Pcubed Managing Consultant Naveed Choudry’s first Pcubed engagement back in 2005 was with Getrag, a German firm which supplies transmission systems to OEMS. They already had a strong product base but wanted to be able to take advantage of emerging markets to help manufacture and deliver innovative new technology.
Choudry was tasked with project managing the establishment of a new manufacturing facility on a greenfield site in Slovakia, a country which offered a cheaper labour market and therefore a lower baseline to support bringing an innovative product to market.
As a result of the success of the programme Getrag appointed Pcubed to set up and establish facilities in Mexico and North America. They are now positioned to provide transmission systems around the world, from multiple locations. Choudry then went on to support various other manufacturing organisations, including OEMs, Tier 1 companies and railway firms to robustly innovate and establish themselves in the global market.
In this article, Choudry shares some of the best practices he’s learnt in nearly a decade of bringing innovative new products to market across various organisations– and mobilising manufacturing operations in emerging economies.
Portfolio Strategy in New Product Innovation
“Companies are typically very good at innovation but are very poor at managing it effectively,” Naveed Choudry says. “They tend to be very effective at generating a portfolio of ideas but the important question is how to effectively prioritize these ideas to ensure that the company achieves a good return on investment – especially in the context of a global marketplace.”
In order to improve their innovation management procedures he recommends bringing procedures in line with best practice portfolio management processes.
“You need to start using an intuitive collaboration tool on which all ideas can be collated and shared effectively,” he says. “They can then be assessed and prioritised against known, pre-agreed criteria using portfolio management tactics.
“A number of factors should be taken into account at this stage: the upfront investment, the resources needed to deliver the portfolio, its potential selling points, and how it could differentiate the organization against its own product range and its competitors.”
For Choudry it’s very important not to lose sight of the market opportunity the new products are addressing.
“You need to ask yourself: have I really understood what the market requires and where we are going?” he says.
“When you conduct your portfolio assessment you need to be sure you understand the basis of the revenue you expect to be created by the new product. You need to ask questions like – how does this affect our brand positioning? Does it affect the market’s perception of what the company can do? What is the cost of launching it?
“It may be a fantastic idea, fit the brand perfectly and tap into a new market, but if it requires some stringent manufacturing capabilities or expensive new marketing techniques you need to consider those costs from the outset.”
Innovation managers need to fully consider all the different elements needed to take the product to market – at the outset. “People can fall into the trap of just trundling through the current processes without thinking about the practical elements needed to deliver it to the market,” he says. “You need to go through the costs of marketing, leaflets, demonstrations, transport, distribution centres and so on – especially in a new global market. You also have to consider the impact of a new product on the rest of the business. What impact will it have on your current resources?
“Typically companies look at how their new products would fit into the engineering process but forget to fully examine what kind of impact it will have on the sales, marketing, logistics, and manufacturing teams. You need to work out how much of a priority the new product will be against your current profitable products. Make sure you won’t be competing with yourself; the new idea needs to be something that adds growth.”
If the new product does become hugely successful, organizations also need to be prepared to answer questions about how easily they’ll be able to scale it up on a worldwide level.
“What could its global reach be?” asks Choudry. “If it’s very successful in western Europe – would you be able to get it out to a new market in Asia? Or start manufacturing it out there? The process of innovating new products is therefore closely linked in some ways with how successfully you research the new global markets in which to sell them.”
Mobilising for new markets
Choudry’s key advice to any organization looking to mobilise in a new market is to start planning during the early stages of any product development..
“There are a number of important stages all companies looking to mobilise into new markets need to go through in order to deliver successfully,” he says. “The first stage is research, including assessing the likelihood of successfully mobilising over a longer period of time – over 3, 5, 10 years, for example. You need a document comparing benefits and risks for different markets; during my experience at Getrag, for example, Slovakia was chosen over Ukraine and Poland.
“Deciding which market to focus on is a strategic decision. Once that decision has been made, teams need to carry out more detailed research into key elements of the new market so the organization understands what needs to be considered before any mobilisation begins.”
Choudry has put together a whole list of activities which need to be reviewed as part of the mobilisation research process, including financial, regulatory and immigration requirements [SEE FIGURE].
“These can be some of the most important questions to answer at the outset,” he points out. “Do you understand the country’s taxation system, its regulatory requirements and immigration rules? If you have expats supporting your initiative, you need to understand how difficult it will be. It may take three months to sign off a business visa, for instance.”
Recruiting local staff is usually a very different process from recruiting western employees.
“If you’re recruiting local staff, you need to understand how laws, regulations and cultural practices differ from those you’re used to,” Choudry says. “In Slovakia, for example, firms which provide transport for their staff are generally much more popular with workers than those which don’t.
