Blog archive - May 2012

Well, it’s my first blog. Not just my first one for Frost & Sullivan – my first blog ever. As a professional writer, and professional communicator, I guess this means I’m somewhat old-fashioned. I’d rather write something longhand than type it, and I wish we’d all put the Postal Service back in business by sending each other some letters. (Remember letters? No “you’ve got mail” ding, dong, ping, or gong could ever be better than the silent anticipation of opening an envelope.) Anyway, I’m old-fashioned in most aspects of my life. I love old movies. I love old music. A few weeks ago my husband asked me to name a famous Grunge band, and the best I could do was Aerosmith (apparently they are NOT “Grunge”). Somehow this makes me eccentric, whereas the fact that he couldn’t tell me the difference between Ella Fitzgerald and Julie London just means he’s cool. Whatever. And so I’ve skipped through life, mostly paying homage to things that happened before I was born, and all to a Cole Porter soundtrack. I’ve watched Singing in the Rain more times than I could count; I’ve memorized all of Fred Astaire’s movies. I’ve devoured books on the Golden Age of Hollywood. Mid-20th Century detective stories are my vice (I’ve read them all, but Nero Wolfe’s brownstone is my absolute ideal…and if that doesn’t mean anything to you, do yourself a favor and pick up Some Buried Caesar, or maybe Champagne for One). Speaking of mid-20th Century detective stories: One of the lovely things about them is the way the detecting is done. There’s no scanning of Twitter pages, no research of Facebook posts. The hero might read back issues of the New York Times, or he might pay a trip to the library. He might even go really high-tech and type something, on a really snazzy machine like an Underwood. In all, a decidedly low-tech (but always successful) way of arriving at whodunit. Imagine my anxiety, then, when I was asked to write about technology. Not the technology of yesteryear—but the technology of tomorrow! Technology that hasn’t even happened yet, and how we can predict it and prepare for it! Did I mention I’ve barely started to blog? As I like to remind my boss, I have only to look at a computer to fry its insides past the point of hope or redemption. Perhaps I should explain why I was so chosen. I’m responsible for writing a series of Growth Team Membership deliverables called the Growth Process Toolkits. These toolkits are essentially primers – how-to-manuals—on key topics that drive a company’s top-line growth. For example, we’ve published toolkits on M&A, new product launch, distribution channel optimization, and more. We needed to write a toolkit on technology strategy, and as the author of the series, the responsibility fell to me. I was, as I said, somewhat hesitant to begin. What could I possibly teach on this subject, when I was so ill-informed myself? And then I realized two lovely things all at once: I’m not the only one who’s overwhelmed by the rapid, nearly disorienting pace of technology evolution today. It’s OK to acknowledge this feeling, and to empathize with others who may also be struggling to make sense of the chaos. That’s why I decided to open the toolkit with a quotation from historian Henry Adams (for you history buffs out there, Mr. Adams was a direct descent of John, who was his great-grandfather). I came across this passage while reading David McCullough’s wonderful new book The Greater Journey: “Every day opens new horizons and the rate we are going gets faster and faster till my head spins and I hang on to the straps and shut my eyes.” He wrote those words in 1900 – but how apt they seem today! Maybe not everyone reading this would self-describe as “old-fashioned,” the way I have, but I think everyone can relate to that sentiment and sometimes feels powerless to keep up with…well, anything today. We live in a crazy time. That’s probably why we need a toolkit on technology strategy in the first place. And that leads me to my second realization: The ideas don’t have to be mine; I just have to present them clearly. One of the great things about my job, and about writing these toolkits, is that it’s made easier by working with extremely smart people. I may not know a lot about technology, but I know who in our company does, and I know how to seek them out, ask them questions, and see how they’ve helped others think through technology-related challenges. All I have to do is collect the goods and translate them into a single, cohesive story. I might not be good at blogging (am I?), but I can certainly do that. And so there was no need for trepidation—and in fact, this was a good chance for me to learn about something that I’ve avoided, perhaps to my detriment, for a very long time. I’m happy to say that the production of this new toolkit has been a learning experience for me; I hope reading it will be one for you as well. That last sentence probably makes it sound like the toolkit is finished. It’s not. But it will be soon, and we’ll share it with you as soon as it is. Check back in with us next month, and we’ll provide some more detail on it (that, and my favorite detective stories). Until then, happy computing. Katherine Burns Katherine is the Director of Strategic Communications for Growth Team Membership, a premier best practices research group within Frost & Sullivan.

