UL Navigating The Product Mindset 2011

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This is the inaugural issue of a global study by UL that features marketplace trends, statistical data, differing stakeholders, varied geographies, diverse industries and a technical panel of UL experts. Entitled, Navigating the Product Mindset, the study and its additional industry reports seek to better understand market forces; drivers of decisions; findings related to safety, performance, sustainability and innovation; and the motivations behind these views.

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UL Navigating The Product Mindset 2011

  1. 1. NAVIGATINGTHE PRODUCT MINDSET A NEW ANNUAL STUDY
  2. 2. LETTER FROM THE CEOGlobal trade is more complex and dynamic than ever before. We have seen the introductionof entirely new trade flows that barely existed just five years ago and the supply chains thatunderpin them are becoming increasingly more complicated. Manufacturing companies onaverage rely on more than 35 different contract manufacturers around the world to create asingle product.1 That’s a massive amount of complexity to harness and navigate.These are important factors for UL to examine. We have spent more than a century helpingfacilitate trade and enabling safe products to abound. Today we are building on this legacywith the introduction of a new study centered on the Product Mindset — a term we’reusing to describe how people think and feel about products globally.The Product Mindset is a critical consideration in a globalized world. How people perceivethe products they make and consume has a profound effect on how those products flowacross borders. Just this past year, food recalls and natural disasters affected global supplychains while political upheavals, new government regulations and continued debatesabout the environment impacted our viewpoints and priorities. All these events shapedthe Product Mindset.Our study aims to better understand the Product Mindset across many dimensions, includingsafety, performance, sustainability and innovation. You will find the results compelling,provocative and, in places, reaffirming. As you explore the Product Mindset, I encourage youto consider ways this new concept affects you in terms of how you think, how you plan andhow you innovate.Welcome to Navigating the Product Mindset, a study whose time has come.Keith E. WilliamsPresident & Chief Executive Officer and Trustee
  3. 3. TABLE OF CONTENTSOUR APPROACH 4MARKETPLACE AT A GLANCE 5THE PRODUCT MINDSET 7KEY FINDINGS 1 CONFIDENCE ABOUNDS 8 2 SAFETY & PERFORMANCE ARE FUNDAMENTAL PRIORITIES 12 3 THE POWER SHIFT 16 4 ENVIRONMENTAL FOCUS IS DESIRED MORE THAN IMPERATIVE 21 5 TRACEABILITY IS KEY 24 6 WHERE YOU ARE MATTERS 29 7 INNOVATION LOOMS LARGE FOR TOMORROW 34CONCLUSIONS 37ACKNOWLEDGMENTS 39METHODOLOGY 40SOURCES 41FURTHER INFORMATION 42
  4. 4. OUR APPROACHTo uncover and then capture the Product Mindset, we explored the idea from multiple PRODUCT STUDY KEYperspectives: marketplace trends, statistical data, differing stakeholders, variedgeographies, diverse industries and a technical panel of experts within UL.Marketplace trends and statistics inform and provide context to what’s already Secondary data: redhappening today, the current climate that is reflected in the Product Mindset. Our indicates marketplacekey findings offer greater insight into the perceptions and attitudes that define the statistics.Product Mindset. They are based on 2,430 quantitative interviews with manufacturersand consumers across a range of significant export and import markets, includingChina, Germany, India and the United States. Four industries — high-tech, building Quantitative data:materials, food and household chemicals — were carefully selected to demonstrate blue indicatesa range of product typologies that vary in complexity, price and frequency of use. Our manufacturers.technical panel of experts gives greater nuance and substance to our key findings,based on their extensive expertise related to the product ecosystem.Navigating the Product Mindset seeks to better understand market forces; drivers of Quantitative data: green indicatesdecisions; findings related to safety, performance, sustainability and innovation; and consumers.the motivations and reasons behind these views.NAVIGATING THE PRODUCT MINDSET 4 OUR APPROACH
  5. 5. MARKETPLACE AT A GLANCE TOP 10 EXPORT MARKETS2 (USD/BILLIONS) 8. ITALY 9. SOUTH 10. HONG 7. NETHERLANDS $547.11 KOREA KONG 5. FRANCE 6. UK $581.63 $500.44 4. JAPAN $648.97 $547.01 $662.12 $871.53 3. GERMANY $1,541 2. CHINA 1. USA $1,752 $1,837 GLOBAL TRADE FLOWS5 (in volume terms)2010 RATIO OF EXPORTS Within the United States, 50%OF GOODS AND SERVICES of all medical devices, 80% of allTO GDP ROSE3 medication ingredients, 75% of DEVELOPED ECONOMIES DEVELOPING ECONOMIES ASIA HAD THE FASTEST seafood, and 60% of fruits and INCREASED & CIS* ROSE GROWTH vegetables consumed come from other countries. 4 12.9 % 16.7 % 23.1 % 85 *Commonwealth of Independent States CHINA INDIA % TRADE FLOWS BETWEEN CHINA AND AFRICA7 31.8 % 22.9 % 30 ANNUAL % GROWTH of companies expect the complexity of their supply chains to grow significantly by 2012.6 1. USA $2,337 2. CHINA $1,520 3. GERMANY $1,361 4. JAPAN 5. UK $796.67 6. FRANCE 8. SOUTH $732.29 $720.57 7. ITALY 9. NETHERLANDS KOREA $514.35 10. CANADA $586.30 $516.33 $493.12 TOP 10 IMPORT MARKETS8 (USD/BILLIONS)NAVIGATING THE PRODUCT MINDSET 5 MARKETPLACE AT A GLANCE
  6. 6. MARKETPLACE AT A GLANCE TOP 10 COUNTRIES TOP 10 COUNTRIES 1. USA 1. CHINA BY GDP9 $14.58 1,351 BY POPULATION14 (USD/TRILLIONS) (MILLIONS) 2. CHINA 2. INDIA $5.88 1,210 PER PERSON SURVEYED, CHINESE CONSUMERS ARE OUTSPENDING U.S. CONSUMERS IN 3. JAPAN 3. USA $5.50 HIGH-TECH PURCHASES 3 TO 110 309 4. GERMANY 4. INDONESIA $3.30 233 $500 $1,500 73 81 5. FRANCE 5. BRAZIL $2.56 U.S. CHINA 195 6. UK % % 6. PAKISTAN $2.24 185 7. BRAZIL of consumers are more of Chinese consumers 7. BANGLADESH $2.08 164 concerned about food said they would buy safety today than they more green products were five years ago.11 if environmental claims could be substantiated.12 8. ITALY 8. NIGERIA $2.05 158 PROJECTED SMART HOME INSTALLATION GROWTH13 2015: 5.38 MILLION 9. INDIA 9. RUSSIA $1.72 145 2010: .44 MILLION 10. CANADA 10. JAPAN $1.57 127NAVIGATING THE PRODUCT MINDSET 6 MARKETPLACE AT A GLANCE
