R&D TODAY: ADDRESSING AND ENHANCING RESEARCH & DEVELOPMENT’S EFFECTIVENESS Concepts, Case Studies, and Debatable Ideas Kenny Ong CNI Holdings Berhad

In other words… How do we make R&D more Effective?

How do we make R&D more Effective?

Before that… How is R&D not effective? Top Down – Process problem Because I can - Competency problem Poor business value – Ignorance problem No Budget - Alignment problem Not-Invented-Here – Ego problem

How is R&D not effective?

Top Down – Process problem

Because I can - Competency problem

Poor business value – Ignorance problem

No Budget - Alignment problem

Not-Invented-Here – Ego problem

Contents: How do we make R&D more Effective? Know Your Business Research Reverse Marketing Align R&D Today -> RD&D Issues and Challenges

How do we make R&D more Effective?

Know Your Business

Research

Reverse Marketing

Align

R&D Today -> RD&D

Issues and Challenges

R&D For What? R&D Product Process

So…What is our Product? Research -> Develop -> Sell -> Improve Coffee? Shampoo? Events? Marketing Plan? Customers?

Research -> Develop -> Sell -> Improve

Coffee?

Shampoo?

Events?

Marketing Plan?

Customers?

A1. Know Your Business The anchor for all decisions

About: CNI 20 years old Core Business: MLM Others: Contract Manufacturing, Export, Trading, eCommerce, F&B retail Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan Staff force: ± 500 Distributors: 200,000 Products: Consumer Goods and Services

20 years old

Core Business: MLM

Others: Contract Manufacturing, Export, Trading, eCommerce, F&B retail

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

Staff force: ± 500

Distributors: 200,000

Products: Consumer Goods and Services

Intro: MLM Sell through people Relationship & people skills Compensation Plan Follow-up Integrity R&D Training Functions & Events Tight regulations

Sell through people

Relationship & people skills

Compensation Plan

Follow-up

Integrity

R&D

Training

Functions & Events

Tight regulations

Intro: CNI CNI’s Business Model background Factory CNIE DC SP Leaders Customers R&D

CNI’s Business Model background

What is the Business Model? USP Market Discipline Profit Model

Business Model: USP Unique Selling Proposition (USP) = Targeted Customer = Core Buying Purpose/ Customer Value Proposition/ Job To Be Done (JBTD)

Unique Selling Proposition (USP)

=

Targeted Customer

=

Core Buying Purpose/ Customer Value Proposition/ Job To Be Done (JBTD)

Business Model: USP “ The Product is Not the Product” What is the customer really buying? What is the “Core Buying Purpose”?

“ The Product is Not the Product”

What is the customer really buying?

What is the “Core Buying Purpose”?

Business Model: USP Insufficient WEALTH Insufficient ACCESS Insufficient SKILL Insufficient TIME

Insufficient WEALTH

Insufficient ACCESS

Insufficient SKILL

Insufficient TIME

Business Model: Profit Model Revenue Cost Margin

Business Model: Market Discipline Mamak stall

Mamak stall

What are they really buying? "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 "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 Product Leadership Operational Excellence Customer Intimacy

"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

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)

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 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

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

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

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 5 th 2007 www.myCNI.om.my

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

Focus: 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)

Focus: 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) www.myCNI.com.my www.OOBEY.com

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

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

“ 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 .”

Dangers of Best Practice and Benchmarking… www.myCNI.co.my Company Performance high low ‘ Best Practice’ theories low high zero Performance “ Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005 Trend line

Dangers of Best Practice and Benchmarking… Company Performance high low ‘ Best Practice’ theories low high zero Performance “ Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005 Trend line

Dangers of Best Practice and Benchmarking… Selection Bias: Success Traits = Failure Traits Successful Cases + Failure Cases Worst effects in ‘Old’ industries Overvalue ‘best practice’ theories Current accomplishments unfairly magnified by past achievements Reverse Causal

Selection Bias:

Success Traits = Failure Traits

Successful Cases + Failure Cases

Worst effects in ‘Old’ industries

Overvalue ‘best practice’ theories

Current accomplishments unfairly magnified by past achievements

Reverse Causal

Dangers of Best Practice and Benchmarking… Also known as ‘Beware of Consultants’: Selection Bias Big vs. Small company Selective success stories Correlation vs. Causal Survey problems Practical vs. Glamour-to-have Leaders who benchmark

Also known as ‘Beware of Consultants’:

Selection Bias

Big vs. Small company

Selective success stories

Correlation vs. Causal

Survey problems

Practical vs. Glamour-to-have

Leaders who benchmark

‘Input’ Filters Mkt Rsc R&D Research Development Filter Filter Filter Marketing Filter

Information Drifts (1/2) Availability Drift: Looking for convenience You give more weight to information that’s more readily available to you. Experience Drift: Influenced by personal prejudice You tend to see things in terms of your personal or professional interest. Conflict Drift: Struggling with beliefs Your natural tendency is to reject information that conflicts with your beliefs. Recall Drift: Trusting your memory You more easily recall information about things familiar to you.