Frost & Sullivan’s Growth Team Membership™ (GTM) recently completed its 2012 survey of R&D/innovation and product development executives throughout Europe. The executives were asked to identify their most pressing challenges for 2012. The survey reveals that R&D executives continue to struggle with doing effective portfolio planning and leveraging a wide network for idea generation. Moreover, respondents are challenged by how to generate an accurate technology map—outlining customer needs, available solutions, and technology gaps—to guide portfolio planning and project prioritization. The other prominent challenge is a perennial one, identifying the next breakthrough idea. To examine these challenges in more depth, the survey asked respondents to “root cause” their top challenges by indicating if they stem from issues with staffing, process, technology/systems, or strategic alignment. R&D executives attribute their challenges to two primary causes: limitations in staffing and processes. R&D executives are unlikely to see additional staff in 2012; most respondents expect staffing level to remain static. On a positive note, budgets are expected to increase in 2012. Despite the emphasis on breakthrough innovation, most of the budget increases will be allocated to short-, medium-term, and incremental innovation projects. In view of open innovation’s (OI) growing prominence and potential to help R&D develop emerging or disruptive technologies, the survey asked respondents about their use of OI. Surprisingly, given its prominence in the last two years’ survey results, the majority of respondents do not leverage OI in their product development processes. This may be attributed to respondents’ challenges with establishing partnerships and measuring the ROI of OI efforts. In regards to creating OI partnerships, respondents struggle with identifying partners with the right IP, establishing clear communication channels, and building sustainable trust. The R&D departments that are embracing OI tend to use it for idea generation and screening during product development life cycle and customers are their primary source of ideas. In terms of staffing for open innovation activities, most respondents employ part-time technology scouts. Open Innovation for Idea Generation - 2012 R&D Innovation Priorities Survey Results View more presentations from Frost & Sullivan

As an in-house designer who works alone, I require constant feedback. It’s the only way to know if I am on the right track. Recently, I had an epiphany: I have ignored my best design resource available, my fellow designer. I could have kicked myself for the oversight. I was working on a poster that was just not fitting together well. I ignored my first instinct to send it to a friend, and instead sent it to a fellow designer in a different department. Her insightful comments and suggestions helped me to see the holes in my design and the fixes we discussed made the poster better. Feedback is only as good as the reviewer. If your reviewer doesn’t know your intended audience or have much experience in your subject, their feedback (while interesting) is not as meaningful as another, more appropriate, reviewer. Take care in gathering feedback. Your work will get better if the feedback gathered is from someone who understands/is part of the audience you wish to engage. As Seth Godin says: “Shun the non-believers.”