  7. 7. THE PRODUCT MINDSET 1 CONFIDENCE ABOUNDS 2 SAFETY & PERFORMANCE ARE FUNDAMENTAL PRIORITIES 3 THE POWER SHIFT 4 ENVIRONMENTAL FOCUS IS DESIRED MORE THAN IMPERATIVE 5 TRACEABILITY IS KEY 6 WHERE YOU ARE MATTERS 7 INNOVATION LOOMS LARGE FOR TOMORROW Product Mindset (prod•uct mind•set | prädekt mahynd-set | noun) A global collective consciousness that reflects how people feel about products—whether people are making and selling products or buying and consuming them.NAVIGATING THE PRODUCT MINDSET 7 THE PRODUCT MINDSET
  8. 8. 1 CONFIDENCE ABOUNDS Manufacturers are certain about their performance and consumers are optimistic about product quality. Despite increasing complexity, economic challenges and pressure along all points on the supply chain, there is a pervasive attitude of confidence and optimism today. This relates to everything from manufacturers’ assurances of their abilities to consumer perceptions about improved product quality. Thus, confidence in one’s skills and in the quality and safety of the product ecosystem are key elements of today’s Product Mindset. 8
  9. 9. MANUFACTURERS FEEL THEY ARE AT OR AHEAD OF THE CURVEManufacturers clearly express confidence related to reliability, product sustainability and product innovation.their abilities across a broad range of competencies. Almost no manufacturers think that they underperformThis overarching and widespread belief suggests across these key measures. Only 6% of manufacturersmanufacturers presently feel they are doing a good consider themselves behind the curve related to productjob and managing many aspects of their supply chain sustainability, while 11% feel they are lagging when itwell. Manufacturers are satisfied with their comes to innovation.performance regarding product safety, product SAFETY RELIABILITY 97% At or ahead of the curve 97% At or ahead of the curve 3% Behind the 3% Behind the curve curve SUSTAINABILITY INNOVATION 94% At or ahead of the curve 89% At or ahead of the curve 6% Behind the 11% Behind the curve curveNAVIGATING THE PRODUCT MINDSET 9 CONFIDENCE ABOUNDS
  10. 10. MANUFACTURER SATISFACTION WITH QUALITY AND TIMELINESSManufacturers feel most confident with their ability to manage consistent product “Manufacturers are confident today. Even in these turbulentquality and on-time delivery. They ranked these as the two best-performing aspects times, they are able to sourceof their supply chain. These are areas where manufacturers have control in overseeing higher quality and more sophisticated components atand ensuring results, and they do so with assurance. lower costs, and have access to ever-more effective analytical tools that help them address potential issues quickly.” Christopher Hasbrook UL Vice President & General Manager, Global Building Materials/Life Safety & Security 79% Consistent product quality 71% On-time product deliveryCONSUMERS STRONGLY AGREE THAT PRODUCT QUALITY IS BETTER TODAY THAN IT WAS FIVE YEARS AGOConsumers echo manufacturer sentiments about product quality. They express asense of optimism, with an average of 62% of consumers believing that manufacturersare making better products today than they did five years ago. High-techmanufacturers are considered the most improved, and overall, Chinese and Indianconsumers are the most positive about product quality. 67% High-tech 64% Household chemicals 62% Building materials 60% Fresh food 58% Processed foodNAVIGATING THE PRODUCT MINDSET 10 CONFIDENCE ABOUNDS
  11. 11. CONSUMERS BELIEVE PRODUCT SAFETY IS STABLE OR IMPROVING Consumers in most countries perceive product safety as stable or improving over “It is not surprising to see that consumers have fewer the past two years. This is an extremely optimistic result, given the extensive media safety concerns in the high- coverage addressing every known supply chain issue and product recall. From a country tech category. The industry has focused for decades perspective, the U.S. and India seem to consistently note the most improvements on improving its safety across products. From a category perspective, consumers indicate a more dramatic performance, including the improvement in the high-tech category. Consumers in China have concerns about development of more exacting manufacturing processes quality trends in the food category — both fresh and processed. and the adoption of globally harmonized standards. However, change is constant in high-tech, and with new innovation or development will come new safety and performance requirements.” Don Talka UL Senior Vice President, Chief Engineer IS PRODUCT SAFETY BETTER OR WORSE THAN IT WAS TWO YEARS AGO? Building materials Fresh food Processed food Household chemicals High-tech INDIA U.S. CHINAGERMANY Worse Better NAVIGATING THE PRODUCT MINDSET 11 CONFIDENCE ABOUNDS
  12. 12. 2 SAFETY & PERFORMANCE ARE FUNDAMENTAL PRIORITIES Today, safety and performance are essential considerations for both consumers and manufacturers. Together, these factors form the bedrock of global trade and are critical elements that impact the Product Mindset. Their importance can sometimes be appreciated more in contemplating their absence; physical harm, dissatisfaction, widespread fear and erosion of trust increase while trade is disrupted, commerce is delayed and costs rise. Some may think that product safety is currently taken for granted or is no longer a critical issue in facilitating trade. However, findings in this study suggest the opposite — that safety looms large in our borderless world. Similarly, product performance and reliability deliver on the key expectations that a product will work as expected and can be counted on to consistently function. Safety and performance are foundational in shaping the Product Mindset. 12
