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*** Some of the policies referenced were updated 2021-08-13. We are working to update this article and others. ***

Embracing Uncertainty: Design Thinking

SR&ED offers businesses and individuals the opportunity to take risks in their R&D which in turn enables them to grow.

A 2017 survey of 553 companies conducted by Canadian Manufacturers and Exporters (CME) found that 38% of companies did not use the SR&ED tax credits.1 According to an article in the Harvard Business Review, performing research and development (R&D) work “drives corporate growth” and, “historically, R&D has been viewed as the engine of national economic growth as well.”2 Company 3M also attributes its growth to its R&D efforts and “has rapidly expanded its R&D operations globally, and now operates laboratories in 36 countries, and has 8,300 researchers worldwide,” with the intention of taking its “organic growth rate to a new level.”3

SR&ED and Design Thinking

SR&ED offers businesses and individuals the opportunity to take risks in their R&D which in turn enables them to grow. If an SR&ED claimant’s experimentations are unsuccessful but still increase their knowledge base (e.g. if the experimentation enables the claimant to reject solutions based on new information generated), then their work may still be eligible for SR&ED. As noted in the Eligibility of Work for SR&ED Investment Tax Credits Policy, “the success, failure, marketability, or commercial significance of work is not relevant to its eligibility.”4

This article investigates design thinking and how this concept may be linked to SR&ED.

What is Design Thinking?

Don Norman defines ‘Design Thinking’ as the idea that:

Designers have developed a number of techniques to avoid being captured by too facile a solution. They take the original problem as a suggestion, not as a final statement, then think broadly about what the real issues underlying this problem statement might really be (for example by using the “Five Whys” approach to get at root causes). Most important of all, is that the process is iterative and expansive. Designers resist the temptation to jump immediately to a solution to the stated problem. Instead, they first spend time determining what the basic, fundamental (root) issue is that needs to be addressed. They don’t try to search for a solution until they have determined the real problem, and even then, instead of solving that problem, they stop to consider a wide range of potential solutions. Only then will they finally converge upon their proposal.5

Many companies have used design thinking to encourage their growth. For example, Google allows employees 20% of their time to commit to experimental development, which has birthed pillar-products such as Gmail and Google Calendar.6 Integrating happy accidents into a company’s business plan is not a common proposition, and it requires faith and a commitment to not committing.

The same can be said for a company that nurtures a healthy, creative R&D environment. By utilizing the talent of their staff to research and develop new ideas, companies can offer additional products and generate growth.

Process and Preparation: A Happy Marriage

The most important part of preparing a claim for SR&ED is preparing the technological narrative. A good SR&ED narrative is the product of a rigorously inquisitive process and lateral thinking. This is much like the process designers take to solve a problem.

In constructing a technological narrative, the important facets of the SR&ED project to focus on are the root issues. This is why the Canada Revenue Agency (CRA) does not accept surface aspects such as style changes or commercial viability as technological uncertainties.7

New Ways to Think About SR&ED

The concept of “design thinking” offers new approaches to SR&ED. Design thinking encourages consideration of the root cause of a problem followed by experimentation to solve a more obvious issue. SR&ED is about hypothesis and experimentation to solve issues that have not yet been solved. Therefore, employing design thinking in your SR&ED process and providing the correct contemporaneous documentation may help your claim.

Have you read about any concepts that remind you of SR&ED? Do you have any insight into the SR&ED experimentation process that you’d like to share?

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Show 7 footnotes

  1. Canadian Manufacturers and Exporters. (2016.) Management Issues Survey. (Accessed: September 5, 2017.) Retrieved from:
  2. Knott, A.M. (March 21, 2017.) Is R&D Getting Harder, or Are Companies Just Getting Worse At It? (Accessed: September 5, 2017.) Retrieved from:
  3. Trefis Team. (December 20, 2017.) R&D: One Of The Driving Factors Behind 3M’s Growth. (Accessed: September 5, 2017.) Retrieved from:
  4. Government of Canada. (April 24, 2015.) Eligibility of Work for SR&ED Investment Tax Credits Policy. (Accessed: October 12, 2017.) Retrieved from:
  5. Norman, D. (March 19, 2013.) Rethinking Design Thinking. (Accessed: September 5, 2017.) Retrieved from:
  6. Mytton, D. (May 13, 2017.) Can Google’s 20% time really work for your startup? (Accessed: September 5, 2017.) Retrieved from:
  7. Government of Canada. (April 24, 2015.) Eligibility of Work for SR&ED Investment Tax Credits Policy. 2.1.1 Was there a scientific or a technological uncertainty? (Accessed: October 12, 2017.) Retrieved from:


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