Recently the economist Michael Mandel wrote on his blog ‘We have only two ways out of our current global economic mess: innovation and inflation. And as the saying goes, we should hope for the best (more innovation) and prepare for the worst (higher inflation).’ (Source: Michael Mandel, Innovation and growth, dated 26th Oct 2011. http://innovationandgrowth.wordpress.com/) Innovation has certainly been a key strategic focus in many corporations, and the current crisis does not alter this reality: Since ‘we should hope for the best (more innovation)’ corporations usually prepare for higher R&D costs because of some underlying trends at work for a decade: Increased externalisation of R&D cost in many industries (automotive, pharma, packaging, etc.) Shorten product life cycle coupled with greater product complexity (communication goods, FMCG, etc.) Longer development cycles in many industries and countries The pending requirements to higher R&D costs are higher success rate & magnitude of these R&D operations. What does it mean? Let’s have a look at Executives requirements with regards to R&D: Increase productivity of R&D spending Minimise financial risk of innovation & technology choices Adapt to shorter cycles Create innovative products that are affordable in emerging countries Strengthen pus innovation internal forces Needless to say that the role of R&D and innovation teams has changed: On top of researching & developing, R&D and innovation teams also have to reconcile discrepant frameworks (low yield & high risk vs. productive and risk-free) and timeline (long R&D cycles vs. short consumption cycles). In other words, R&D and innovation teams must adopt multidisciplinary skills & codes (in particular, finance, marketing and strategy) i.e. ‘external’ input, since expected outcome have changed. When observing corporations we notice different models (emerging or in place): Model Illustrations External sourcing of non-R&D skills Permanent or ad-hoc consulting services provided by external parties Internal sourcing of non-R&D skills Closer collaboration with specific teams (typically, finance, purchasing Dep.) Internalisation of non-R&D skills & codes Within the R&D and innovation creation of dedicated resource (typically, an R&D marketing manager) Obviously the choice depends on the industry, corporation size, internal capabilities, internal processes and set-up, and so on. Whatever the model, R&D and innovation teams are a combination of people, budget and processes in a specific organisation. If now daily work goes beyond labs then this combination of budget, people, and processes is called for change: Area Major changes Budget Usually a percentage of revenues, thus changes are irrespective of R&D expected outcome shift. The allocation model however will have to address the principle ’allocate budget to fewer but more impactful project’ People One major impact is the need for multidisciplinary skills, which may require extra headcount, or more likely education in particular with regards to strategic marketing & planning Process The most frequently implemented change is budgeting process. We can also consider purchasing processes, project selection processes, open innovation processes Organisation Depending on the chosen model, set-up is likely to change. This could be from roles, KPIs and RACI definition upto mobility, incentives and career management But what about the daily work change? R&D remains about improvement and innovation for sure, but has to comply with higher success rate requirement. This means higher return, better differentiation leveraging competitive advantage. Even better, ensure it on various time scales: Area Rationale Impact on R&D team daily work à skill set needed Return on investment Whether it is NPV, cash flow or ROCE more and more R&D projects must match a financial justification Increasingly needs to incorporate financial approach even at early stage Differentiation Innovation can’t always be ‘breakthrough’ but it must offer new benefits to customers Increasingly needs to incorporate competitive a Market Based Value Proposition approach Competitive advantage Corporations focus on core skills & capabilities and must be able to identify missing link and options to fill gaps Increasingly needs to incorporate competitive intelligence approach Long term portfolio Ensure innovation pipeline vitality, at all stage of development; adopt a push model Increasingly needs to encourage idea generation, incl. external support/ outside-in ideas So, when Michael Mandel said ‘we should hope for the best (more innovation)’ we should say ‘for more productive innovation’. One success factor lies in R&D teams’ ability to adopt Executives language & frameworks in order to promote their innovations, improve their chances of success and their R&D performance. And this means new practices adoption and new external collaboration to help R&D reaching its new goals.

