By Pichaya Changsorn
Published on September 29, 2010
How four corporate giants encourage creativity, and use R&D to stay ahead
For some renowned Thai companies like Siam Cement Group and Charoen Pokphand Foods (CPF), innovations don't begin in the laboratory but at their customers' premises.
CPF senior vice president Virote Kumpeera said the feed-farm food company's new product development processes some times originated at its business partner's favourite restaurants.
"When we visit our trading partners abroad, they usually take us out to good restaurants. Once, in Japan, our executives were taken to a noodle shop. Our execs found the noodles so delicious that they didn't want anything else. Then our executives persuaded the restaurant owner to let us mass-produce the noodles.
"Our Wonton noodle cup was born out of these [talks]," the CPF senior vice president revealed.
Virote said CPF, which operates more than 130 animal-feed factories in 13 countries around the world, is the world's largest producer of animal feed, ahead of US firm Cargill. Nevertheless, in terms of management, CPF remains a largely Thai company as 80-90 per cent of its factory managers at its overseas units are still Thai nationals. The reason the company is pursuing this policy is to ensure an alignment of the group's plans and strategies among different units and locations, he said.
However, when it comes to new ideas and innovations, CPF executives constantly look out for the best ingredients from anywhere in the world which they can use as inputs for developing new products, he said.
Also to ensure a consistent flow of innovations and creative ideas, CPF has made it a compulsory for every factory manager at its operations worldwide to bring in at least two creative or innovative showcases to share with others at their meetings in Bangkok every three months.
"Then, after one meeting, we will get about 40 new [innovative] topics, or 160 topics a year. This is what we have done to constantly improve our standards," Virote said.
CPF's chief executive follows an open-door policy, trying to encourage new ideas and innovations, and is ready to discuss the benefits and returns of the proposed innovative projects with staff. CPF has also leveraged on its scale to make it easier to push through R&D projects as costs can be averaged among 13 factories, said Virote.
Thanks to its knowledge management system, Virote said CPF has accumulated innovations and new ideas collected from various sources for nearly 10 years already. It has set up a team and tasked it with analysing the thinking behind these innovative ideas, and then coming up with a curriculum to teach other staff how to get their ideas. CPF has found there are about 30 thinking methods for innovation: cancelling, doing the opposite, doing simultaneously or changing the sequences, suspending or continuing, integrating or disintegrating, centralising or decentralising, adding or subtracting, automating, etc.
--scg focus on r&d
The Siam Cement Group has spent several billions of baht setting up R&D labs, buying equipment, attracting and developing qualified PhDs and research and development personnel over the past couple of years. However, the manufacturing conglomerate has made it obligatory that 80 per cent of all R&D projects originate from marketing information. Only the remaining 20 per cent are open for researchers to work on projects which offer no direct link to businesses, or provide a promise of immediate investment returns, said Wilaiporn Chetanachan, SCG director for its corporate technology office.
"The most important thing is that researchers translate marketing information, and work all the way towards the end [product] that consumers will be ready to pay for," she said.
To ensure alignment of R&D and marketing inputs, SCG has provided various training courses to its R&D personnel, equipping them with knowledge and awareness in the areas of, for instance, a project's feasibility study and investment returns. The conglomerate has also put a major focus on the building of a "cross-functional teamwork" or its so-called "SCG-wide teamwork", which people from different business units and functions are encouraged to collaborate and brainstorm their new ideas and project development initiatives.
There are three important elements of a successful R&D programme:
-R&D projects are aligned with the business strategies, and answer the needs of customers;
-the organisation is capable of making effective use of the R&D outcomes such as in manufacturing and selling of the newly-developed products;
-there is a proper innovation management system in place, to take care of R&D portfolios, ensuring a linkage with businesses, the applications, and the investment returns of R&D projects, among others.
"The Innovative culture, is also critically important [that has to be cultivated within an organisation]," she said.
And since R&D is a kind of activity where money has to be poured in first, with no guaranteed return, the vision and commitment of the firm's top executives are a prerequisite. During the past many years, SCG has continued to increase its R&D budgets, from merely Bt40 million several years ago to Bt1.3 billion this year, despite the recent global financial crisis. The group's CEO has set a target to raise annual R&D budget to Bt5 billion by 2015.
In line with the global trends, SCG has focused its R&D efforts on green technologies, energy conservation and alternative energy, added Wilaiporn.
"Courage" is an important ingredient in innovation, according to Ariya Banomyong, chief commercial officer of True Life Plus, a subsidiary of the True Group. "� because innovation, by definition, is to change the business, as Ajarn Wilaiporn [of SCG just] mentioned, without knowing if it would work," he said.
Ariya cited the case of a mobile-phone company, which fell from its leading position because it did not change in keeping with the altering business environment.
At True, innovation begins with the firm's vision and strategies which are clearly directed towards becoming a "convergence lifestyle enabler" and to leverage its own content and convergence networks which cover all the "three screens" - mobile phone, TV and computer, he said.
Ariya said "True Innovation Awards" were set up to invite and reward innovative ideas and plans from staff. This creates a channel for all its 15,000 staff, including those working at its retail outlets, to have their ideas reaching the CEO.
Ariya said True would soon introduce a new service that would allow customers to subscribe to its high-speed Internet service without having to own a True fixed-line number. The idea for this service was the brainchild of a True technician, one of the winners of last year's True Innovation Awards, who found a cheap way to utilise existing telephone lines for providing Internet connection to additional users.
--PTT's efforts pay off
The head of PTT Research and Technology Institute Songkiat Thansamrit said that part of PTT's marketing success in oil and lubricant products stemmed from its past R&D efforts.
He said the Thai energy giant's approach in R&D had been to focus on one or a few projects at a time. It began with product development efforts for the lubricant from 1994 to 1999 when more than Bt1 billion worth of investment was poured into an engine oil laboratory. PTT had to compete with foreign oil companies. Most local consumers in the past shunned PTT's oil and lubricants in which they had no trust, Songkiat recalled.
"This is the first year that PTT lubricants have become the No 1 [brand] in Thailand. And now, we're exporting to China under the brand of PTT Lube," Songkiat said proudly.
Research was also a major factor behind PTT's advancements in oil products after it became the first company to introduce unleaded petrol to the local market in 1991, followed by its development in more recent years of new products, including biodiesel, gasohol, and natural gas for vehicle [NGV].
Songkiat agreed that researchers had to see alignment between their work and the competitive strengths of their organisation. However, unlike SCG where the R&D unit has to consider the returns on its projects, PTT has a separate team to help conduct pre-feasibility studies for R&D projects.
The CPF, SCG, True, and PTT executives were speaking at a seminar held recently by the Thailand Management Association to share the best practices of companies that have received the Thailand Corporate Excellence Awards 2009. SCG has won four of the eight awards, including the innovation excellence award while the three other firms were nominated in the category.