When business slows down, as it has in recent months, it is not unusual to lose track of what is really important and instead focus on what is more immediate. For instance, as customers of packaging companies pack and ship fewer products, the immediate response in the packaging industry is to cut back on a wide variety of investments and reduce costs. While we have not yet heard any major layoffs in the packaging industry on a scale that some of the larger companies have announced, I suspect that some companies are already doing this on a smaller scale. Similarly, I am also aware that several companies are scaling back on R&D and new product development.

While most of us recognize the potential long-term hazards of cutting down on research and development, I think the way we are structured, these are inevitable. However, there are certain things that a slowdown should allow us to do. I might even say that a brief slowdown is healthy for an economy as well as an enterprise. During a rapidly growing economy, we are all forced to keep up with demand for our products and services, have to make investments for productivity enhancements, and need to compromise on quality of resources that we employ to meet short-term commitments. I am sure a lot of you would agree that we are essentially forced to cut corners, which is not the way winners generally work.

Why a slowdown may be good
It provides us an excellent opportunity to fix what we think is not best-in-class. Resources that are now freed up to some extent can be utilized to improve our processes. There is no better time to test the efficacy of your systems than in a fast-changing business environment. I have been told by several industry executives that they have learned a lot about the limitations of their processes in recent years. This is, then, a perfect opportunity to use that new knowledge to eliminate the bugs from the system.

Similarly, I am aware of hundreds of companies that had to hire employees who were not the most suitable for the jobs that they were hired for. Many of these new employees struggled in their new jobs and, while some were able to pick up speed, others are still having a hard time. This may be a good time to train these employees. So before you decide to get rid of these employees, think hard about the staff you might need in case the economy picks up steam again.

The final area that we can all work on is new product development. When the economy was going through the roof, what customers wanted was packaging that would get their products from point A to B. It really didn’t matter how the design looked and how much protection it provided – speed to supply current products was more important. On the other hand, as economy improves, it will do so only gradually. The implication of a U- or V-shaped comeback is that customers will be more selective. Thus, product differentiation and quality will be absolutely critical. The current slowdown might well provide a perfect opportunity to approve all those dollars that your R&D group has been asking for years. It will payoff real soon.

What are the short-term risks?
It would be appropriate to disclose the short-term risks inherent in this strategy. Almost all public companies are struggling right now to meet their revenue and earnings expectations. The way our economy is currently set up, no matter what happens next year, you still have to meet your expectations for this quarter. This means that a lot of companies are not at liberty to undertake the steps that I am recommending. However, if you can in any way allocate funds for these projects today, do it. It will be a productive and judicious use of your resources.

Labels: market research, planning, recession, risk management, strategy

In recent weeks I have received emails and phone calls from packaging industry executives who are concerned about the future. While the industry has been branded as “laggard,” “slow to change” and other not-so-flattering descriptions by analysts in recent months, several industry executives have started to embrace new business models.

However, as these executives start to implement these new business models, they are already seeing these models failing at some of the early adopter companies. The recent demise of several business models that only a year or so ago were hailed as revolutionary is enough reason to cause serious doubts. To many senior-level executives in the packaging industry, this only means even more confusion regarding future steps.

I will try to address some of these concerns in a two-part article. In this article, I will try to put the recent events of the so-called “new economy” in perspective, and then next week I will analyze what it means to the packaging industry and what are some of the things that industry executives could do to meet these challenges.

Turbulence is permanent
During the past several months, mankind has witnessed changes that had not been seen so far. Certainly, the inventions of fire or the wheel and eventually electricity/automobile/telephone caused similar changes in the way humanity lived or how commerce was conducted, but a major difference is the timeframe. It took thousands of years before we could fully exploit the power of fire or the wheel. It took us decades to perfect the automobile or the telephone. But in the current environment we are starting to see revolutionary changes within weeks or, at the most, months. And it is not just the Internet — it also includes the changes in communication technology, relationships between companies, number of new products and their short lives — the list is long. If something does not change at similar speed, it appears that it is not worth talking about.

No wonder this is causing so much turbulence in our lives. Starting from the business world and the stock market, to how we are expected to perform our jobs, we are being exposed to changes at a rate that our generation is not accustomed to. Additionally, businesses today are structured in a manner in which they find it hard to respond to constantly changing market forces. Companies and executives that were organized and conditioned to develop multi-year plans and goals now realize that within months they have to revise their plans and rewrite their goals because new companies have emerged out of seemingly nowhere and have rewritten the rules of the game in their competitive space.

The reaction of the stock markets has been exactly similar. The degree of change has been so rapid that old rules no longer apply and new rules are not accepted yet by everybody. The result has been lots of confusion, nervousness and lack of direction.

Not too long ago, we saw some new rules emerge that made it more important, for instance, to attract eyeballs or create brand awareness or increase the number of transactions, but those rules are no longer valid. It appears that the wider base of investors did not feel comfortable with the new rules of the game and the stock market is now trying to figure out rules that would be fairer in evaluating new economy companies but still satisfy the basic principles of economics.