High feedstock price is the new norm ‘Back in 2005, when oil price peaked at US$60/bbl, the community started admitting that a US$100/bbl price was a realistic work hypothesis. 6 years have passed since then, we have pushed the ceiling several times.’ This is exactly what we can expect for agricultural products too. Firstly, prices are related to oil price. Secondly, demand keeps growing (with a significant impact of biofuels). Thirdly, temporary and permanent risks upon supply & demand balance have a direct impact upon prices. Historical prices show an increase trend (circa +7% pa since 2000), with levels never seen before (figure 4). There is a consensus that high prices will remain and this impacts the industry economics in 2 ways: - Impact upon competitiveness vs. chemicals to be substituted (if the green chemical becomes costlier, buyers switch to petrochemicals) - Impact upon margin levels Questions are therefore: Which attrition can we accept? Which raw material cost burden can we handle? What can be passed over our selling price? Figure 4: Oil price vs. agricultural crop prices (Frost & Sullivan analysis, based on IMF & USDA 2011) Feedstock price volatility is the norm and is likely to worsen ‘Demand for agricultural commodities is quite price inelastic’ reminded the OECD/FAO in 2009. Growing demand and more frequent weather events have impacted all agricultural commodity prices. Speculative trading also increases this volatility. The analysis of recent prices shows that price volatility is getting more frequent and has greater magnitude (figures 5 & 6). There is no evidence that volatility frequency and magnitude will reduce dramatically in the coming years. Actually, it is a working hypothesis on many plans which points a central question: how do we address this negative factor given that: - Cost risk increases with volatility - And return is not certain, in particular when price peaks dissuade purchase There is no single answer; both financial choices and industrial choices are concerned. Therefore, which mix of mitigation measures shall be adopted? Figure 6: Palm oil & Rapeseed oil price volatility (Frost & Sullivan analysis, based on USDA 2011) Mitigation measures: Some food for thoughts Financial instruments have been largely used in agricultural business and remain valid risk mitigation measures to offset logistics and/or raw material costs (through swap and/or hedging). However, long term risks need upstream responses. On top of these financial instruments, the biofuels industry gave example of feedstock diversification: For instance, Abengoa operates with barley, maize and wheat. Some plant can be feedstock specialised; other can be designed to handle various type of grains, this flexibility brings better cost resilience. Not far from the biofuels challenges, the surfactant industry frequently faces the backward integration question, in particular with the new Indonesian crude palm oil tax raise (+25%). Not surprisingly, P&G is considering a JV in that space, according to Reuters (dated 23rd May 2011). The idea of (re-)organising the raw material supply is also defining the local ecosystem in the Champagne region, France. The network of companies, subsidiaries and neighbours (ARD, BioAmber, Soliance, etc.) creates a nearly circular supply system leveraging main/co/by-products: Each player takes a specific block (starch, glucose, straw, etc.). This French example is equivalent to a fragmented bio-refinery; on the other hand, integrated chemicals platforms are also developed irrespective of the feedstock type, as illustrated by Martek/DSM (algae), Roquette (cereals) or Borregaard (wood). The use of the entire plant and the operations by building blocks certainly address some economics challenges: Value creation, operating cost, supply cost, etc. The development of alternative routes can lead to differentiated feedstock, this way contributing to supply risk mitigation. Some companies intend to take advantage from this technology platform diversification. P&G, for instance, has ties in cellulosic chemistry (development agreement with Zeachem) and in sugar-cane-based chemistry (development agreement with Amyris). Green chemicals feedstock plans are closely connected to technology choices. Similar to renewable energies, we probably have to build a mix of green chemicals technologies to cope with feedstock challenges. New generation of feedstock (wood, algae) are certainly seen as long range solution, Solazyme >$1billion IPO being an illustration of the hope lying in algae. However, the economic equation remains fragile and partly depends on the equilibrium between bulk green chemicals & specialty chemicals, the former providing scalability the latter offering superior sales prices. This last point is a direct input to the ability to rapidly amortise the industrial assets, while the feedstock choice will the ability to capitalise on high conversion yields. The CHOREN bankruptcy in July 2011 is probably a good reminder that feedstock economics indeed count a lot. Illustrations cited here can be found on Doris de Guzman’s blog: http://www.icis.com/blogs/green-chemicals/

