Get On The Lookout!

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Don't Trust Your Gut During Slow Growth

Stay on The Lookout with R&D

Strategy is always the opposite of your objective. In periods of protracted slow growth, your gut tells you to cut spending to protect profits. However, if you're holding back R&D investment because you're waiting for the economic recovery that's "just around the corner", you could be waiting for a longer time than anticipated. So now what? Continue to suffer falling prices and rising costs?

GE's Immelt: Invest Now

In the November 11 USA TODAY, GE Boss Jeffrey Immelt gives what we consider to be wise advice:

		Prepare for Five More Years of Slow Growth. Sounds biblical, huh? But we think he's right. Assume that slow growth will last for at least five more years. Make your decisions accordingly.
		Price Pressures will continue, shrinking your margins even more.
		Solution: Innovate Now. Your basic strategies in a scenario of slow growth with never ending price pressures are either cut price to compete or innovate with technology solutions for customers. The latter is better, says Immelt. Who could disagree?
		Hit singles as well as home runs. Have a steady stream of "singles and home runs", meaning, smaller frequent innovations along with major, big ones
		Look everywhere for talent to help innovate.
		Consider Alternate Pricing Models (Our Suggestion) The current markup based pricing model may be obsolete. But you can charge for certain services that differentiate and avoid giving away value for nothing. Take our Survey.

Message for Manufacturers and Distributors

Immelt's message for Manufacturers and Distributors is that they should both heed this advice. Why? There are two big reasons

Reason 1: Take Share Now

R&D investment is effective in slow growth because it helps you take share if you come up with a more valuable solution for customers. Want to save money? Do the opposite. Save your customers money in their operations. Demonstrate how to calculate your value and savings to customers.

Reason 2: Get Ahead Before The Next Big Growth Cycle

When the next big growth cycle hits, if you haven't prepared for it, you'll be selling the same old stuff the same old way. Think how much farther ahead you'll be if you're ready to introduce the next "home run" as soon as things start growing at a rapid pace? And take the competition by surprise!

How Should I spend R&D?

Spend R&D on technology research as well as customer research. Innovations are spawned from two initiatives: technology research and customer research. It works best when you're doing both at the same time. With customer research, you're uncovering more opportunities to provide solutions. With technology research, you're uncovering more possible solutions. You need to keep an eye on the customer's situation as well as technology that MIGHT be applicable.

Wander a Bit

Yes, you have to wander a bit in what the more focused commanders in your organization might consider to be frivolous indulgence. But it pays off. Think of it this way: When you want to buy a house, you look in a suitable neighborhood, right?. But you don't always find the exact one right away. You have to look around. The same goes for R&D. You're looking around in the "neighborhood".

Watch Their Feet, Not Their Lips

As long ago as 1989, I remember a less enlightened former associate that wondered why I was experimenting with mapping technology to help new account sales development and distribution planning. "The sales force didn't ask for that," said my associate. "I guess I was wrong in my assumption that the technology could reveal patterns that could lead to both better distribution choices and more focused pursuit of end market opportunities," said I. Now, everyone is using programs like MapInfo and Tactician for mapping end customer locations and distributors.

When conducting customer research, the most profound solutions come from watching customers in action, using your product or service. Why? Customers can't often tell you what they need. You need to observe them, catch them in the act. Focus groups are only the beginning. They are effective for testing solutions in the making or as a lead-in to further investigation. Furthermore, with survey research, customers have narrowed their mental field of vision to what they THINK their problem is and what they THINK you (or any other competitor in your category) can do for them. Again, you're narrowing the possibilities.

This issue's downloads (above left) cover some of these concepts... and more. Wander around them a bit. Maybe you'll find a "house".
 

Article Highlights

Contributing Writer

Leverage Your Supplier's Productivity

Ed Miller

Vice President, Sales and Marketing,

Wiremold Corporation

Distributor partners have an excellent opportunity to improve profitability and customer service by leveraging the productivity of “lean” manufacturers like The Wiremold Company. 

The Secret: Move from Batch to One-Piece flow manufacturing.

Increased productivity has its roots in our manufacturing facilities.  As an example, The “Wiremold Production System” is a fundamental shift from traditional "batch" manufacturing that involves making large lots of a particular part and then sending the entire batch to wait until the next operation in the production process.  Manufacturers who still use this method are burdened with high inventory, which they must move to their distributors. 

Production Cycles Shrink From Weeks To Days

In contrast, one-piece flow enables products to move – one complete product at a time – through various operations according to market demand.  The Wiremold Production System has cut production cycles from up to six weeks to one or two days.  This virtually eliminates the need for large mountains of inventory. 

Reduce Distributor Inventory Dramatically

With such dramatic gains in lead time, the Wiremold Production System enables distributors to “pull” product from the supplier, rather than carrying large inventories and the risks associated with basing inventory on long-range sales projections. You place an order and receive a shipment when you need it - you replenish your inventory as you sell it.

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