Developing New Revenue Streams
Developing profitable new products and processes is the major mission of corporate laboratories. Professors justify their research grants aimed at developing new knowledge by describing how the research can eventually result in new products and processes to create new business, improve health, or protect the environment. Government labs justify their research in the same way.
The Lab Manager's Role in Finding Untapped Product and Process Opportunities in Their Labs
Developing profitable new products and processes is the major mission of corporate laboratories. Professors justify their research grants aimed at developing new knowledge by describing how the research can eventually result in new products and processes to create new business, improve health, or protect the environment. Government labs justify their research in the same way.
The key to creating new revenue streams for your organization is becoming aware of new science and business developments and figuring out how to take advantage of them. Other than reading research journals in their field and encouraging their staff members to do the same, how can laboratory managers participate in the development of new revenue streams for their employers?
Read, read, read
Read business magazines, newspapers and trade magazines. Firms constructing new plants could be a source of new business. While I was heading Shell’s Pulp & Paper Chemicals Group, my keeping up with general news enabled Shell to begin competing early for business at companies building or expanding their paper recycling mills. Reports of new technology developments could give you ideas for new product lines.
And read those research journals. New developments could be the basis of new businesses. For example, John Fenn received the Nobel Prize for his research developing the electrospray ionization technique for mass spectrometry. This capability is now built into many commercial mass spectrometers, enabling them to identify and analyze complex biological polymers. The instrument companies whose scientists read Fenn’s papers could have gotten a jump on commercializing this technology.
Read the patent literature, or subscribe to a service that scans patents worldwide using key words supplied by the lab manager and his/her staff members. This information can enable researchers to work around patent claims to develop competitive technology or recommend licensing of the patented technology.
Talk to sales and marketing personnel
Your firm’s sales representatives are usually at the front line of communication with customers. Thus, they can bring in information on what problems customers are facing and what new technology they have under development. Lab managers and their staff members in various business areas should read sales people’s customer call reports for these business areas. All this information can result in new products and additional business.
Play an active role in the sales process
You and your staff members can play a more active role in the sales process by sometimes accompanying sales representatives on sales calls to customers. Hold periodic discussions with customers to see what problems they face in their businesses. It could be that lab managers have the staff members and other resources to discover solutions to these problems and generate additional business for their employer. By the same token, lab managers should hold similar discussions with their employer’s suppliers. They may be developing new raw materials that the employer could convert into profitable new products. Confidentiality agreements are sometimes needed for these discussions to be meaningful.
In these situations, the lab staff member often presents a talk based on new results that would interest the customer. Customer input can help guide the development process and give customers an emotional stake in the project outcome. They may be more willing to evaluate a new product if they feel they had a role in its development.
Lab personnel may also participate in plant evaluations of new products in the customer’s plant. If things go well, your lab personnel may make valuable contributions that help plant personnel do their jobs. They could even be regarded as members of the customer’s plant team. This customer familiarity helps builds sales and customer loyalty.
Sometimes this positive attitude goes to the point of sharing product performance data from the customer’s operation and allowing you to write a paper on the results. You may be asked to keep their company’s name confidential in the paper. Alternatively, if they give permission to use the customer’s corporate name, you can make their employee (or employees) coauthors of the paper. The paper can be presented at a trade association conference or published in a trade magazine. Such papers can be an effective sales tool in trying to sell the product to other customers, more effective than an advertisement.
Attend conferences
Attend conferences and see what’s new in fields that are of interest to your employer. Lab managers can do some of this themselves, but should also send their scientists to meetings to scout for new developments that could result in additional business for their employer. Your people can take prospective customers out for meals and business discussions during conferences. A sense of camaraderie can build as they attend presentations with customer personnel and discuss the papers with them.
If your employer is operating a trade show booth at your conference, lab personnel can participate in staffing the booth and talking with customers. When I worked for Shell Chemical Company, the sales people had director chairs made in the company colors (red and yellow) and with the company emblem and the lab people’s names on them. These matched the sales representative’s chairs and contributed to the impression that the lab and sales people were on the same team. Customers felt that concerns they discussed with a sales representative would be taken to the lab personnel if appropriate. Most also really appreciated the opportunity to discuss their problems and concerns with lab personnel.
Some of my lab managers would sit down with their staff members and with sales and marketing personnel and discuss what conferences lab personnel should attend in the coming year. They would also discuss what papers lab staff members might present at these conferences. This planning enables papers to be written more carefully than is the case when personnel decide to submit a paper with little advance notice and then rush to finish a manuscript to meet a deadline.