The green chemistry industry is developing fast because of a set of 3 major trends: - Oil progressive scarcity - Durable high (if not skyrocketing) oil price - Continued population & demand growth (in particular middle class) Needless to say, the industry is growing in a context of deteriorating environment, which also has an impact upon ‘green’ feedstock. Many players are rightfully focusing their effort on technology development but I believe that feedstock strategy is equally important to enable a sustainable business. Although the industry currently has a small footprint, there is no doubt that major challenges will remain offer & demand balance and price, both aspects being impacted by feedstock. Feedstock risk lies in security & stability challenges. The way we address those challenges will alleviate or build up further price levels & volatility risks. Supply security risk is hardly predictable but is real ‘September 2018: In this repeated context of draught Governments have decided intervention actions in the agricultural market: While the USA and Argentina have stopped exporting wheat, the EU Commission has prohibited irrigation for maize. In Brazil & China, sugar cane plantation is limited to force farmers to harvest food crops.’ The scenario may be pessimistic; however the risk is real because a limited number of countries produce the key green chemicals feedstock (figures 1 & 2). Let’s consider this: 4 countries hold 51% of wheat production; Brazil, China and India bring 65% of the sugar cane production; China and USA represent 61% of maize production; 2 countries hold 80% of palm oil production. We often witness temporary regulations (due to adverse weather event). The risk is to have tougher regulations (quota; tax; etc.) due to more structural issues (permanent water stress & repeated adverse weather conditions; misbalance between food & feed and industrial crops; reduced capacity to finance agricultural subsidies). This supply security risk goes beyond feedstock access & predictability issues: Are we fit to face an input shortage? What is the impact on our economics if we have to face a 15% input shortfall? Figure 1: Global sugar cane production shares (source FAO, 2011) Figure 2: Global palm oil production shares (source FAO, 2011) Supply stability risk is certain & real ‘2014/2015 campaign: As nearly every couple of years the major grain producing countries are facing a severe drop in harvest due to the impact of drought. The situation is particularly dramatic in China and USA.’ This scenario is not far from reality (figure 3). If we look at the past 100 years the warmest years were in 2010, 2005, 1998, 2003 and 2002. Each time there was a severe draught in at least one (often 2 or more) of the key producing regions, meaning fewer volumes produced. Nearly each time prices skyrocketed. The agricultural output & price levels can’t be 100% guaranteed since it depends on weather conditions. This output have a nearly captive market: Food & feed industries, in a context of demand growing faster than production, remain even more the prime end markets. The risk is to see more frequent adverse events impacting/ disrupt feedstock supply. Incremental production and yield will provide a limited solution: Arable land is limited, best soils are already exploited, yield gains are less and less important. In the end, instable volumes raise operational issues: What & where to source? What’s the impact upon logistics? Instability put our economics at risk: What’s the impact of volume/price deviation upon margins, upon cash flow? Figure 3: Wheat production, price & major droughts (Frost & Sullivan analysis based on USDA 2011 and National Climatic Data Center 2011 data

About Food for Thoughts The good thing with consulting is that you can work on very diverse topics and areas; you accumulate a lot of transversal and specific knowledge, you meet and exchange thoughts & ideas with many people but these inputs are not necessarily re-usable immediately in the projects we all work on. It certainly doesn’t mean that these thoughts should be buried. That’s a whole purpose of this blog: Keep a tangible print of thoughts, some kind of idea inventories, hoping they may feed & fuel further discussion. It is food for thoughts. Food for thought = anything that: Provides mental stimulus for thinking Put issues into perspective Helps identifying innovative solutions to address future challenges About The Blogger How on earth can a non-chemist and non-agro guy be interested in chemicals & agriculture? Both are involved in nearly every business and have a major impact on our lives. Both are based on a lot of transversal and specific knowledge. Both are at the heart of future challenges and solutions. Both have become Loic’s main area of interest since his career start at Frost & Sullivan. Loic is a Principal Consultant, based in Paris. He joined Frost & Sullivan in 2005 after a short experience in other consultancies. Loic holds a Master in Business from the ESCP-EAP school (Madrid, Oxford), a Master in Corporate Law from Universitat Pompeu Fabra (Barcelona) and a Maitrise in European Law from La Sorbonne (Paris). He has been working with international companies across the global involved in agro output (Food & beverages; Personal care; Green chemicals; Biomass energy), chemicals (Green & Petrochemicals) and equipments (Energy; Industrial; Transportation). His typical assignments are strategy & strategic marketing projects, with a strong B2B focus: Industry landscape analysis (value chain, segmentation, distribution, supply), Value proposition modelling, Scenario & business modelling (outlook, prospective, business cases), Investment evaluation (greenfield, acquisition), Portfolio modelling (feedstock, products, technologies, suppliers), Benchmark (financial, organisation, operation practices, competition) To send questions or comments, email at loic.cesbron@frost.com