  13. 13. PRODUCT SAFETY AND RELIABILITY ARE THE KEY FACTORS IN MANUFACTURER SUCCESSProduct reliability and product safety are the top two key considerations that impact manufacturers’ abilities toeffectively compete in the marketplace. This demonstrates the fundamental importance of product safety toglobal business today and the priority of performance/reliability in ensuring success.Using environmentally friendly packaging 2% Outsourcing to contain costs 2% Operational sustainability 8% Designing sustainable products 9% 49% Product reliability Speed to market 10% & product safety Product innovation 20%PRODUCT SAFETY IS A KEY ISSUE TODAYManufacturers agree that product safety is the most important issue facing them today and is growing ratherthan diminishing in importance. This finding suggests that the Product Mindset currently values and sees81product safety as essential. % OF MANUFACTURERS BELIEVE THAT PRODUCT SAFETY IS BECOMING MORE IMPORTANT.NAVIGATING THE PRODUCT MINDSET 13 SAFETY & PERFORMANCE ARE FUNDAMENTAL PRIORITIES
  14. 14. PRODUCT SAFETY AND PERFORMANCE ARE PRIORITIES FOR CONSUMERSSafety and performance are considered the most important types of information “Safety is a fundamental need and the very underpinningthat consumers consider critical and valuable when evaluating a product. This of society. As nations arounddemonstrates their fundamental importance to consumers, across categories the world progress, we see their increased interest in andand geographies. commitment to safety as a shared sense of responsibility and a significant sign of advancement globally.” August W. Schaefer UL Senior Vice President and Public Safety Officer THE TOP TWO MOST IMPORTANT TYPES OF PRODUCT INFORMATION Insulation Fresh meat & fish Cell phones Household cleaners 1. Safety 1. Freshness (Performance) 1. Quality 1. Safety 2. Performance 2. Safety 2. Performance 2. PerformanceMANUFACTURERS FEEL CONSUMERS WILL VALUE SAFETY AND PERFORMANCE IN THE FUTUREManufacturers feel strongly that product safety and environmentally friendly. This finding reinforces theperformance information is essential for consumers, not high degree of significance consumers afford safetyonly for today but also for tomorrow. When asked to think and performance. It also highlights that manufacturersabout the next five years and the most important type of agree this is imperative to consumers and suggestsinformation to communicate to consumers, manufacturers these considerations will continue to play a key roleranked product safety and product performance/ in the Product Mindset for years to come.reliability highest, above product innovation and being Other 19% Environmentally friendly 8% 52% Product safety & packaging/product performance/reliabilityOperational sustainability 8% Product innovation 13%NAVIGATING THE PRODUCT MINDSET 14 SAFETY & PERFORMANCE ARE FUNDAMENTAL PRIORITIES
  15. 15. MANUFACTURERS ARE RESPONSIBLE FOR PRODUCT SAFETYBoth consumers and manufacturers agree that manufacturers are responsible for ensuring the safety of aproduct. While other stakeholders contribute to shaping and enhancing a product’s safety, the onus clearlylies on the manufacturer. With consumers wanting to know more about where a product’s components andingredients are from, it is not surprising that they are twice as likely as manufacturers are to believe thatcomponent manufacturers are also responsible for product safety. Manufacturers are more likely to holdthose manufacturers that assemble the final product primarily accountable for safety. 38%Manufacturers that assemble final products 64%Companies that manufacture components 22% 120% 10% MORE 17%Government agencies or organizations 10% 10%Independent safety testing organizations 6% 8%Consumer groups 4%Distributor or retailer that sells products 4% 4% CONSUMERS MANUFACTURERSNAVIGATING THE PRODUCT MINDSET 15 SAFETY & PERFORMANCE ARE FUNDAMENTAL PRIORITIES
  16. 16. 3 THE POWER SHIFT Consumers are becoming more influential and gaining control across the supply chain. They are demanding more information and getting a more sophisticated understanding of products. Consumers also expect more from manufacturers. They perceive manufacturers as prioritizing profit over safety, not using the best parts or ingredients and being overly concerned about launching new products. The growing power of consumers is a key facet of the Product Mindset. 16
  17. 17. THE RISE OF THE SAVVY CONSUMERConsumers are increasingly gaining influence and effectively getting their voices heard “The Internet as a source of information and aacross the global supply chain. Manufacturers clearly see consumers commanding communication vehicle (blogsgreater power. Nearly 70% of manufacturers today agree that consumers are becoming and social networks) hasmore aware and better educated about products in general. Furthermore, two-thirds of empowered consumers in new and profound ways, givingmanufacturers concur that consumers are requesting more safety information about them more influence at theproducts and that consumer confidence in product safety is improving. More than half end of the supply chain.”of manufacturers also agree that consumers are demanding environmentally friendly Sara Greensteinproducts for the same cost as non-eco-friendly products. UL Senior Vice President Chief Marketing & Strategy OfficerMANUFACTURERS STRONGLY AGREE Consumers are becoming more aware and better 69% educated about products in general Consumers are requesting more safety 66% information about products 65% Consumer confidence in product safety is increasing 58% Consumers are demanding more eco-friendly products at the same cost as non-eco-friendly productsTHE VALUE OF CONSUMER ENDORSEMENTSManufacturers express a strong degree of confidence in consumers regarding the value of their endorsements.They also consider claims made by consumers who use their products as the single most-valuable type ofendorsement. With the pervasiveness of online customer testimonials and recommendations from friends/family,it is clear that manufacturers greatly respect the opinions of consumers and are continuously seeking ways togain and leverage their approval. Demonstrating confidence in their own performance, manufacturers rank theirown endorsements as the next most-valuable type of endorsement.MOST VALUABLE PARTY MAKING A CLAIM ABOUT YOUR PRODUCT 83% Consumers 76% Manufacturers 69% Retailers 68% Independent safety certification companies 67% Government agenciesNAVIGATING THE PRODUCT MINDSET 17 THE POWER SHIFT
