R&D today: Addressing and enhancing Research & Development’s effectiveness

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R&D TODAY: ADDRESSING AND ENHANCING RESEARCH & DEVELOPMENT’S EFFECTIVENESSConcepts, Case Studies, and Debatable Ideas

Kenny OngCNI Holdings Berhad


In other words…

• How do we make R&D more Effective?


Before that…

• How is R&D not effective?

1.Top Down – Process problem

2.Because I can - Competency problem

3.Poor business value – Ignorance problem

4. No Budget - Alignment problem

5.Not-Invented-Here – Ego problem


Contents:

A. How do we make R&D more Effective?1. Know Your Business

2. Research

3. Reverse Marketing

4. Align

B. R&D Today → RD&D

C. Issues and Challenges


R&D For What?

R&D

Product Process


So…What is our Product?

Research → Develop → Sell → Improve

Coffee?

Shampoo?

Events?

Marketing Plan?

Customers?


A1. Know Your Business

The anchor for all decisions


About: CNI

1. 20 years old

2. Core Business: MLM

3. Others: Contract Manufacturing, Export, Trading, eCommerce, F&B retail

4. Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan

5. Staff force: ± 500

6. Distributors: 200,000

7. Products: Consumer Goods and Services


Intro: MLM

1. Sell through people

2. Relationship & people skills

3. Compensation Plan

4. Follow-up

5. Integrity

6. R&D

7. Training

8. Functions & Events

9. Tight regulations


Intro: CNI

CNI’s Business Model background

Factory CNIE

DC

SPLeadersCustomers

R&D


What is the Business Model?

USP

Market Discipline

Profit Model


Business Model: USP

Unique Selling Proposition (USP)

=

Targeted Customer

=

Core Buying Purpose/ Customer Value Proposition/ Job To Be Done (JBTD)


Business Model: USP

“The Product is Not the Product”

• What is the customer really buying?

• What is the “Core Buying Purpose”?


Business Model: USP

1. Insufficient WEALTH

2. Insufficient ACCESS

3. Insufficient SKILL

4. Insufficient TIME


Business Model: Profit Model

Revenue

CostMargin


Business Model: Market Discipline

• Mamak stall


What are they really buying?

"They are the most innovative"

"Constantly renewing and creative"

"Always on the leading edge"

"A great deal!"

Excellent/attractive price

Minimal acquisition cost and hassle

Lowest overall cost of ownership

"A no-hassles firm"

Convenience and speed

Reliable product and service

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service and flexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

Product Leadership

OperationalExcellence

CustomerIntimacy


Operational Excellence(low cost producer)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

Product Leadership(best product)

Customer Intimacy(best total solution)

Strategy: Value Disciplines


Operational Excellence

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'

Operational Excellence

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Strategy: Value Disciplines


The McPlaybook*

Make it easy to eat• 50% drive-thru• Meals held in one

hand

Make it easy to prepare• High Turnover• Tasks simple to learn

& repeat

Make it quick• “Fast Food”• Tests new products

for Cooking Times

Make what customers want• Prowls market for new

products• Monitored field tests

*Adapted from: Businessweek , Februrary 5th 2007

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Focus: Value Disciplines






Focus: Value Disciplines

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What does the Customer want?

* Treacy & Wiersema, The Discipline of Market Leaders, 1995

Product/Service Attributes Relationship Image




Product/Service Attributes

Price

Quality

Time

Selection

√

√

Smart Shopper

Relationship Image

Operational Excellence: Quality and selection in key categories with unbeatable prices





√

Brand

Time

Function

√

√

Best Product

Relationship Image

Product Leadership: Unique products and services that push the standards





√

√

√

√

Service Trusted Brand

Relationship Image

Customer Intimacy: Personal service tailored to produce results for customer and build long-term relationships

Relations


Business Situation vs. R&D

Upturn Flat Downturn

Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

NPD Cycle Time

Improve Edge

Extensions

Counter Competitor

Innovation

Acquire

Profits

Build momentum

Sales

Cash Flow

Focused on ‘Breakthrough’

JV, In-source, Out-source

Eliminate bottom 20%

Improve Top 15% revenue-generating products

↓ R&D, ↑Sales


A2. Research

Lies. Deception. Statistics.


Problem…

“In business after business, 60% to 80% of lost customers reported on a survey just prior to defecting that they were satisfied or very satisfied.”