Or rather, what is an example of a subject line you simply could not resist opening? I can think of a few – “How you can do what xx did”, or “Does this version work for you?”. Sometimes no subject line is the most effective of all. The airlines could stand to improve at this. I’m subscribed to perhaps every domestic airline’s email list, and the emails (judging by subject line) have virtually nothing to say. Subject lines consist of “Austin, check out these great offers”, or “Take advantage of our (insert month) sale”. The airlines must also get data from the same source on the best time/days to launch an email, since they tend to dump into my inbox at roughly the same time. In an effort to uptick open rates and increase email campaign effectiveness, here are 3 tips: Spike curiosity – This can be achieved in a number of ways. Introducing an incomplete thought that can only be completed by opening the email is very effective. For example, “Do you believe it?” virtually requires a reader to open it and learn more. Get to the point – Every word chosen either adds or detracts from the message. Limit subject lines to 50 characters or less, and ideally just 4-5 words maximum. The goal of the subject line is to get the reader to open the message. Once that’s been accomplished, the message itself can convey your objective. Don’t shoot yourself in the foot – There are certain terms that recipients are reluctant to open (such as “Free!”, or “Reminder”, or “Help”). Even worse, some terms are set to be blocked by spam filters. Choose wording that will grab the reader and entice them to open the message. Use these tips in your next email campaign and compare the results with previous campaigns. Post tips of your own if I'm missing anything critical!

Frost & Sullivan’s Growth Team Membership™ (GTM) recently completed its 2012 survey of R&D/innovation and product development executives globally. The executives were asked to identify their most pressing challenges for 2012. GTM will focus its best practices research to address the prominent issues identified in the survey. This year’s survey indicates R&D executive struggle with two chronic challenges: (1) managing the product portfolio and (2) finding the next disruptive idea. In regards to portfolio management challenges, respondents struggle to develop accurate technology maps for planning, to prioritize innovation projects, and measure their portfolios’ success rate. Overcoming these challenges requires R&D executives to map out their portfolio strategy and develop key performance indicators to guide project prioritization and monitoring. Identifying the next breakthrough idea rarely involves a “Eureka” moment, but does require time and resources. While companies understand the need to develop emerging technologies, they are reluctant to commit substantial resources to high-risk projects. This risk aversion appears to be impacting R&D budget allocations—budgets for incremental innovations are increasing, while disruptive technology budgets remain stagnant. The survey asked respondents to “root cause” their top challenges by indicating if they stem from issues with staffing, process, technology/systems, or strategic alignment. R&D executives attribute their challenges to two primary causes: understaffing and processes (ineffective or nonexistent process). On a more positive note, R&D executives foresee additional resources—both staffing levels and budgets are expected to increase in 2012. Given the pressure on R&D executives to tap into new ideas and emerging technology, survey respondents were asked about their use of open innovation. The majority of respondents employ some form of open innovation team (OI)—typically a small, dedicated sub-group within R&D. It comes as no surprise that OI’s primary role in the product development life cycle is idea generation and that customers are the primary source of ideas. Even though companies are committed to using OI to increase their ability to develop emerging or disruptive technologies, respondents struggle with the fundamentals of establishing an OI process: securing internal buy-in, getting resources for idea testing, and creating a collaborative framework with external partners. Idea Generation and Portfolio Management - 2012 R&D Innovation and Production Development Priorities Survey Results View more presentations from Frost & Sullivan

Frost & Sullivan’s Growth Team Membership™ (GTM) recently completed its 2012 survey of R&D/Innovation and product development executives in North and South America. The executives were asked to identify their most pressing challenges for 2012. GTM will focus its best practices research to address the prominent issues identified in the survey. According to the 2012 survey results, R&D executives continue to wrestle with portfolio management. Specifically, R&D executives need to prioritize innovation projects, balance the value and risk of the portfolio, and allocate budgets across a wide range of project categories. Respondents also struggle with two other persistent issues: (1) identifying breakthrough ideas and (2) integrating inputs from internal stakeholders (e.g., Sales and Marketing) with portfolio planning. The survey reveals differences in challenges between different business models. For example, the key challenges for R&D