  18. 18. SPECIFICITY DEMONSTRATES AN ADVANCEDUNDERSTANDING OF PRODUCT SAFETY TOP THREE CONSUMER SAFETY CONCERNSConsumers understand and prioritize product safetyenough to comprehend that there are different safetyissues specific to particular industries and the products Building materialsthey create. The widespread use of the Internet, social 1. Toxic emissionsmedia and media reporting likely has facilitated 2. Structural safetythis education. 3. FlammabilityToxic emissions are the primary concern in the buildingmaterials category, while long-term exposure and skinirritation rank as the most important safety concernsin the household chemicals category.Safety concerns for food are also varied. Contracting a Household chemicalsfoodborne illness is the greatest safety issue for fresh 1. Long-term exposurefood, and there is also concern about the cleanliness 2. Skin irritationof the environment where food is stored or situated. In 3. Interaction with other productsterms of processed food, chemical additives causethe greatest worry across all geographies, particularlyconsumers in China, demonstrating that food safetyconcerns go beyond fresh, unprocessed ingredientsand impact the entire food industry supply chain. Fresh foodIn general, consumers are less concerned about safety 1. Foodborne illnessand more interested in product performance and 2. Cleanliness/sanitary conditionsreliability in the high-tech category. Among safety 3. Freshnessconcerns, emissions and wireless radio wavesare the most significant. Processed food 1. Chemical additives 2. Foodborne illness 3. Cleanliness/sanitary conditions High-tech 1. Emissions 2. Wireless radio waves 3. Electric shockNAVIGATING THE PRODUCT MINDSET 18 THE POWER SHIFT
  19. 19. CONSUMERS EXPECT MANUFACTURERS TO DO MOREConsumers believe that manufacturers are most the current economy and complexity of their supplyinterested in profits, causing them to rush new chains. This consumer sentiment may also demonstrateproducts to market and not test them adequately. consumers’ motivation to become more engaged in theThese perceptions may be unfair to manufacturers that supply chain — to ensure the safety, performance andcontinue to find it a challenge to be profitable given quality of the products they use.PERCENTAGE OF CONSUMERS WHO FEEL MANUFACTURERS VALUE SALES MORE THAN PRODUCT SAFETY 42% High-tech 40% Household chemicals 40% Processed food 38% Fresh food 36% Building materialsPERCENTAGE OF CONSUMERS WHO FEEL MANUFACTURERS DO NOT CONDUCT THOROUGH TESTINGBEFORE LAUNCHING NEW PRODUCTS 72% Processed food 72% Building materials 70% Fresh food 69% Household chemicals48 67% High-tech % OF CONSUMERS FEEL HIGH-TECH MANUFACTURERS BRING NEW PRODUCTS TO MARKET FASTER THAN PEOPLE NEED THEM.NAVIGATING THE PRODUCT MINDSET 19 THE POWER SHIFT
  20. 20. CONSUMERS DO NOT FEEL MANUFACTURERS USE THE BEST MATERIALS IN THEIR PRODUCTSOn average, 76% of consumers do not believe better job and perhaps another indication as tomanufacturers use the best raw materials/ingredients why consumers are increasingly interested in knowingavailable when making their products. This is another the origin of a product’s components/ingredients.proof point in their view that manufacturers can do aSTRONGLY AGREE MANUFACTURERS DO NOT USE THE BEST-QUALITY MATERIALS 77% Household 77% Processed 76% Building 75% Fresh food 75% High-tech chemicals food materialsIT IS HARD FOR CONSUMERS TO FIND PRODUCT INFORMATIONConsumers in general do not feel that product information is easily available. Product safetyinformation is particularly difficult to locate, and on average, 53% of consumers are challengedin finding quality/performance content.DIFFICULTY FINDING PRODUCT SAFETY INFORMATION 76% 68% AGREE AGREE 64% 62% AGREE AGREE 76% Fresh meat & fish Cell phones Household cleaners InsulationDIFFICULTY FINDING PRODUCT QUALITY/PERFORMANCE INFORMATION 58% 58% AGREE AGREE 49% 47% AGREE AGREE 58% 58% Household cleaners Insulation Fresh meat & fish Cell phonesNAVIGATING THE PRODUCT MINDSET 20 THE POWER SHIFT
  21. 21. 4 ENVIRONMENTAL FOCUS IS DESIRED MORE THAN IMPERATIVE The environment is not a primary business issue for manufacturers today. Few appear to make it a top-tier priority; instead, focusing on environmental concerns is more desired than it is essential. The environment is not seen as a critical driver of global trade in the way product safety and performance are. However, adding to the importance of the environment is consumer interest in more sustainable, environmentally friendly products and practices; this consumer appeal will likely continue to influence manufacturers over time. Coupled with the fact that manufacturers are starting to see profits from environmental products, this will likely result in an increase in mindshare and significance in the future. Overall, the emerging markets appear to be leapfrogging the more-established manufacturing markets in terms of adopting an environmental focus. The U.S. in particular appears to be struggling more to monetize and make this area of focus profitable. 21