Availability Drift: Looking for convenience

You give more weight to information that’s more readily available to you.

Experience Drift: Influenced by personal prejudice

You tend to see things in terms of your personal or professional interest.

Conflict Drift: Struggling with beliefs

Your natural tendency is to reject information that conflicts with your beliefs.

Recall Drift: Trusting your memory

You more easily recall information about things familiar to you.

Information Drifts (2/2) Selectivity Drift: Picking your priorities You screen out information and observations about things that do not interest you. 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. Recency Drift You place greater emphasis on what has just happened to you. 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.

Selectivity Drift: Picking your priorities

You screen out information and observations about things that do not interest you.

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.

Recency Drift

You place greater emphasis on what has just happened to you.

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 1 st Tongkat Ali Ginseng Coffee

The birth of Malaysia’s 1 st Tongkat Ali Ginseng Coffee

The “Old” Days Invent R&D Build Manufacturing Market Marketing Sell Sales

The “New” Days Invent Build Market Sell R&D Manufacturing Marketing Sales

Marketing 101 Product Promotion Pricing Place 4Ps

Marketing & R&D Features Brand Target Logistics Product Promotion Pricing Place 4Ps

Marketing & R&D Features Brand Target Logistics Price Promotion Place Product IKEA Apple Nestle Asus

A4. Align Running in the same direction with the proper resources

Strategy: 4-Wheels Philosophy Corporate Objective Corporate Strategy Structure Resources 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

Leader vs. Innovator

Bloom vs. Prune

Breakthrough vs. Incremental

Horizon

Timing vs. Quality

Internal, External, Outsourced

TopDown vs BottomUp

Blockbuster vs. Multiplier vs. Pyramid

Strategy: Framework Org Structure Job Design C&B Policies & procedures Decision making Job fit Management Systems BSC and KPIs Decentralized & Empower Structure

Org Structure

Job Design

C&B

Policies & procedures

Decision making

Job fit

Management Systems

BSC and KPIs

Decentralized & Empower

Strategy: Framework Technology Equipment Information Channels Partnerships, Alliances Brand Funding & Allocation* Resources

Technology

Equipment

Information

Channels

Partnerships, Alliances

Brand

Funding & Allocation*

*Funding & Allocation CNI’s Performance Market Potential Sell Outside Sell IP License out IP Sell IP Drop Re-invest Exchange IP

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

Vision/Mission/Philosophy

Leadership Style

R&D importance

Delegation & Empowerment

C&B, Promotions

Sense of Urgency

Speak regularly about customers

Appetite for Risk

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

Specialist Career Ladders

Competencies**

Co-habitation

Team vs. Individual

Standard or Creative?

C&B, Retention

Toys

In-source? Co-source? JV? BPO?

Strategy: Framework Philosophy Corporate Objective Corporate Strategy Structure Resources 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

Garnier

Digi

R&D Today -> RD&D CNI Waterlife Design Point 1: Designed to SELL Design Point 2: Before-After R&D

CNI Waterlife

R&D Today -> RD&D R esearch, D evelopment & DESIGN Features Benefits Differentiation

R esearch, D evelopment & DESIGN

Features

Benefits

Differentiation

R&D Today -> RD&D R esearch, D evelopment & DESIGN Function Aesthetics Logistics Design Point 1: Designed to SELL Design Point 2: Before-After R&D

R esearch, D evelopment & DESIGN

Function

Aesthetics

Logistics

New Product Development Matrix Marketing (4.0) Production (2.0) Finance (2.0) Manpower (1.0) Procurement (1.0)

Marketing (4.0)

Production (2.0)

Finance (2.0)

Manpower (1.0)

Procurement (1.0)

C. Issues and Challenges Problems, Problems, Problems

The Product/Service Innovation Challenge Add 10 value increasing properties to each product or service every 90 days Reduce jointly held inventories and lead time required by 90% in 24 months Reduce new-product/service development cycle time by 75% in next 2 years Copy 10 ideas every 60 days form competitors and noncompetitors Target % Revenue from New Products (previous 24 months ) - start with 50% Source: Thriving on Chaos , Tom Peters; Alfred A. Knopf Inc.

Add 10 value increasing properties to each product or service every 90 days

Reduce jointly held inventories and lead time required by 90% in 24 months

Reduce new-product/service development cycle time by 75% in next 2 years

Copy 10 ideas every 60 days form competitors and noncompetitors

Target % Revenue from New Products (previous 24 months ) - start with 50%

Thank You. soft copy of slides: http://totallyunrelatedrandomanddebatable.blogspot.com/