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QUEST FOR BLOCKBUSTER PRODUCTS SUPPLANTS `CUT COSTS' AS HIGHEST GOAL

Well, what do you know? Just when every publication in town is telling us that austerity is the economic theme for the 1990s, American business appears to have made an astonishing discovery: Cost control alone will not be enough to enable us to lick the world. We'll actually have to have some products.

That startling revelation is the thread running through the latest batch of annual reports surveyed for this column by William P. Dunk, a leading authority on corporate communications, based in New York and Dallas.Once a year, Dunk gives us an exclusive annual report on annual reports, and it repeatedly has kept readers ahead of such headline-making changes as the trend toward slimming down and reducing debt, which has resulted lately in massive plant shutdowns and corporate restructurings.

A year ago, Dunk noted presciently that the annual report was "undergoing a critical transformation" from its old role as an institutional cheerleader, and was increasingly being aimed at preparing the corporation's own employees for rigorous times ahead. Now he finds, looking through the latest barrage of corporate releases, that "all this continues in '92 - a dose of B-School 101 plus exhortation to work harder and suffer longer."

But Dunk reports that something new has been added to the doleful litany of "low revenue gains, ardent cost control and the gospel of continuous improvement." He calls it "the quest for blockbuster products that can get revenues moving again," spurred by corporate America's rediscovery that "you can't build a business out of New Age business philosophies and self-liquidation."

Dunk terms this a significant - and healthy - new development. "Isn't this a relief?" he asks. "American business has gotten back to making things. It has learned financial Ping-Pong does not a business make."

Generally, Dunk reports, this means two things: a genuine commitment by tomorrow's likely leaders to reverse the decline in R&D (research and development) spending that has afflicted U.S. industry since 1989, and "a surfeit of product introductions."

Examples in the incoming annual reports:

- Westvaco heralds "Innovation: A sound strategy that works" and trumpets its "aggressive investments in research and development and in modern technology."

- Campbell Soup, with a headline "Winning Again," tells readers that "a product-driven company must keep on the cutting edge of change and innovation" and says that "with fewer crises we were able to set priorities to develop new products and marketing strategies."

- Compression Labs talks about going from one product line to three in a year's time, Computer Sciences brags that it "has identified a dozen key technologies that will drive innovative ways of doing business in the '90s," and Procter & Gamble devotes two pages to "Product Innovation - P&G's Competitive Edge."

While Dunk calls this a "broad, deep, sophisticated" new commitment to R&D, he observes that "it is not altogether certain that really new process technology and techniques are taking hold, despite all this investment" and warns that "even with the renewed emphasis on innovative products and services, we must be wary of management claims of product success."

But whether they are all truly becoming globally competitive or not, he adds, it's obvious what America's good companies are hoping to get for their accelerated research spending: a burst in market share or an explosion into new markets.

John Deere's report maintains that such policies are already paying off, and Analog Devices emphasizes the importance of foregoing today for tomorrow: "The primary reason for low operating profits is the aggressive investments we have been making to get revenues growing again in the '90s."

To get moving again. That's what well-managed companies are talking about this year, because even many of the best are stuck with mediocre revenue performances and more restructuring charges on the way. Cutting back, it has now become evident, can't do it all.

What does this say for investment? As Dunk sees it, "The `smart' money is pouring into intermediate-term bonds - the useful investment vehicle when you can't make up your mind. On the other hand, the `wise' money is getting long term into companies with a passion for new products and new process technologies."