“When setting up the new factory I worked on in Slovakia, one of things we didn’t first consider was the need for a bus route to pick up the factory workers. The rural site we had chosen had no public transport and we had naively assumed everyone would drive to work. We couldn’t understand why we weren’t recruiting as many employees as we’d expected – when suddenly we realised we weren’t offering them a route to work from home and vice versa. We scrambled to solve the problem and quickly funded a bus route and coach for each shift to bring people in from a radius of 20 miles away.”
Health and safety in the workplace
Medical and life insurance needs tend to differ starkly between different countries, as do health and safety standards. “In the UK, for instance, there are clear guidelines and regulations,” Choudry says. “Emerging market countries generally don’t have such strict standards, but for us it was important to set the standard and demonstrate a westernised approach to the working environment. This was also an advantage during the recruiting process.”
More general cultural considerations can also make a big difference to the success of your mobilisation.
“One project I am currently supporting is in the Middle East,” Choudry says. “One of the key requirements there is having an allocated prayer room facing the right direction.
Cultural practices and the climate also make a big difference. Even something as simple as food can end up being very important – in Slovakia, for example, it is usual for employers to provide a full hot dinner at lunchtime. Individually these might seem like fairly minor things, but they really add up, and missing any one of them could really damage your ability to get the right people, to keep them, and get the best possible work from them.”
Once the mobilisation process has begun there are many specific details you need to consider to ensure the process goes as smoothly as possible. “It’s important to make sure the organization’s legal entity is set up correctly, contracts are in place and appropriate partners are carefully identified,” Choudry says.
“Bear in mind you may need to do this in several languages and will have to meet the requirements of both western legal standards and local expectations. You need to make sure you find a local legal representative for the business who is on your side – not their own country’s.
“You need to think about trademarks, IT security, intellectual property – and ask yourself how you are protected. You don’t want to enter a new market just to have people take advantage of your ideas.”
Effective recruitment and getting the right skillset
One of the most important areas to get right is recruitment, from expat packages and equipment needs to administrative staff.
“We had a big surprise in Slovakia – even though unemployment was high enough that we should have had a lot of choice in recruiting staff, we actually had a really tough time finding enough people with the right skillset,” Choudry says. “We ended up having to advertise in neighbouring countries such as Hungary and Poland to get the team we wanted. It’s not easy to get 750 people employed, trained, and operational in six months. People don’t realise how much energy is required in recruitment: you need to find people with the right skills, agree terms and conditions, and then train them to suit your company needs. It’s important not to underestimate how long this process will take.
“In the longer term it’s also a good idea to research the local education system to see how school and universities equip the people with the skills you need. In one of the Getrag manufacturing locations, for example, we installed a similar manufacturing machine into the local university so people got to understand its processes and our manufacturing techniques. They therefore became educated in our manufacturing processes and that of course fed into our recruitment process down the line.”
Infrastructure and networking
“When it comes to setting up a new facility abroad most organizations are primarily thinking in terms of building the actual building itself,” Choudry points out. “It’s only at the last minute that they start considering the software and networking facilities needed within it. Have you thought about cooling system within your IT location? It’s astonishing how many organizations don’t consider these kinds of questions until the last minute.
“From an infrastructural perspective you need to be thinking about hardware, software, network requirements, how to feature the new market on your website, how your corporate entity will operate, as well as all those many questions around your logistics, finance, HR, accounting functions.
Methods, processes and cross-cultural communication
It’s equally important to be prepared to think differently about how you communicate your methods and processes to your new team.
“Do you simply copy the methods used at your head office?” Choudry asks. “Often more simplified instructions are needed. Ask yourself whether a sentence means the same thing once it’s been translated into another language, another culture.
“In Slovakia for example, staff are generally trained to follow instructions. For many employees, they had never previously had the freedom to ask questions or make suggestions back to their managers. We worked hard to try and push against these cultural boundaries, encouraging staff to come and tell us if they thought something should be changed.
“And that culture did slowly embed itself. When we set up the production line, for example, we had production operators assembling components from a set of shelves to put on the assembly line rather like in a postal sorting office. As we had encouraged out of the box thinking, one of our staff told us that it would be more efficient if we redesigned the shelves so they could be set up in a semi circle around the staff, so they didn’t have to reach for the parts. Because we responded to the suggestion, those staff felt valued. It was a humbling experience”.
The Slovakia programme was a huge success for Getrag; the company has now expanded its manufacturing operations across many other countries across the world. The area of Slovakia in question has enjoyed a real economic boom, as dozens of other major global corporations followed suit and sought to establish their own operations in the area. By doing their research, getting the details right and adapting to local cultural practices, global organizations can take advantage of the opportunities offered by mobilising in emerging markets, and use them to help deliver innovative new products as efficiently as possible.