Impact on the packaging industry
Change of this magnitude has adversely impacted the packaging industry, too. While the stock market has severely battered several packaging companies, the demands on the industry to meet the needs of customers in the new economy has posed new challenges:

• The designs are different, and they change more frequently.
• Time pressures are intense.
• Supply chains are more complex.
• Competition is increasingly global.
• Most importantly, the future is so uncertain.

When packaging industry executives see companies with world-class, best practices struggling to meet market expectations, they do not see many successful models that they can follow for their own businesses. I will be addressing these issues next week based on my study of companies that are taking mature approaches to managing change.

Labels: business model, market research, packaging industry, supply chain

Video games require huge investments? Think again. Some video games can be developed relatively inexpensively and the children, tween and teen segments are attractive, particularly if you focus on family-friendly, educational, violence-free games.

Here is an assessment of this highly attractive market opportunity.

Labels: christian games, family friendly games, market research, teens market, video games

I was working to evaluate new market opportunities and needed a way to screen them. Are they attractive enough? Can we find resources to fund them? Will the management and investors be excited about them? Can we successfully execute them?

That is when I built this template for analysis purposes. As you can see, it may be used for virtually any market opportunity. Feel free to use it for your analytical purposes.

Labels: business analysis, business model, business plan, market research

Objectives

Labels: consulting, market research, project, proposal, template

INTRODUCTION

• Packaging industry size is estimated at more than $125 billion and transport packaging amounts to about $40 billion

• Transport packaging accomplishes one of the most critical functions of packaging since it adds to the value of the product by lowering the cost for customers to obtain possession of the product from its point of origin

• The goals of transport packaging are relatively simple:

• Safe shipping of the product

• Optimum use of packaging material

• Convenient disposal of the packaging material

• Achievement of these goals has become increasingly complex due to an interplay of the following factors:

• Customer needs have become more sophisticated

• Product protection requirements are more stringent

• Handling and storage are increasingly automated

• Manufacturing cost has to be minimized

• Ensuring full utilization of carrier vehicles

• Compliance with regulatory requirements

• Use of environmentally responsible and easy to dispose materials

INDUSTRY TRENDS

• Consolidation is projected to thrive as a tool to increase competitiveness. This will result in fewer, but larger, companies and will further polarize smaller and larger firms

• Companies are under pressure to improve their profitability. This is expected to be accomplished through such aggressive cost-cutting efforts as de-layering, outsourcing, and out-tasking

• Sustainable competitive advantage would be built by focusing on the firm’s core business, while divesting all support functions

• Breaking down of barriers between customers and suppliers through increased sharing of information

• Producers of goods are evolving from being manufacturers to becoming facilitators that coordinate a group of key vendors to achieve organizational goals

• Distinction between employees and suppliers are dissolving

• Packaging industry suppliers will be paid not for the materials supplied but for achievement of such goals as number of units safely shipped and level of customer satisfaction achieved

IMPACT ON THE PACKAGING FUNCTION

• Customers will reduce or eliminate packaging staff and other engineering departments

• Packaging department within a company will evolve into a profit or quasi-profit center rather than a cost center

• The role of packaging professional will become multi-dimensional with responsibilities ranging from product and package development to marketing and customer service

• Package design will stop being a mere technical exercise within the organization. It will encompass marketing of the product, customer satisfaction, and addition of value

• The definition of product and package will become more fluid and design of product, primary packaging, and transport packaging will be done in parallel, generally by the same group

REDEFINITION OF MARKETPLACE AND PLAYERS

• Enterprises would become larger in size, but a small number of them in the industry would intensify competition

• Smaller companies would form alliances with other companies of similar size and packaging needs to improve their competitiveness

• A company would be served by several satellite companies and packaging materials and services would be provided by another such satellite company

• The satellite company employees might share space in their customer’s facility, participate in meetings like a regular employee, and access information more freely than is currently done

• The satellite companies providing materials, services, and equipment would establish alliances and partnerships based on synergies to help their customers reduce cost and improve profitability

• The competitiveness of satellite companies would come from market expertise rather than product expertise

• The successful companies would be the ones willing to take full responsibility for their customer’s entire packaging needs rather than just what they supply

• The new packaging equipment would reflect this redefinition of the marketplace better in form of equipment designed to meet specific needs presented in a cooperative manner by material suppliers, designers, and converters

SHARED GROWTH MODEL

• Customers should consider outsourcing packaging function to improve their cost position

• Packaging material suppliers, equipment manufacturers, and package designers should explore synergies and opportunities for alliances to improve competitiveness and increase customer satisfaction

• Packaging professionals need to look at their changing role and prepare themselves accordingly by increasing their knowledge base, taking on additional responsibilities representing a cross-section of functions, and thinking of them as profitable solution providers

BENEFITS OF SHARED GROWTH

• Well-defined road maps to success

• Long-term sustainable competitive advantages

• Wide knowledge base encompassing industries, markets, and segments, enabling better service to the customers

• Innovative and optimized product launches, improving prospects for success and sharing of profits by all

Labels: business model, industry overview, market research, packaging industry