Talk to customers and suppliers
You can rent a small meeting room in the conference hotel and hold private meetings with customers, complete with oral presentations and slides. By reserving two or three hours for this meeting, often just before or after the formal conference, you can have detailed discussions and often agree on joint efforts going forward.
I used this approach when I headed the Pulp & Paper Chemicals Group at Shell. We often rented a small meeting room in a conference hotel and held these discussions during paper industry conferences. Shell business managers and sales representatives were also involved in these discussions. High-level business people sometimes flew into town just for these meetings.
Visit research universities
Encourage staff members to give talks at research universities, and pay their expenses. University departments strapped for funds to bring in outside speakers are often eager to take companies up on offers to provide speakers. Lab managers and their staff members can meet with faculty members doing work of potential interest to their employer. They can also meet with graduate students and postdoctoral researchers working in these areas of potential interest. Should the employer decide to develop some of this science into commercial applications, lab managers can get a fast start on the project by hiring one of these graduate students or post-docs.
Becoming a sponsor of university research can promote a closer relationship with professors eminent in technology fields important to your company and to your laboratory. Often a professor’s research is sponsored by a consortium of companies rather than a single firm. A visit to the campus for consortium meetings can provide valuable face time with customers’ representatives who are also members of the consortium. Often these individuals are influential members of customers’ R&D teams.
When Shell Chemical was a member of a consortium sponsoring paper recycling research in the chemical engineering department at the University of Maine, I was fortunate that my employer was the only chemical company member of the consortium. Most of the members were customers or potential customers for our paper industry chemicals. I didn’t overtly sell, but I provided chemicals needed by the university team to perform their experiments and discussed chemical performance requirements with the professor and with other consortium members. Our participation and these discussions helped bolster our credibility with customers and potential customers.
Sometimes you can combine these discussions and visits with recruiting trips to the campus.
Increase sales to current customers
Some of your best prospects for new business are your firm’s current customers. There are three main strategies to this. The first is providing excellent customer service for the products you already sell to current customers.
When you improve current products, work with sales personnel to “up-sell” the new product. This requires the development of data that clearly indicates the superiority of the new version over the current product in terms of both performance and cost effectiveness. Remember, if you replace an old product with a new one, you have to increase both your firm’s sales revenues and profit margins.
Cross-selling means selling additional products to customers already purchasing one or more of your products. Because you already provide high-performance products and excellent customer service, your firm’s customers will be more open to purchasing additional products from your firm. Your firm’s established credibility makes this process easier and shorter.
Develop your oral and written communication skills
Many of these strategies require lab personnel to have good oral communication skills. Therefore, it is a good strategy to have lab staff members take courses to improve their oral presentation skills. Joining Toastmasters International can also help them do this. Some of my lab managers had staff members rehearse their conference and customer presentations by delivering them to coworkers.
Your staff members also need to create concise, wellwritten lab reports for your firm’s sales and marketing personnel and for customers. This requires good writing skills. You can improve these skills by coaching staff members and having them take short courses.
Write reports that sales and customer personnel can understand. Remember that many of your firm’s customers probably aren’t chemists. Your staff members’ reports should be concise and focused on the customers’ interests so they will understand and appreciate the reports when they read them. Your staff members aren’t writing a paper for a research journal, so excessive use of jargon and theorizing about the science behind the results probably won’t be appreciated by your firm’s sales and marketing personnel.
Lab personnel can also write or participate in the writing of product technical bulletins. Lab managers can work with sales representatives and marketing personnel to decide what bulletins should be written in the coming year. They should also carefully review this literature for technical correctness before it gets printed or posted on your firm’s website. They can advise on the proper tone to strive for in these documents. This approach facilitates the introduction of new technical literature shortly before a major conference and its distribution at the meeting, increasing traffic at your firm’s tradeshow exhibit booth.
Wrap-up
Doing a good job of increasing revenue through new product and process development and enhancing profit margins provides justification for a laboratory’s continued existence and for continuing employment of the laboratory staff. Recently, big pharmaceutical companies have cited the failure to develop new products and develop new revenue streams as the rationale for R&D cutbacks and even the closure of large research centers. Preventing this sort of situation from occurring at your company is a major responsibility for lab managers at all levels of the organization.
Dr. John K. Borchardt is a consultant and technical writer. He is the author of Career Management for Scientists and Engineers and often writes on career-related subjects. He can be reached at jkborchardt@hotmail.com.