How A Symbiotic Parent-Subsidiary Relationship Fuels Product Innovation
In today’s globalized economy, the need for manufacturers to innovate and bring new products to market rapidly has never been more intense.
This is especially true among manufacturers based in the U.S., whether they are American manufacturers or U.S.-based subsidiaries of foreign companies.
A February 2014 report by the Congressional Research Service noted that U.S. manufacturers spend far more on research and development (R&D) than manufacturers in any other country. In fact, U.S. manufacturers spent 11 percent of their sales on R&D in 2008, which was significantly higher than the 8 percent figure in 2000. Only Korea has grown its rate of manufacturing R&D intensity faster than the U.S., according to the report.
Many U.S.-based subsidiaries of multinational companies are at a disadvantage when it comes to R&D investments. While many multinational companies are decentralizing R&D, a lot of it still takes place in the home countries of those companies.
Finding innovative ways to share, reuse and collaborate on R&D is a key part of the parent-subsidiary relationship.
Our company, Madico, Inc., is a subsidiary of Lintec Corporation, based in Tokyo, Japan. At Madico Window Films, a division based in St. Petersburg, FL, we develop advanced laminates to help residential, commercial property and automotive owners reduce energy use, mitigate the effects of harmful ultraviolet rays and increase personal safety.
Madico Window Films has its own local R&D team which focuses its efforts on partnering with our sales and marketing staff to refine existing products and develop new ones for our four major markets including North America, EMEA, Asia/Pacific and Latin America. We also have a larger R&D team at Madico corporate in Woburn, Ma working on window film innovations. In spite of this, it is still a challenge to keep pace with the extensive R&D resources of some of our larger competitors.
To remedy this problem, over the past several years, Madico has increasingly been utilizing the extensive R&D resources of our parent company, Lintec. The company’s Research Center has about 200 personnel and roughly $70 million in R&D funds at its disposal.
A great example of shared R&D between a parent and subsidiary was the launch of our Wincos line of premium automotive films in the US market. The Wincos line is designed to increase efficiency and reject infrared solar energy while eliminating heat gain. It doesn’t rely on dark tints to provide protection, which allows dealers to sell more products that comply with local vehicle codes on window tinting.
As this product was coming to market worldwide, we saw an immediate opportunity with Wincos to penetrate the premium automotive specialty product space in the U.S. It gave dealers a potentially lucrative upsell opportunity to their customers.
Within a short time, Wincos automotive film was our fastest growing product line.
Here are five tips for U.S.-based subsidiaries to leverage the product development of their parent company and profitably target new markets at home:
Develop a close parent-subsidiary collaboration on R&D: By closely coordinating and having input into the parent company’s R&D efforts, you’ll help ensure that new product development will meet market demand in your country or region. This collaboration will be even more successful if you can anticipate the emerging needs and trends happening in your sales territories.
Assess whether the new product fits within your product strategy: When a new product is launched by your parent company, it should be tied to your product roadmap and target the market segments with the largest growth opportunities in your territories. Otherwise, it could be a distraction.
Don’t cannibalize your existing sales: The new product should complement, rather than conflict with, your existing product lines. The Wincos product line fit well within our existing product portfolio because our existing products catered to a different segment of the automotive market.
Ensure that you can rapidly train your extended enterprise: Like many other manufacturers, Madico relies on an “extended enterprise” of dealers and distributors to have the most up to date information about the new product and be empowered to sell and install it. This process can be challenging when the product development is happening at the parent company level, and product details and features change frequently. Help your dealer and distributor partners be more successful by giving them the most up-to-date expertise and product knowledge.
Time the product launch correctly: The launch of the Wincos product line in the U.S. happened at a time when our company was looking to go upscale into higher-margin markets within automotive aftermarket industry. In addition, the premium automotive specialty products market had recovered from the recent economic recession. Demand from premium car owners for window film that offered a combination of more privacy and more style had ramped up.
By following the five tips above, you can ensure that your parent company’s product development pipeline will drive demand and greater sales in your home sales territories.
Jeffrey Plummer is Senior VP of Sales and Marketing for Window Films for Madico, Inc which develops, manufactures, and markets technologically advanced laminates.