  22. 22. MANUFACTURERS DO NOT FEEL PROMOTING THE ENVIRONMENT IS ESSENTIALManufacturers do not think incorporating environmental features or operations will be “Environmental findings largely reflect what we hear and seecritical in determining their success. From designing sustainable products and operational in the marketplace. The biggestsustainability to using environmentally friendly packaging, manufacturers indicate driving forces in environmental advancement today arerelatively minimal levels of importance. When manufacturers were asked to forecast their government regulations,interest 2-3 years from now, the results were not significantly different. By comparison, government purchasing, NGOsproduct reliability, product safety and product innovation all received 20% or higher totals and initiatives by influential organizations, like retailersfrom manufacturers regarding the impact on their ability to compete. or large private purchasers. Thus, it is consistent with our perspective that there is a greater focus in emergingCONSIDERATION MOST IMPORTANT IN IMPACTING YOUR COMPANY’S markets, where governmentsABILITY TO COMPETE are incentivizing the creation of environmental products in sectors like building materials, 27% Product reliability 200% furnishings, electronics and 9% Designing sustainable products MORE cleaning chemicals.” 8% Operational sustainability Stephen Wenc UL President, Environmental2% Using environmentally friendly packaging Services BusinessFUTURE CONSIDERATION MOST IMPORTANT IN IMPACTING YOURCOMPANY’S ABILITY TO COMPLETE 27% Product innovation 145% 11% Designing sustainable products MORE 8% Operational sustainability 4% Using environmentally friendly packagingNAVIGATING THE PRODUCT MINDSET 22 ENVIRONMENTAL FOCUS IS DESIRED MORE THAN IMPERATIVE
  23. 23. AN ENVIRONMENTAL ORIENTATION CAN BE PROFITABLEThe potential of the environment as a significant the Product Mindset today but is not essential. Chinesebusiness driver is evidenced by the fact that 65% of and Indian manufacturers are most likely to feelmanufacturers consider environmental products to be environmental products are profitable. From a sectorprofitable or somewhat profitable. Perhaps the fact that perspective, those in the building materials and high-nearly 30% of manufacturers feel sustainable products tech categories are more likely to report profitabilityare not yet profitable today is too high for widespread currently. Those in the food industry feel that this areaadoption, thus suggesting the environment is part of will hold a promise of profitability in the future. Not profitable and you do not expect it to be 6% in the next few years 31% Profitable Not profitable today 29% but may be over time 34% Somewhat profitableCONSUMERS FEEL MANUFACTURERS ARE NOT FOLLOWING ADEQUATE ENVIRONMENTAL PROCEDURESOn average, 75% of consumers across all geographies German and American counterparts; however, the highdo not believe that manufacturers are taking sufficient number indicates consumers believe manufacturerssteps to maintain environmental procedures. Consumers are not doing all they can to promote environmentally75in China and India are more positive than are their sound manufacturing procedures. % OF CONSUMERS DO NOT FEEL MANUFACTURERS HAVE TAKEN ADEQUATE STEPS TO ENSURE THAT ENVIRONMENTALLY FRIENDLY PROCEDURES ARE FOLLOWED.NAVIGATING THE PRODUCT MINDSET 23 ENVIRONMENTAL FOCUS IS DESIRED MORE THAN IMPERATIVE
  24. 24. 5 TRACEABILITY IS KEY Where a product’s ingredients or materials come from is becoming increasingly important. With an understanding of the growing complexity of products and the global supply chain, stakeholders express interest in knowing where a product is made, where it is assembled and the countries from which its ingredients and raw materials originate. In fact, it is a product’s pieces and parts that are more important than the whole. 24
  25. 25. CONSUMER AWARENESS OF COUNTRY OF ORIGINOn average, 57% of consumers state they are always which are those close to the body or ingested, mayor usually aware of the manufacturing country of sometimes be seen as higher risk in terms of safetyorigin. Awareness of country of origin is greatest and understanding how and where they are assembled.among Chinese consumers and is most important in Additionally, both food and high-tech products arethe categories of high-tech and food, both fresh and used frequently, which may also impact consumer57processed. This may suggest that “intimate” products, awareness and concern. % OF CONSUMERS STATE THEY ARE ALWAYS OR USUALLY AWARE OF A PRODUCT’S COUNTRY OF ORIGIN.55 % OF CHINESE CONSUMERS BELIEVE COUNTRY OF ORIGIN WILL BECOME MORE IMPORTANT OVER THE NEXT FIVE YEARS.FOOD MANUFACTURERS FIND COUNTRY OF ORIGIN IMPORTANT60 % OF FOOD MANUFACTURERS BELIEVE THE COUNTRY OF ORIGIN OF FRESH DAIRY PRODUCTS AND MEAT, FISH, AND FRUIT AND VEGETABLES IMPACTS THE QUALITY OF THEIR PRODUCTS.NAVIGATING THE PRODUCT MINDSET 25 TRACEABILITY IS KEY
  26. 26. CONSUMERS ARE PRIORITIZING FOOD TRACEABILITYOver 50% of consumers across all geographies believe country of origin for both “Food is emerging as one of the key global safety concerns,processed and fresh foods will become more important over the next five years, like electrical safety wassignaling the high level of concern consumers globally have about food safety. for industrialized nations56 at the turn of the century. Consumers around the world see the absolute need to better understand where their food has % OF CONSUMERS been and factor that into their decision-making process.” BELIEVE THAT WHERE Hank Lambert UL General Manager, Food FRESH AND PROCESSED and Water Business FOOD IS ASSEMBLED/ MANUFACTURED WILL BECOME INCREASINGLY IMPORTANT.NAVIGATING THE PRODUCT MINDSET 26 TRACEABILITY IS KEY