executives in B-to-B companies are generating technology roadmaps for portfolio planning and managing an open innovation process. In contrast, their peers in B-to-C companies are challenged by securing buy-in for promising innovations with senior management and streamlining the product development process to reduce costs. The survey asked respondents to “root cause” their top challenges by indicating if they stem from issues with staffing, process, technology/systems, or strategic alignment. By and large, R&D executives attribute their challenges to understaffing. Fortuitously, staffing and budgets are expected to increase in 2012. Ironically, though respondents stress the importance of driving breakthrough innovations, short-term or incremental projects account for the majority of the 2012 budget increase. Given the potential of open innovation (OI) to tap emerging technologies, survey respondents were asked about their use of OI. The majority of respondents (58%) apply OI approaches to their product development process. When asked about the role OI plays in product development, respondents report using OI for ideation generation and screening. However, respondents in B-to-C companies are more likely to use OI throughout the product development process than their B-to-B peers. The composition of respondents’ OI teams varies by business model. Respondents within B-to-B companies employ small, dedicated open innovation teams, while R&D executives in B-to-C companies use part-time technology scouts. While most R&D organizations engage in OI activities, R&D executives still struggle with implementation: establishing an effective OI process, garnering resources, and collaborating with partners. Respondents in B-to-B companies are focusing on developing a method to measure the ROI of OI activities, while their peers in B-to-C companies are endeavoring to establish a structured process to test the feasibility of idea submissions. From Portfolio Management to Open Innovation - 2012 R&D Innovation and Product Development Priorities Survey Results View more presentations from Frost & Sullivan

The Growth Team Membership™ (GTM) program recently surveyed marketing executives to identify their principal challenges for 2012. The survey found that marketers struggle to (1) cultivate a differentiated value proposition that resonates with clients, and (2) ensure Sales adopts the appropriate messaging and materials. Survey respondents indicate that understaffing and a lack of strategic alignment across Sales and Marketing’s leadership are the primary causes of Marketing’s struggles. By joining forces with Sales, Marketing can address the strategic alignment issue and tap into additional staff. However, successful collaboration requires taking a closer look at the following three areas: 1. Goal Alignment—Since revitalizing the value proposition requires a substantial commitment in time and resources, it is essential that Marketing and Sales agree on the reason for the revitalization at the outset. To achieve this goal, marketing and sales executives need to build consensus on answers to the following questions: Are our assumptions about how we are perceived by our customers accurate? Can we quantitatively prove any of our assumptions? How does our value proposition differentiate us from the competition? Does our current messaging tell the story we want? How consistently is our messaging being used? 2. Sales Involvement—No matter how necessary, or how compelling, the redesigned value proposition may be, the sales force may still resist it. Successful marketers understand that sales reps want some measure of control over the way they communicate with their customers and are prone to resenting outside influence. Marketers therefore involve the sales force throughout each stage of the new value proposition’s development (including messaging creation). This inclusion builds cross-functional ownership of the new messaging and limits the likelihood that Sales will reject it later on. Furthermore, it speeds new messaging roll-out, since the sales force will already be familiar with the value proposition and how to tailor its message for various segments. 3. Continuous Engagement—Trust and transparency are crucial to any long-term successful collaboration between Sales and Marketing. One way to maintain this openness is through regularly scheduled meetings between senior management in Sales and Marketing. Growth Team Membership researchers have found that a monthly cadence works best for keeping the conversation flowing, collecting feedback, and addressing collaboration challenges. Monthly meetings also allow marketers to track value proposition adoption and identify opportunities for improvement. While sales and marketing collaboration is a perennial challenge, some companies have found ways to unite these often-at-odds functions. Take the experience of Kronos, a workforce management software solutions company. For many years, Kronos considered itself a market leader, in spite of its flat product revenue growth. This disconnect stimulated Marketing and Sales to collaboratively revise and differentiate Kronos’ value proposition and messaging. Kronos’ sales and marketing teams followed the practices outlined above—alignment, inclusion, and engagement—to overcome key barriers to collaboration. Successful collaboration has resulted in 92% of the sales force consistently using the messaging. Kronos’ new value proposition has also led to a 36% increase in its earnings before interest, taxes, and amortization (EBITA). In conclusion, Growth Team Membership survey data suggest that marketers are committed to differentiating their companies through redesigned value propositions. However, Marketing’s efforts are constricted by a lack of coordination and buy-in from Sales. By including Sales in the development process, Marketing can ensure its efforts are adopted and strengthen its relationship with Sales for long-term success. Want to learn more about best practices for sales and marketing integration? Sales & Marketing: Revitalizing the Value Proposition View more presentations from Frost & Sullivan

