Wednesday 11 July 2007


I came across this article by T.D Clark and I feel I should share it with you.
Innovation & Emerging Markets: Perfect Together?
Everybody’s talking about innovation these days, but is anyone really doing it and doing it well? Are execs really using innovation to meet revenue goals and drive competitive advantage? A new study from Deloitte says “not really.”

Gary Coleman, global managing director of the Manufacturing Industry Group for management consulting firm Deloitte, says less than 50 percent of top-tier executives of developed-world companies that do business in emerging markets aren’t meeting their revenue goals.

Deloitte offers results of a new 23-page study, “Innovation in Emerging Markets,” in which the management consulting firm surveyed 446 “top executives” from manufacturing companies in 31 countries in order to profile business practices of U.S. companies in developing countries. (Although Deloitte won't disclose the list of corporations represented, 36 percent of the executives work for companies with annual revenues of $1 billion or more, 34 percent work for companies with annual revenues between $100 million and $1 billion, and 30% for companies with revenues under $100 million.)

Perhaps the most surprising result from the study finds that forming a wholly owned new subsidiary is a very popular strategy among global companies when establishing a presence in emerging markets. Also, consider the following:

Sixty-five percent of executives at companies that deployed this strategy had rated their ability to meet their operational goals as "extremely or very successful." Although the report doesn't provide a detailed case study, it concludes that a key factor in deciding when to deploy a greenfield strategy is whether a company is relying on proprietary technology or process true innovations as the main element of a value proposition in an emerging nation. Why? Because intellectual-property protection is crucial.

Deloitte’s Coleman says intellectual property (IP) really is the most obvious risk when focusing on innovation, especially in emerging markets simply because lack of IP laws means that it is easier for other companies to copy new products.

“We'll soon be looking at how companies like China's Haier, which now has the No. 1 market position for compact refrigerators in the U.S., built their brands globally,” Coleman says. “In terms of innovation in emerging markets, that’s the story of tomorrow.”

Not so fast, Deloitte. There are plenty of other “stories of tomorrow” out there.
Take Bristol-Myers Squibb, for instance. Like dozens of other firms, they are expanding research and development efforts in India. But what is slightly different about this expansion strategy is that it’s aimed squarely at attracting top talent to drive innovation efforts. Consider this:

Bristol-Myers Squibb will significantly increase the scope of its existing relationship with Biocon Limited to further develop integrated capabilities in India in medicinal chemistry, biology, drug metabolism, and pharmaceutical development. Under the terms of the agreement Biocon, through its subsidiary Syngene International, will work with Bristol-Myers Squibb to establish a research facility in Bangalore that could ultimately house more than 400 scientists to help advance Bristol-Myers Squibb’s discovery and early drug development.

“This broad expansion of R&D in India will allow us to grow competitively while maintaining our industry-leading position in productivity and innovation,” said Elliott Sigal, M.D., Ph.D., executive vice president, Bristol-Myers Squibb, and chief scientific officer, president, Pharmaceutical Research Institute. “Working with Biocon and Accenture, two well-respected and valued partners, Bristol-Myers Squibb will continue to access world-class talent to deliver and grow our robust product pipeline.”

And leading consumer goods company Land O’ Lakes is also hip to the notion of using product innovation to butter up profits. But rather than focus on attracting top talent, as in the aforementioned case, Land O’ Lakes will be investing in state-of-the-art Product Lifecycle Management (PLM) software to churn out innovation results.

The solution will be used initially within the company’s Dairy Foods business unit, where it will support cross-functional teams responsible for developing and commercializing new products. Plans include subsequent enterprise-wide deployment. Here’s more insight into their strategy:

Land O’Lakes has stated that one of its principal strategic goals is to incorporate best practices into all aspects of its operations. This focus is part of an overarching plan for driving additional revenue and profit growth from core businesses. Actions include an initiative aimed at enhancing the company’s processes for product innovation.

As such, Land O’ Lakes’ PLM system will be used to automate the product development process and assist the company in setting project priorities. Its capabilities will help to ensure that the right products get to market on time.

Of course, many leading manufacturers have deployed PLM to address new product development and introduction (NPDI), while others are now exploring its benefits. And even though studies from IBM and even Deloitte rank innovation and new product launch as a top strategic initiative, AMR Research surveys have shown that two-thirds of executives feel that this process is not under strategic and financial control. Perhaps resolving this ownership will be a top priority for manufacturers this year.

Are you on time with your innovation strategy? Do innovation and emerging markets go hand in hand?

1 comment:

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