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February 12, 2008
Innovation at Forefront of Profitable Growth Strategies
Increasingly more companies are realizing that there is only so much cost-cutting that can be tolerated. As such, innovation again comes to the forefront as a means to drive sustainable, profitable growth.
Case in point: Aberdeen Group's recent report, Product Innovation Agenda 2010: Profiting from Innovation Today and Tomorrow, found that more than 80 percent of companies are focused on driving profitable growth through product innovation, while many participating companies are looking to make innovation a repeatable and sustainable process. (More on this report next week.)
News of this "innovation sustainability" seems to be more often in the news, and more specifically, in the language of manufacturing execs. The head of chemical manufacturer Croda International's North American operations, for instance, says that as his company grows, product innovation will continue to be a key driver for their business.
"Consumers won't find Croda brand products in shopping malls or grocery stores," Kevin Gallagher, president of Croda, Inc., the division that oversees a number of North American operations, told Pennsylvania newspaper The Express. "We sell our products to companies who use them as ingredients in other products. Our ability to be innovative in our products has been key to our success and will continue to be what leads our efforts in the future."
Innovative ingredients patented by the chemical manufacturer include a "detangling agent" that revolutionized the shampoo and conditioner market and an acne product that helped create one of the leading acne products sold in the U.S. Interestingly enough, Gallagher says his company has no plans to expand beyond the markets that make the most sense like personal care, health care, lubricants and crop performance.
Cereal and snack maker Kellogg is also racheting up its innovation strategy and sticking to the markets that make the most sense for its business. According to a recent announcement, the company has big plans for a $40 million addition to its W.K. Kellogg Institute for Food and Nutrition Research (WKKI) in Michigan in addition to introducing a slew of new products to consumers.
Here's a compelling tidbit of information that proves their innovation investments are paying dividends:
Since WKKI opened in 1997, Kellogg's net sales from innovation have almost doubled. In addition, the company's investment in research and development has increased significantly from $106.4 million in 2002 to $179.3 million in 2007.
Adds Dr. Donna Banks, senior vice president, global innovation at Kellogg: "We're proud of our proven track record of delivering results from our innovations. In 2007, approximately 17 percent of net sales or almost $2 billion dollars were delivered through innovations launched in the last three years."
Ditto for Corning Incorporated, which is enjoying its fifth consecutive year of increased sales and profitability, thanks to innovation, according to a recent press release. The specialty glass and ceramics manufacturer's chairman and CEO recently told analysts and investors that Corning's strategy is to grow through global innovation.
"Innovation will continue to drive the company's long-term growth, as it has throughout the company's past," Wendell P. Weeks said. (Specifically, Corning's growth opportunities lie within creating and delivering new display technologies as consumer demand for LCD TVs will be the primary driver behind an anticipated 25 percent to 30 percent increase in total LCD glass demand in 2008.)
Corning also plays in the diesel product space, generating some $249 million in sales last year. Company execs anticipate that new emissions regulations taking effect over the next several years in the United States, Europe and Japan should provide a significant longer-term market opportunity for the company's heavy-duty diesel particulate filter and substrate products.
So there you have it. "Innovation" may be the buzzword du jour for increasingly more executives, but real-world examples exemplify how different manufacturers are seizing upon the concept to drive profits and market share.
Resources
Product Innovation Agenda 2010: Profiting from Innovation Today and Tomorrow
by Jim Brown
The Aberdeen Group, December 2007
Product Innovation Continues to Drive Croda's Business
The Express, Feb. 9, 2008
Kellogg Company Debuts Latest New Product Line-Up
Kellogg Company, Feb. 8, 2008
Corning Sees Growth Opportunities Continuing
Corning Inc., Feb. 8, 2008
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Comment
2 CommentsIt seems to me that if you look at the examples of companies who have grown in both sales and profitability they are firms that have decided on an area of business, focused on filling a need and have concentrated on being the best at it. If you contrast that with the buzz words of the recent past like "being broadly based in the market"..."serving multiple market segments" and the other buzz words we all suffered, you will see that deciding WHAT you can do and then striving to do it more effectively than others and not being satisfied with just average results yields astounding results.
So often I see very successful companies with a narrow product line, innovative in design, a mover in the market being purchased by a large entity with dollars to spend and watched the new management literally trash the line because they "know how"...after all look at how big we are! The only real good that come from it is: one the original stock holders made some money and two, it will sooner or later make a nitche for another innovative group to do the job again and take over the market share from the now trashed line.
I recall two things told to me some time ago: "Bigger ain't always better" and "A smart man knows what he can do, but an intelligent man knows what he can't do".
February 14, 2008 11:59 AMIt comes in handy what I have just seen in "El Pais", Spanish newspaper. It's a caption for a daily humour picture. You see a thoughtful eagle thinking loud "What's the point in studying hard to become an eagle if later, there are only jobs for the vultures"...?
February 14, 2008 1:28 PM