The future is inherently unpredictable, forcing companies to conduct strategic planning in the face of great uncertainty. As a result, many companies struggle to develop strategies that take into account long-term threats and opportunities, while balancing short-term priorities. Scenario planning is a structured methodology you can use to test existing strategies against varied future states or scenarios. Scenario planning is not meant to predict the future. Instead, it allows you to explore a series of high-impact, uncertain—yet plausible—future states. This knowledge, in turn, enables you to recognize the “signposts” of scenarios as they unfold and react accordingly. Frost & Sullivan’s Growth Team Membership (GTM) profiled Merck & Co., Inc. (the global pharmaceutical company) and how it applied scenario planning. Merck’s objective was to better anticipate how different strategies would hold up against the state of the global healthcare environment looking out 10 years. What follows are some of the key insights the team gleaned in understanding Merck’s approach. Garner Internal/External Insights and Buy-In To establish plausible scenarios for the future, it is important to involve a cross-divisional team to garner the full range of views within the company. It is equally important to tap into external perspectives on the industry, and outside scenario-planning consultants, to lend credibility and objectivity to the effort. Finally, C-level buy-in and participation in the initiative must be secured. Challenge Assumptions about the Future Before you can start exploring future scenarios, you must first understand your existing assumptions about the future. What is the conventional wisdom about where the industry and economic, political, and regulatory factors are headed over the next 10 years? What assumptions about the future underpin this outlook? Once this information has been brought to light, you need to challenge your underlying assumptions to explore alternative future scenarios. It can be helpful to pose this question: What if, and how could, your assumptions about the future turn out differently? The answers to this question uncover they key uncertainties you have about the future and allows you to start envisioning different future scenarios that could emerge. Explore Future Scenarios’ Implications After considering a range of alternative future scenarios, it is important to focus on a digestible number of scenarios—generally no more than four—to explore in depth. It is essential to filter the scenarios by plausibility and impact to select the most significant, relevant scenarios for your company and industry. Identify signposts of the future: A critical step in evaluating the final group of scenarios is to identify early indicators that would signal each scenario is coming to pass. A company should continually monitor this list of indicators to look for early warning signs so it can determine what, if any, strategic shifts are necessary. This enables you to hedge your bets against future risks and gain a first-mover advantage. Test current strategies against divergent futures: It is important to think about how your company’s current strategies would perform in the context of each scenario. What challenges and opportunities would you face? What actions should you consider taking now to prepare for each scenario? Revisit Investment Decisions Once you have identified and explored the most plausible scenarios, the next step is to present your findings to executive management and help them internalize the scenarios’ implications. It can be beneficial to run an investment exercise with executive management that compares their current long-range resource allocations with the allocations they would make in the context of each future scenario. If a particular scenario were coming to fruition, how might your company change its resource allocations toward existing and new business areas? This type of exercise can translate scenario planning into strategic discussions and decision-making about the future. Learn from Merck’s Approach to Scenario Planning Scenario planning enabled Merck to embed longer time horizons in its strategy planning, gain a deeper understanding of its internal capabilities and the competitive landscape, and prompt scenario-based resource allocation decisions. Register for a complimentary webinar on May 22nd featuring the Merck case and learn how Merck used scenario planning to explore long-term threats and opportunities. Download a three-page sample of the Merck Best Practice Guidebook, Scenario Planning: Fostering Long-Term Strategic Thinking. If you have questions regarding the Growth Team Membership™, contact us at GTMResearch@frost.com, follow us on Twitter @Frost_GTM, or visit us at www.gtm.frost.com.