  27. 27. MANUFACTURERS WILL BE SOURCING COMPONENTS FROM MORE COUNTRIESHalf of manufacturers across all sectors state they will an ever-expanding and complex compendium ofincrease sourcing from other countries. Chinese and countries involved in completing a single product.Indian manufacturers are more likely to forecast an This also suggests the continued importanceincrease in the outsourcing of raw materials, as are those consumers will link to traceability as more countriesin the high-tech sector. Among this group, 85% say they become involved in the supply chain.50will be adding new countries to their roster, conveying % OF MANUFACTURERS WILL INCREASE SOURCING FROM OTHER COUNTRIES.THE IMPORTANCE OF COMPONENTS AND INGREDIENTS TO CONSUMERSPerhaps more notable than the overall significance of where a product is assembled is the fact thatconsumers are prioritizing the importance of knowing the origin of a product’s parts/ingredients.Understanding that consumers are more concerned about components than they are with where aproduct is assembled demonstrates both their expanded comprehension of the supply chain and theircommitment to ask for and discern more-detailed product safety information.IMPORTANCE OF KNOWING WHERE PARTS COME FROM VS. WHERE A PRODUCT WAS ASSEMBLED ASSEMBLY/ PARTS/ PACKAGING COMPONENTS Food 31% 69% Household 65% 35% chemicals Building 36% 64% materials High-tech 46% 54%NAVIGATING THE PRODUCT MINDSET 27 TRACEABILITY IS KEY
  28. 28. THE IMPORTANCE OF COMPONENTS AND INGREDIENTS ACROSS GEOGRAPHIESA review of consumer viewpoints across specific Germans are a bit more divided on this overall, notablygeographies about particular industries reveals the regarding home building materials and high-tech.importance of knowing the origin of a product’s Chinese consumers seem to rate parts/ingredientscomponents/ingredients versus the assembled product. as more important than do other consumers.IMPORTANCE OF KNOWING WHERE PARTS COME FROM VS. WHERE A PRODUCT WAS ASSEMBLED INDIA CHINA U.S. GERMANY Food 35% 65% 24% 76% 23% 77% 40% 60% Household 34% 66% 28% 72% 27% 73% 51% 49% chemicals Building 37% 63% 23% 77% 32% 68% 52% 48% materials High-tech 47% 53% 31% 69% 44% 56% 61% 39% ASSEMBLY PARTSNAVIGATING THE PRODUCT MINDSET 28 TRACEABILITY IS KEY
  29. 29. 6 WHERE YOU ARE MATTERS Stakeholder perceptions are largely formed based on where they are from. Geography and a country’s stage of development have a significant impact on the Product Mindset. For manufacturers, this may be due to understanding and experiencing similar supply chain challenges: regulations, economic realities, growth opportunities, country perceptions and consumer involvement. For consumers, this may align to cultural norms, the range of products available, social factors, quality/safety assurances and cost considerations. 29
  30. 30. CONSUMERS AND MANUFACTURERS PERCEIVE PRODUCT QUALITY AS BETTER IN DEVELOPED VS. EMERGING COUNTRIESConsumers in both developed and emerging nations feel quality products. Manufacturers in all countries surveyedstrongly that developed markets produce higher-quality staunchly believe that their domestic products are theproducts. Consumers in India and China rate goods best and rank themselves higher than any other nation.made in developed countries higher than they do those In general, products manufactured in developed countriesmade in their own. In the U.S. and Germany, consumers are perceived to be of better quality overall, although thisperceive the emerging markets as delivering lower- belief is not as pronounced among manufacturers.41IMPRESSION OF OVERALL PRODUCT QUALITY IN DEVELOPED COUNTRIES RELATIVE TO EMERGING COUNTRIES % HIGHER FROM DEVELOPED TO EMERGING COUNTRIES ACCORDING16 TO CONSUMERS. % HIGHER FROM DEVELOPED TO EMERGING COUNTRIES ACCORDING TO MANUFACTURERS.NAVIGATING THE PRODUCT MINDSET 30 WHERE YOU ARE MATTERS
  31. 31. GLOBAL SOURCING IS VIEWED DIFFERENTLY BY EMERGING VS. DEVELOPED MARKETSU.S. and German manufacturers, coming from nations with mature manufacturing bases, tend to see global sourcingas somewhat detrimental to product quality. In contrast, those in emerging economies — notably China, whoseeconomy benefits from global sourcing — logically see this dynamic as positive for product quality.AGREE THAT GLOBAL SOURCING IS IMPROVING PRODUCT QUALITY DEVELOPED EMERGING 70% CHINA 65% INDIA 32% GERMANY 14% U.S.OPERATIONAL SUSTAINABILITY IS VIEWED DIFFERENTLY BY EMERGING VS. DEVELOPED MARKETSChinese and Indian manufacturers are significantly more likely to believe their industries are ahead of the curvethan are manufacturers in the U.S. and Germany when it comes to operational sustainability. This suggests thatthis consideration may be more prioritized in emerging markets than in established ones, or that expectationsand standards are different across geographies.AHEAD OF THE CURVE FOR OPERATIONAL SUSTAINABILITY DEVELOPED EMERGING 54% CHINA 46% INDIA 31% U.S. 24% GERMANYNAVIGATING THE PRODUCT MINDSET 31 WHERE YOU ARE MATTERS
  32. 32. CONSUMER AWARENESS OF COUNTRY OF ORIGIN IS VIEWED DIFFERENTLY BY EMERGING VS. DEVELOPED MARKETSChinese and Indian consumers are significantly more aware of the manufacturing country of originfor the products they purchase than are American or German consumers.ALWAYS/USUALLY AWARE OF MANUFACTURING COUNTRY WHEN MAKING A PURCHASE DEVELOPED EMERGING 70% INDIA 66% CHINA 48% GERMANY 46% U.S.CHINESE MANUFACTURERS VALUE INNOVATIONIn addition to established versus emerging sensibilities, The competitive and fast-growing environment in Chinathere are also some specific geographic features that may be a key reason why innovation is prized, and animpact the Product Mindset. Chinese manufacturers essential part of business success or perhaps governmentacross all industries surveyed value innovation more prioritization of innovation is another key consideration.than manufacturers from any other geographies.INNOVATION IS THE MOST IMPORTANT CONSIDERATION THAT IMPACTS YOUR ABILITY TO COMPETE 30% CHINA 58% 19% GERMANY MORE 16% INDIA 16% U.S.YOUR INDUSTRY IS AHEAD OF THE CURVE REGARDING PRODUCT INNOVATION 57% CHINA 36% MORE 42% INDIA 39% GERMANY 39% U.S.NAVIGATING THE PRODUCT MINDSET 32 WHERE YOU ARE MATTERS
