Innovate Faster? Why?

How to make R&D efficient and effective?

Speed to Market is Key

758 Words ... Reading time 4 minutes 

In the new millennium, Speed to Market will be the key to growth and survival. Speed to Market will be the essence of Corporate IQ, the essence of Product Development. It will be a prerequisite for corporate success.

Al Ries and Jack Trout, in their book, 22 Immutable Laws of Marketing, make a simple and yet profound statement:

"It is better to be first than it is to be better."

Based on Profit Impact of Marketing Study, they observe:

If you are first to market, you have a chance at 40% market share, if second, 24%, and if third, 14%*.

As examples, one can cite for the American market place, Amazon.com, eBay, Tide, Crest, Gillette, McDonald’s, Dell, etc.

Amazon was among the first to start selling books via internet, eBay started the first auction model for retail sales on internet and served as a broker between a buyer and a seller, Tide was the first detergent, Crest, the first toothpaste, Gillette, first razor, McDonald first large scale franchise for fast food, Dell first to sell PCs on internet without a retail store presence.

Let us look at Dell. When Dell started, leaders in PC world were Compaq and HP. Both were selling PCs through retail stores and making corporate sales through distributors and direct sales force. Dell’s real innovation was not in PCs but its business model. Whereas Compaq and HP had a 45 day cash collection cycle, Dell’s was -13 days(minus 13 days), because it collected money first via internet sale and then manufactured and shipped the product within one to two weeks. Dell also did not share the revenue with the middleman, the retail store!

For the Indian market place, what examples can you think of?

Perhaps we need to rephrase the question slightly to aid the memory.

Here are a few keywords, when you hear them, which Indian company/product do you think of?

Butter?  _________________

Adhesive?  ______________

Steel?___________

Software? _______________

Why these product/company names? What made you think of them?

Still not sure? For your key product write down the names of top three competitors. Then ask, how did they acquire that position?

Ries and Trout, in their book Positioning, The battle for Your Mind, postulate that the real battle is not in the market place for market share, but in the consumer’s mind for mindshare. The real estate in consumer’s mind is limited and the consumer only cares to remember the top two or three brands at most. So if you ask an Indian consumer what are top two or three mobile phones in India or top two or three Dosa restaurants in their area, they will rattle of their names, beyond that they will have difficulty.

So you may ask what this has to do with New Product Development, R&D and Innovation?

Everything!

Being first ensures higher free publicity, higher name recognition, higher market share and, yes, higher profit margins. Even Wall Street rewards you with higher valuations.

You see, not only a consumer thinks, brand X is a top brand; they also make believe that the top brand is a superior brand and therefore worth a higher price.

So a McDonald or a Domino can charge a premium price and get away with it. And with higher pricing and higher profits, they have more money to spend on marketing. So the beneficial cycle continues.

So if you want to higher profits, think innovative products that are new to market. With these new products, you will get higher free publicity - free marketing and higher profits.

Also, recognize that developing an innovative product is not enough; you also need to capture consumer’s mindshare.

A recent example from Indian chemical industry is Astral Poly Technik. Sandeep Engineer, founder and managing director, after considerable struggle, identified CPVC and PVC pipes and pipe fittings as a very good replacement for steel pipes used for plumbing in Indian homes. Astral’s insights and hard work resulted in 45% CAGR for seven consecutive years, 2012 revenue of Rs 950 Crores. and a 2013 Ernst &Young Entrepreneur of the Year award for the founder.https://www.youtube.com/watch?v=Pxy-ceUn1NM

So innovation is a battle on two fronts; a new innovative product and an innovative twist in marketing to capture the consumer mindshare.

It helps if you are ignorant, and have the courage. And it is a winning formula for the “overnight” success.

So crank up your innovation engines …And let the fun begin!

In the next issue we will share another reason to be first to market.


 *The exact numbers are: slightly different.


Republished from the book, "Innovation and R&D, A Primer" Mukul Mehta,

Chemical News, India 2017

About Author

Mukul Mehta

Mukul Mehta has over 40 years of proven industrial experience in chemical , polymer, and plastics industry. Worked as a Sr. Manager, Statistics and Computer Aided Research for BF Goodrich Chemical, a Fortune 500 company, and then as a software entrepreneur, promoted "quantitative, predictive modeling in one minute or less as a mantra for R&D and New Product Development." Many multi-million dollar successes for dozens of Corporate R&D clients in chemical and pharma industry. Trained over 750 R&D chemists, engineers and managers to Speedup New Product Development through statistical design of experiments.

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