HBR March/April 1996


Dangers of Best Practice and Benchmarking…

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Company Performance

high

low

‘Best Practice’ theories

low high

zero Performance

Trend line

“Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005

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Company Performance

high

low

‘Best Practice’ theories

low high

zero Performance

Trend line

“Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005



Selection Bias:

1. Success Traits = Failure Traits

2. Successful Cases + Failure Cases

3. Worst effects in ‘Old’ industries

4. Overvalue ‘best practice’ theories

5. Current accomplishments unfairly magnified by past achievements

6. Reverse Causal



Also known as ‘Beware of Consultants’:

1. Selection Bias

2. Big vs. Small company

3. Selective success stories

4. Correlation vs. Causal

5. Survey problems

6. Practical vs. Glamour-to-have

7. Leaders who benchmark


‘Input’ Filters

Mkt RscR&D

Research

Development

Filter

Filter

Filter

Marketing

Filter


Information Drifts (1/2)

1. Availability Drift: Looking for convenience• You give more weight to information that’s more

readily available to you.

2. Experience Drift: Influenced by personal prejudice• You tend to see things in terms of your personal or

professional interest.

3. Conflict Drift: Struggling with beliefs• Your natural tendency is to reject information that

conflicts with your beliefs.

4. Recall Drift: Trusting your memory• You more easily recall information about things

familiar to you.


Information Drifts (2/2)

5. Selectivity Drift: Picking your priorities• You screen out information and observations about things

that do not interest you.

6. Anchoring Drift: Weighing answers too heavily• If you lack experience in a specific area, you hang on to or

anchor to the first information you hear.

7. Recency Drift• You place greater emphasis on what has just happened to

you.

8. Favorability Drift• You are more likely to look harder for information that

supports your beliefs rather than input that is obvious in front of you.


A3. Reverse Marketing

What we can vs. What we need


What we needed

• The birth of Malaysia’s 1st Tongkat Ali Ginseng Coffee


The “Old” Days

InventR&D

BuildManufacturing

MarketMarketing

SellSales


The “New” Days

Invent

Build

Market

Sell

R&D

Manufacturing

Marketing

Sales


Marketing 101

Product

Promotion

Pricing

Place

4Ps


Marketing & R&D

Product

Promotion

Pricing

Place

4Ps

Features

Brand

Target

Logistics


Marketing & R&D

FeaturesBrand

Target

Logistics

Price

Promotion

Place

Product

IKEA Apple Nestle Asus


A4. Align

Running in the same direction with the proper resources


Strategy: 4-Wheels

Philosophy

Corporate

ObjectiveCorporate

Strategy

StructureResources

Leadership

Person


Strategy: Framework

• Leader vs. Innovator• Bloom vs. Prune• Breakthrough vs. Incremental• Horizon• Timing vs. Quality• Internal, External, Outsourced• TopDown vs BottomUp• Blockbuster vs. Multiplier vs. Pyramid

Philosophy


Strategy: Framework

• Org Structure• Job Design• C&B• Policies & procedures• Decision making• Job fit• Management Systems• BSC and KPIs• Decentralized & Empower

Structure


Strategy: Framework

• Technology• Equipment• Information• Channels• Partnerships, Alliances• Brand• Funding & Allocation*

Resources


*Funding & Allocation

CNI’s Performance

Market Potential

•Sell Outside

•Sell IP

•License out IP

•Sell IP

•Drop

•Re-invest

•Exchange IP


Strategy: Framework

• Vision/Mission/Philosophy• Leadership Style• R&D importance• Delegation & Empowerment• C&B, Promotions• Sense of Urgency• Speak regularly about customers• Appetite for Risk

Leadership


Strategy: Framework

• Specialist Career Ladders• Competencies**• Co-habitation• Team vs. Individual• Standard or Creative?• C&B, Retention• Toys• In-source? Co-source? JV? BPO?

Person


Strategy: Framework

Philosophy

Corporate

ObjectiveCorporate

Strategy

StructureResources

Leadership

Person


B. R&D Today → RD&D

R&D in Totality


R&D Today → RD&D

• Garnier• Digi

Design Point 1: Designed to SELL

Design Point 2: Before-After R&D


R&D Today → RD&D

• CNI Waterlife




R&D Today → RD&D

• Research, Development & DESIGN

1.Features

2.Benefits

3.Differentiation


R&D Today → RD&D

• Research, Development & DESIGN

1.Function

2.Aesthetics

3.Logistics




New Product Development Matrix

1. Marketing (4.0)

2. Production (2.0)

3. Finance (2.0)

4. Manpower (1.0)

5. Procurement (1.0)


C. Issues and Challenges

Problems, Problems, Problems


The Product/Service Innovation Challenge

1. Add 10 value increasing properties to each product or service every 90 days

2. Reduce jointly held inventories and lead time required by 90% in 24 months

3. Reduce new-product/service development cycle time by 75% in next 2 years

4. Copy 10 ideas every 60 days form competitors and noncompetitors

5. Target % Revenue from New Products (previous 24 months) - start with 50%

Source: Thriving on Chaos, Tom Peters; Alfred A. Knopf Inc.

Thank You.

soft copy of slides: http://totallyunrelatedrandomanddebatable.

blogspot.com/