery. 
• Advanced mathematical modelling. 
• Design, development and integration of a new production line. 
• Development of new products or processes. 
• Design and development of new data aquisition methods such as drones or the integration of Artificial Intelligence (AI). 
• Development of a new software system, an intranet platform using cloud technology or enhanced security solutions.