NEED FOR QUICK RESPONSE IN PRODUCT INNOVATION
Apart from basic technological strength, R&D and innovation have also now become crucial for Indian firms. In the past, Indian firms had by and large neglected R&D and innovation for a variety of reasons. The protection enjoyed by them under the regulated regime was one. There was no compulsion to pay attention to R&D. The prevailing control on prices of products was another reason.
When an industry is kept under price control, firms in the industry will neither have the resources nor the motivation to invest in R&D. For example, under the price control regime, pharmaceutical companies in India whether Indian companies or MNC subsidiaries or JVs-found their profit margins too low to permit any significant investment in R&D. Investment in R&D in the industry has never gone beyond 2% of sales, whereas in the developed countries, it has been around 12%.
The MNCs usually spend a fortune on R&D and keep bringing in improved products in a stream. In the new context, such companies are the competitors of Indian firms. Investment on R&D naturally becomes a must for Indian firms.
Some significant developments have been taking place in recent years in the matter of new product launch/product innovation:
* Cycle times for new product launches are getting compressed.
* Diffusion/ adoption of new products is becoming faster.
* PLC of products is becoming shorter.
* Time lags between launch of new products in global markets and their launch in India are also getting compressed.
On account of these developments, firms now face the challenge of speed in the matter of new product launch/product innovation.
Compression of Cycle Time of New Product Launch
The long time lags of earlier days between new products idea stage and final launch are now vanishing. The result is a rapid arrival of a stream of new products in the market. Business firms now find that the luxury of a leisurely approach to new product ventures is no longer available to them.
Faster New Product Adoption
Simultaneously, from the other hand of the process, the new product adoption time is getting shorter. The earlier time lags in the process of diffusion/adoption of new products among consumers are varnishing. For instance, the time lags that Indian firms had experienced in yesteryears in consumer adoption of products like proposed like processed foods and chemical fertilizers no longer apply to the new products of recent times. Consumers are now adopting new products faster. In new products like PCs, cell phones, and credit cards, Indian consumers have been rapidly traversing the adoption process.
The above changes have their impact on the life cycles of products/product categories. Faster turnouts of improved products, substitute products and new products, naturally affect the life cycles of ongoing products/product categories. Consumers start switching over to new product and new versions of ongoing products faster, leaving the existing products in the lurch. The profitable and productive life cycle stage of such products is thus shortened. The message is obvious. Business firms have to make the best use of a product during its relatively shorter growth phase. They also have to keep many new products ready in the queue to replace products that are getting obsolete faster than ever before.
Time Lags Between Launch of New Products in Global Markets and in India Get Compressed.
The time lags of yesteryears between advanced countries and India in the matter of availability and adoption of new products have also started shrinking. The entry of multinationals into the countries has accelerated this phenomenon. Now, many MNCs are launching their new product in the advanced countries and India simultaneously.
Innovation and development of new products is faster in computer hardware & software, entertainment electronics and personal care products. Developments of this kind are compelling business firms of India to remain doubly alert on the new product/product innovation otherwise they may lose their market share to their competitors including multinationals.