  33. 33. U.S. MANUFACTURERS VALUE SPEED TO MARKETSpeed to market as a priority is notably higher among U.S. manufacturers than “Speed to market ranks low among Chinese manufacturers.manufacturers in any other country. American manufacturers are five times more likely We believe this is likely becausethan are Chinese manufacturers to consider this as impacting their ability to compete. the majority of Chinese manufacturers have strength in making products more cost effective, efficient andAGREE SPEED TO MARKET IS THE MOST IMPORTANT CONSIDERATION THAT IMPACTS dependable, rather than inYOUR ABILITY TO COMPETE advancing technology.” Weifang Zhou 19% U.S. 73% UL Vice President, Greater China 11% INDIA MORE 5% GERMANY 4% CHINAU.S. MANUFACTURERS ARE LEAST LIKELY TO BELIEVE ENVIRONMENTAL PRODUCTS ARE PROFITABLEU.S. manufacturers are the least likely to agree that environmental products are profitable. Manufacturers in Chinaare almost three times more likely than are manufacturers in the United States to believe in the financial benefit ofcreating environmentally friendly products. From an industry perspective, those in the building materials and high-tech categories are more likely to report profitability currently. Those in the food industry feel that this area will holda promise of profitability in the future.AGREE THAT CREATING AND MANUFACTURING SUSTAINABLE AND ENVIRONMENTALLYFRIENDLY PRODUCTS IS PROFITABLE TODAY 41% CHINA 36% INDIA 30% GERMANY 15% U.S.NAVIGATING THE PRODUCT MINDSET 33 WHERE YOU ARE MATTERS
  34. 34. 7 I NNOVATION LOOMS LARGE FOR TOMORROW For manufacturers, innovation is a key consideration for advancement. While product safety is a dominant concern today, for manufacturers product innovation is a priority for tomorrow, helping ensure growth and competitive advantage. Given profitability challenges, fast-paced competitors and the need for continuous new offerings in the pipeline, product innovation is becoming an increasing focus for manufacturers. Interestingly, innovation does not seem as essential to consumers. 34
  35. 35. FOR MANUFACTURERS, INNOVATION LEADS TOMORROW “History shows that newWhen asked what considerations are most important in impacting a company’s ability technologies are adoptedto compete effectively in the marketplace today, manufacturers find product safety as slowly by the mass marketslightly more important than or equal to product innovation. However, manufacturers without accepted safety and performance standards (andsay that 2-3 years from now, innovation will become more important, demonstrating it compliance to such standards).is already impacting the Product Mindset and is a key factor in ensuring success. Early adopters will buy new gadgets, but mass market adoption will stall. Think about PV panels and smart meters —CONSIDERATION MOST IMPORTANT IN IMPACTING YOUR COMPANY’S they suffered from false startsABILITY TO COMPETE due to unintended consequences around safety and performance.” 27% Product reliability Clyde Kofman UL Senior Vice President, 21% Product safety Chief Commercial Officer 20% Product innovationFUTURE CONSIDERATION MOST IMPORTANT IN IMPACTING YOURCOMPANY’S ABILITY TO COMPETE 27% Product innovation 22% Product reliability 14% Product safetyIN THE FUTURE, INNOVATION TRUMPS SAFETY FOR ALL INDUSTRIES EXCEPT FOODLooking at how manufacturers in each industry prioritize innovation in the coming years, it is notable that all sectorsexcept food agree it is becoming more significant. Food manufacturers still believe safety will be their most criticalissue in the future.2-3 YEARS FROM NOW, WHICH CONSIDERATION WILL HAVE THE LARGEST IMPACT ON YOUR COMPANY’S ABILITY TO COMPETE? #1 High-tech #1 Household #2 Food #1 Building chemicals materials Designing Operational Outsourcing PRODUCT Product Product Speed to Using sustainable sustainability to contain INNOVATION reliability safety market environmentally products costs friendly packagingNAVIGATING THE PRODUCT MINDSET 35 INNOVATION LOOMS LARGE FOR TOMORROW
  36. 36. MANUFACTURERS OVERESTIMATE CONSUMERS’ INTEREST IN INNOVATIONWith the exception of consumers regarding the high-tech industry, it appears consumers do not prioritizeinnovation as much as manufacturers think that they do. In general, manufacturers underestimate theimportance of safety to consumers and overestimate the significance of innovation.IMPORTANCE OF INNOVATION TO CONSUMERS MANUFACTURERS’ PERCEPTION CONSUMERS’ ACTUAL INTEREST OF CONSUMERS’ INTEREST Building 5% 11% materials Food 3% 11% Household 4% 17% chemicals High-tech 13% 12%NAVIGATING THE PRODUCT MINDSET 36 INNOVATION LOOMS LARGE FOR TOMORROW
  37. 37. CONCLUSIONToday, we are more intertwined, interlinked and interdependent. With supply chain complexity growing andglobal trade increasing at unprecedented rates, it appears that Navigating the Product Mindset is essentialto better understand the shifting dynamics of a changing world — a world that is more connected today thanever before — and an ecosystem where information, dialogue and interdependencies occur with greaterfrequency and greater impact.NAVIGATING THE PRODUCT MINDSET 37 CONCLUSION
  38. 38. HOW TO NAVIGATE THE PRODUCT MINDSETUpon completion of our inaugural study, we have identified three key takeaways to help you navigatethe Product Mindset. We encourage you to consider the ways these findings can impact how you makedecisions, prioritize and plan. 2 SAFETY PERFORMANCE ARE FUNDAMENTAL PRIORITIES 7 INNOVATION LOOMS PRIORITIES LARGE FOR TOMORROW 5 TRACEABILITY IS KEY 4 ENVIRONMENTAL FOCUS 6 WHERE YOU ARE MATTERS INFLUENCES IS DESIRED MORE THAN IMPERATIVE ATTITUDES 1 CONFIDENCE ABOUNDS 3 THE POWER SHIFTPRIORITIES INFLUENCES ATTITUDESConsiderations of significance, Factors that are helping directly or Stakeholder expectations andunderscoring key areas of importance indirectly shape the Product Mindset perspectives about their own abilitiesand accentuating essential beliefs through shared points of view and the performance of othersCutting to the core of what matters Geography, state of growth and In Confidence Abounds (#1), a prevail-today is Safety Performance Are culture clearly influence perception ing sense of assurance is evident andFundamental Priorities (#2), which and demonstrate a significant gap may belie today’s turbulent times.shows consensus among both manu- between emerging and developed It suggests that manufacturers arefacturers and consumers regarding countries