Last week I introduced 7 reasons to get your R&D or innovation process (or whatever your company calls it) into high gear To be clear, what I am talking about in this series is getting new products to the market. The focus is on increasing top lines sales, improving margins, and enhancing the reputation of your company. Having a highly productive product development and commercialization process is not a luxury, but a necessity. Let’s take a look at a couple more of the 7 reasons.
New products add incremental new revenue boosting your top line growth. Top line growth is important since without it, you are standing still. It is inevitable that some of your current products will become obsolete or competitors will introduce new products that erode sales of current products. The solution is a pipeline of new products that will result in top line growth. I have been fortunate to work in multiple companies where we consistently grew the top line with new products. Sustained growth requires a focus on new product development (NPD) and addressing the challenges inherent in NPD. In each of these companies (AlliedSignal, Honeywell, Ablestik Labs) we were able to grow the top line by multiple millions of dollars each year by introducing a steady stream of new products.
Some of the products were product line enhancements (i.e. how many times do you see the words “new and improved” on the label of many commodity items like laundry soap or food items). Product line enhancements provide the base to protect your current products. This is an important business strategy since if you don’t continuously improve your products, your competitor will do it for you! In this type of new product you might not get a price increase, so the margins might not be incrementally better.
In order to improve margins and increase profitability, you need to develop new products. The definition of a new product:
The key is to clearly identify the market unmet need. Too many companies spend a lot of energy developing a new technology (the teal circle) then go on a search for a customer application or market. I call this “technology push.” Sometimes this works, but a far more productive and ultimately more profitable approach is to identify both a market unmet need in parallel with developing the technical solution. When you have an identified unmet need, then the technology or product development can be laser focused. I call this a “market pull” approach. Your customers or the markets you serve can provide a gold mine of new product ideas. All of the companies I mentioned above had a clearly defined market pull approach.
So why expend a lot of energy upfront for the market pull approach? Improved margins. When a new product provides a new benefit or solves a problem, the value proposition is enhanced. The better the value proposition, the better the margins. I quickly learned early in my career that what IBM really sold was reliability. Back when IBM was a massive computer hardware company, and the phrase was “no IT manager ever got fired for buying IBM.” Customers who purchased a large multi-million dollar mainframe computer were buying a good nights sleep! I frequently told my Ablestik chemists we weren’t selling glue (or die attach adhesives) we were selling reliability. Customers pay more and margins increase when your new product is not a commodity and has a clearly defined value proposition. The cost of the die attach adhesive was fractions of a cent per chip, but the selling price was quoted in $/gram! Think about what would be the result if a chip became unglued in your cell phone? A highly engineered die attach adhesive minimizes risk for the OEM and thus has a very solid value proposition.
How are you going to increase the revenues and margins at your company?
Contact InnoCentrix and we can work with you to turn your “polymers into profits.”
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