Lean Times

Consumer goods companies (CG) typically fare better during recessions than those in many other industries, but lean times force a re-evaluation of product portfolios and R&D allocations. This is not the time to cut back on new product development, says Daniel Staresinic, worldwide director for Consumer Products and Life Sciences at Siemens PLM Software (www.siemens.com). Efficient and cost-effective innovation is now more important than ever.

What adjustments should a CG company make in a down economy?
When the economy is strong, the innovative consumer packaged goods (CPG) manufacturer enjoys the luxury of focusing on margin growth. A relative high percentage of the product and brand focus is "up-market" with the goal of providing superior performance at a premium price. In a down economy, the consumer is more willing to step past superior performance, at least for a while. The leaders in CPG shift their focus correspondingly to the promotion of midrange and value brands. And while the margin game is temporarily delayed, the market share game begins in earnest.

What does this mean for innovation and new product development?

The new product development engine will need to crank out a higher percentage of cost reductions and low-cost upgrades that provide "new news" without requiring price hikes at the shelf. Some larger efforts may be put on hold in favor of these share-building efforts. Some new projects may also be established that deliver no consumer-noticeable benefit at all, but instead allow the manufacturer to switch to a less expensive ingredient or component.

With more projects now in the pipe and with cost control at a super-premium, it is more important than ever to identify and accelerate the best ideas, and to identify and eliminate the bad ones early in the process. A purposeful and well-managed ideation/selection process is a must, as is rigorous portfolio management. Particularly helpful are portfolio management tools that can re-evaluate projects quickly against the heightened priority on cost reduction and share growth.
In addition, if CPG companies aren't already doing so, they should broaden their definition of innovation so that it begins at the idea and continues through to the shelf. There are ample opportunities for innovation at every stage of the lifecycle, and a holistic view is always important to getting new products to market faster and more cost-effectively.

Can you define PLM technology in detail?

The University of Michigan PLM Development Consortium defines PLM as an integrated, information-driven approach to all aspects of a product's life -- from its design inception through its manufacture, deployment and maintenance, culminating in its removal from service and final disposal. PLM is the coveted single source of truth about product, production and process information, as well as the infrastructure necessary to enforce best business practices throughout the lifecycle.
PLM enables an organization to rally around its true source of value (its products) and to digitally supply information about these products to all other enterprise systems. This, along with well-structured security and change management capabilities, provides an extraordinarily effective collaboration environment. And in a large CPG organization, effective collaboration is the foundation of effective innovation. This aspect of PLM -- that it can link product team members no matter where they are located -- is particularly important today with project team members distributed around the globe and with cost pressures creating a revolving door of material and contract manufacturing vendors.

What other advice do you have for CG companies at this time?

It is time to build share. Innovation and execution are the watchwords. Our shorthand for the two-part challenge is "build the right product/build the product right." Portfolio restructuring must go hand in hand with heightened cost management, and PLM is the platform to support that challenge.