Lean Times
INNOVATION IN A DIFFICULT ECONOMY
BY ALBERT GUFFANTI
Consumer goods (CG) companies typically fare better during recessions than
those in many other industries, but lean times force a re-evaluation of product portfolios and R&D allocations. This is not the time to cut back on new
product development, says Daniel Staresinic, worldwide director for Consumer
Products and Life Sciences, Siemens PLM Software ( www.siemens.com).
Efficient and cost-effective innovation is now more important than ever.
What adjustments should a CG company make in a down economy?
When the economy is strong, the innovative consumer packaged goods (CPG)
manufacturer enjoys the luxury of focusing on margin growth. A relative high
percentage of the product and brand focus is “up-market” with the goal of
providing superior performance at a premium price. In a down economy,
the consumer is more willing to step past superior performance, at least for
a while. The leaders in CPG shift their focus correspondingly to the promotion of midrange and value brands. And while the margin game is temporarily delayed, the market share game begins in earnest.
What does this mean for innovation and new product development?
The new product development engine will need to crank out a higher percentage of cost reductions and low-cost upgrades that provide “new news”
without requiring price hikes at the shelf. Some larger efforts may be put on
hold in favor of these share-building efforts. Some new projects may also be
established that deliver no consumer-noticeable benefit, but instead allow the
manufacturer to switch
to a less expensive ingredient or component.
To read this article in its entirety, visit
www.consumergoods.com/BTL0209
DANIEL J.
STARESINIC,
Worldwide
Director,
Consumer
Products and Life
Sciences,
Siemens PLM
Software
“The new prod-
uct develop-
ment engine
will need to
crank out a
higher percent-
age of cost
reductions
and low-cost
upgrades that
provide ‘new
news’ without
requiring price
hikes...”
With more projects now in the pipe and with
cost control at a super-premium, it is more important than ever to identify and accelerate the best
ideas, and to identify and eliminate the bad ones
early in the process. A purposeful and well-managed ideation/selection process is a must, as is
rigorous portfolio management. Particularly
helpful are portfolio management tools that can
re-evaluate projects quickly against the heightened priority on cost reduction and share growth.
In addition, if CPG companies aren’t already
doing so, they should broaden their definition
of innovation so that it begins at the idea and
continues through to the shelf.
Can you define PLM technology in detail?
PLM is the coveted single source of truth about
product, production and process information,
as well as the infrastructure necessary to enforce
best business practices throughout the lifecycle.
PLM enables an organization to rally around
its true source of value (its products) and to digitally supply information about these products
to all other enterprise systems.
This, along with well-structured security and
change management capabilities, provides an
extraordinarily effective collaboration environment. And in a large CPG organization, effective collaboration is the foundation of effective
innovation.
