R&D TODAY: ADDRESSING AND ENHANCING RESEARCH & DEVELOPMENT’S EFFECTIVENESSCNI’s Journey, Mistakes, and Lessons Learned

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 lah - 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

So…What is your Product?

Research → Develop → Sell → Improve

Coffee?

Shampoo?

Events?

Marketing Plan?

Customers?

R&D For What?

R&D

Product Process

A1. Know Your Business

The anchor for all decisions

About: CNI

1. 18 years old

2. Core Business: MLM

3. Others: Contract Manufacturing, Export/Trading, eCommerce

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

5. Staff force: ± 500

6. Distributors: 250,000

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

Know Your Business

• What are the Implications?• E.g. IKEA• E.g. CNI

Know Your Business

“The Product is Not the Product”

• What is the customer really buying?

• What is the “Core Buying Purpose”?

Productvalue

Productvalue

Servicesvalue

Servicesvalue

Personnelvalue

Personnelvalue

Imagevalue

Imagevalue

Mentalcost

Mentalcost

Energycost

Energycost

Timecost

Timecost

Monetarycost

Monetarycost

Total customervalue

Total customervalue

Total customercost

Total customercost

Value to CustomerValue to Customer

What are they really buying?

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

What does the Customer want?

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

Product/Service Attributes Relationship Image

What does the Customer want?

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

Product/Service Attributes

Price

Quality

Time

Selection

√

√

Smart Shopper

Relationship Image

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

What does the Customer want?

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

Product/Service Attributes

√

Brand

Time

Function

√

√

Best Product

Relationship Image

Product Leadership: Unique products and services that push the standards

What does the Customer want?

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

Product/Service Attributes

√

√

√

√

Service Trusted Brand

Relationship Image

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

Relations

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(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

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

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

‘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

Brand and Positioning

• For who?

• Your Offer?

• Key Differentiator?

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

• Tools• Physical facilities• Peer support• Information Systems• Communications Systems• T&D Programs• 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

Design Point 1: Designed to SELL

Design Point 2: Before-After R&D

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

Design Point 1: Designed to SELL

Design Point 2: Before-After R&D

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/