in Where You Are Matters confident in what they control andthe primacy of these considerations. (#6). Running counter to the that consumer attitudes are generallyAnother standout finding is Trace- abundance of greenwashing noise optimistic in terms of product qualityability Is Key (#5), where we observe in the marketplace, both manufactur- and safety. Those same consumersincreased awareness and interest ers and consumers currently view should be carefully consideredaround the key ingredients or source the environment as aspirational because it is evident they wield morematerials that are part of what forms more than mandatory, as detailed influence and importance, asan assembled product. Among manu- in Environmental Focus Is Desired showcased in The Power Shift (#3).facturers, the need for invention be- More Than Imperative (#4).comes more significant in the future,according to Innovation LoomsLarge For Tomorrow (#7).NAVIGATING THE PRODUCT MINDSET 38 CONCLUSION
  39. 39. ACKNOWLEDGMENTSWe would like to acknowledge the contributions ofthe UL teams that worked on Navigating the ProductMindset and the enthusiastic support this initiativehas received from our management.TECHNICAL PANEL:Sara Greenstein, Christopher Hasbrook,Clyde Kofman, Hank Lambert, August Schaefer,Don Talka, Stephen Wenc and Weifang ZhouEXECUTIVE EDITOR:Suzanne LavinThis study was concepted and createdin association with:ABOUT ULUL is a premier global independent safety science company with more than 117 years of history. Employing morethan 9,000 professionals in over 96 countries, UL has five distinct business units – Product Safety, Environment,Life Health, University and Verification Services – to meet the expanding needs of our customers and to deliveron our public safety mission. Additional information about UL may be found at UL.com.NAVIGATING THE PRODUCT MINDSET 39 ACKNOWLEDGMENTS
  40. 40. METHODOLOGYIn Spring 2011, UL employed an independent researchfirm, ORC International, to conduct a global quantitativesurvey among 1,235 consumers and 1,195 manufacturersacross four countries: China, Germany, India andthe United States. To meet the objectives of the survey,manufacturers across the high-tech, food, householdchemicals and building materials sectors were inter-viewed by phone, and consumers interviewed throughan online survey. Manufacturers were director-level andabove and specialized in management, research anddevelopment, marketing and sales, quality control,product management, or design. Consumers were arepresentative mix of age, gender, education andincome. Data tabulations among sub-groups have beentested for statistical significance at the 90% and 95%confidence levels. A technical panel was used to provideadditional insights, and Product Mindset considerationswere selected based on importance and overallsignificance of the data.NAVIGATING THE PRODUCT MINDSET 40 METHODOLOGY
  41. 41. SOURCES1. U.S. Food and Drug Administration, Pathway to Global Product 8. The World Bank, “Imports of Goods and Services” (2011). Safety and Quality. http://www.fda.gov/downloads/aboutfda http://data.worldbank.org/indicator/BM.GSR.GNFS.CD /centersoffices/oc/globalproductpathway/ucm259845.pdf (last accessed Nov. 28, 2011). (last accessed Sept. 7, 2011). 9. The World Bank, “Gross Domestic Product” (2010).2. The World Bank, “Exports of Goods and Services” (2011). http://siteresources.worldbank.org/DATASTATISTICS/Resources/ http://data.worldbank.org/indicator/BX.GSR.GNFS.CD GDP.pdf (last accessed Nov. 28, 2011). (last accessed Nov. 28, 2011). 10. Accenture, Finding Growth: Emergence of a New Consumer 3. M. Ravindran, “Global Trade: Emerging Trends in China and India,” Technology Paradigm, The 2011 Accenture Consumer Electronics Markets in Motion (July 11, 2011). http://www.ftkmc.com/newsletter/ Products and Services Usage Report (2011). Vol2-17-july11-2011.pdf (last accessed Sept. 7, 2011). 11. Frank Ohel, Darin Floyd and Alan Fowler, “Food Safety’s New4. Susan Blumenthal, MD, “Food Safety in the 21st Century,” Regulatory Reality: Are You Prepared?” Food Safety Magazine Huffington Post (Aug. 5, 2011). http://www.huffingtonpost.com/ (May 2010). http://www.foodsafetymagazine.com/articleFF. susan-blumenthal/food-safety_b_918282.html asp?id=3605sub=sub1 (last accessed Nov. 18, 2011). (last accessed Nov. 18, 2011). 12. Michael Standaert, “Chinese Market for Green Products Growing, 5. World Trade Organization, “World Trade 2010, Prospects for 2011” But Consumers Skeptical of Domestic Labels,” BNA’s Daily Report (April 7, 2011). http://www.wto.org/english/news_e/pres11_e/pr628 for Executives (Oct. 20, 2011). _e.htm (last accessed Nov. 20, 2011). 13. Rajani Baburajan, “The Number of Smart Home Installations to 6. Dr. Reinhard Geissbauer and Michael D’heur, “Global Supply Chain Touch 5.38 million by 2015,” (July 6, 2011). http://smart-grid.tmcnet. Trends 2010-2012” (PRTM Management Consulting, June 21, 2010). com/topics/smart-grid/articles/193687-number-smart-home- http://www.prtm.com/strategicviewpointarticle.aspx?id=3959 installations-touch-538-million-2015.htm (last accessed Nov. 20, 2011). langtype=1031 (last accessed Nov. 23, 2011). 14. “Top Ten Countries by Population,” WolframAlpha (2011).7. U.S. Food and Drug Administration, Pathway to Global Product http://www.wolframalpha.com/input/?i=top+10+countries Safety and Quality. http://www.fda.gov/downloads/aboutfda/ +by+population (last accessed Nov. 22, 2011). centersoffices/oc/globalproductpathway/ucm259845.pdf (last accessed Sept. 7, 2011).NAVIGATING THE PRODUCT MINDSET 41 SOURCES
  42. 42. FURTHERINFORMATIONFor more information about this study:Visit: www.ul.com/productmindsetEmail: productmindset@ul.comCall: +1 847.664.2226UL and the UL logo are trademarks of Underwriters Laboratories Inc. © 2011Navigating the Product Mindset cannot be copied, reproduced, distributedor displayed without UL’s express written permission. V.71.NAVIGATING THE PRODUCT MINDSET 42 FURTHER INFORMATION

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