International Strategic Marketing: Research and Development

1.0    Introduction

Only 30 years ago, innovation was perceived as a threat, growth came from linear expansion, and the Standard Industrial Classification (SIC) codes didn’t leave much room for the creation of new industries. Innovation was about improving the existing products and processes. Today, innovation is perceived by the financial markets as one of the most important value drivers in a company. In fact, non-financial performance like innovation accounts for as much as 35 percent of institutional investor’s portfolio allocation decisions today. Innovation is what made the world what it is. Had there been no innovation, man would still be wandering in the wilderness, fighting and killing animals for food. Then too, the tools used for killing animals had to be made. This also involved innovation, for without any trial and error, tools would not have become effective enough to kill the animal for food and clothing. Research and Development (R&D) is an integral part of this process.

With the gradual improvement in life, man began to seek other methods to make life more meaningful and enjoyable. It is again through innovation that mankind was able to develop his life to be more meaningful. History is full of innovations, both constructive and destructive. Economist Joseph Schumpeter described the economic, sociological, and organisational impacts of innovation and its winds of creative destruction well over half a century ago. Today, ideas are created and recombined at great speed and in new ways to satisfy mankind. After years of research, the Cap Gemini Ernst & Young Center for Business Innovation (CBI) began to understand how organisations could use the dynamics of the networked economy to enhance each of the four stages of the innovation life cycle of idea generation, concept development, innovation adoption & diffusion, and end game (Ruggles, 2002).

2.0    Overview

Syngenta, a world leader in agribusiness is committed to sustain the importance of agriculture through innovative research and technology. Synonymous for crop protection, and the third largest high-value commercial seeds market producer, the company netted a whopping $8.1 billion in sales in 2006. It employs around 21,000 people in over 90 countries. Syngenta inherited its strength and tradition through the merger of two companies; Novartis and AstraZeneca, on November 13, 2000. Despite this initiative, the company retains a distinct identity of its own (Syngenta (a), 2007).

The world is growing at an alarming rate. Countries such as China, India, and Brazil make up for a large percentage of the world population. Population is ever growing, thanks to the advancement of science and technology. Food is a basic necessity for life. If food becomes scarce, the nations of the world would turn against each other for food. In order to enhance production, and to improve the quality of food, companies such as Syngenta involve a lot of their time in research and development. Syngenta invested around $800 million in research and development to improve ways of growing and protecting crops in 2006 alone. The initiative to develop new products to meet increased demand has made Syngenta a global agribusiness conglomerate. The company provides seeds and crop protection solutions to growers around the world. As expected, there is a huge global demand for new agricultural products and solutions, and technologies to deliver them. Demand is driven by population growth and scarcity of land (Syngenta (b), 2007).

The following figure No.1 illustrates the growth of human population over the years starting from 1950 to the anticipated growth of population by the year 2025. As mentioned earlier, the demand for food is driven by population growth and scarcity of land. What was consumed by 2 people in 1960 will be consumed by 5 persons in 2025. This goes to show that unless serious research and development is not instigated, the world will have much lesser to eat in another 2 decades.

Figure 1 shows the growth of population and consumption of food in the world between 1950 and 2025

Picture courtesy: Syngenta: Research and Development, www.syngenta.com

3.0    Life Cycle

The study of consumer buying behaviour in the context of a product is synonymous to the product’s life cycle. This trend needs to be understood completely by marketer to develop a successful marketing plan.

While business strategy is related to a specific product, market and business, designing strategy is based on Product Lifecycle. The lifecycle follows an initial curve, growing slowly, and then hits the fast track of consumption, before making a quick exit. Most products follow a similar lifecycle, with a few having the ignominy of a shorter life cycle. The early stage of the lifecycle is a period of testing. Only a handful of customers may venture (1-3 per cent of the population maybe) to experiment or experience an innovation. This is followed by an awareness drive, where more people come forward to try or experiment the new product, called the ‘also tried’ category of consumers (13-15 per cent maybe). It is this segment of consumers who are the opinion leaders or trendsetters. Word spreads around and slowly but surely, a larger section of society takes a liking for this innovation, and the product move into the mainstream. The product is suddenly acceptable to the masses, and just when everything seems to be in order, consumers are faced with the prospect of testing a new product.  The existing product begins to decline in demand and face the fate of its predecessors, become obsolete.

What is sustainability? Sustainability can be termed as a ‘virtuous circle’. If agriculture uses sustainable solutions it will be able to meet the needs of future consumers without difficulty. This is what Syngenta is striving for through its R&D. The company spends millions of dollars every year to develop new source of ‘vitamins’ for improved and quality crop, which can help sustain the required consumption of the growing population over generations. This will lead to a better community to business relationship, resulting in economic growth (Syngenta (c), 2006).

The following figure No.2 shows the typical s-shaped value curve synonymous to innovation. The rise of the curve represents the unique value generated by innovation over time.

Figure Courtesy: CBI Journal 8: Connected Innovation, www.leader-values.com

There are four major stages in the life of an innovation (R&D):

Idea Generation is the stage where ideas are created. Scanning, analysis, and insight are envisaged here. At this stage, even those concepts destined for greatness are just barely recognizable.

Development of Idea is where the generated idea is into practice developing the product, service, process, or business. The development of the prototype, testing and analysing the results occurs here.

Adoption & Diffusion of the concept or product or service is marketed to its targetted audience. It is here that the innovation gets acceptance and starts to add value. Diffusion represents the acceptance of the product or service with the masses. The hard work is ultimately paid of here.

End Game is the sad decline of the popularity or acceptance of product for change. The product or service has come to a stagnation point. The desire for change becomes strong and takers are a rarity. It is at this point that companies strive to add new features to existing products or bring about complete changes. This is where R&D is helpful (Ruggles, 2002).

4.0    Research and Development

Syngenta works in partnership with over 150 organisations worldwide in research and development of sustainable agricultural products. Research involves identification of new plant breeding and plant protection product development. These products are used by farmers and others in agriculture to ensure higher productivity. Protection of paddy and other edible agricultural products is necessary to ensure that food produces are not impeded from full harvest. It is estimated that 40% of arable food production is lost to pests and diseases. So devastating are the agents of destruction, that Syngenta invests almost US$800 million (about £500 million) each year in research and development to improve ways of growing and protecting crops.

Humans are known to accept and seek change every now and then. One sees the development of new electronic systems ever so often. Automobile manufacturers change their models frequently to avoid cliché or lose of interest. Mobile phones are replaced with new systems very frequently. All these changes come about after considering the market tendency and consumer interests. A lot of money is spent by these industries on their R&D. Imperative that money is spent on R&D, products will become obsolete and the companies will face low sales and revenue, leading to severe lose and closure (Syngenta (c-i), 2006).

As society develops, the consumers’ demands change. Nokia mobile phones introduce new versions of their phones with additional features to retain their brand identity and market share. This would not have possible, if the company had not kept feeding their R&D wing. Thus, R&D plays an important role in the growth, sustainability and survival of any company. To meet the needs of farmers, Syngenta has to balance environmental concerns with the need to produce food. Within Syngenta research and development are two separate, but closely integrated units (Syngenta (c-i), 2006).

Figure No.3 shows how R&D at Syngenta follows a defined pattern of activities to produce a new product.

Picture Courtesy: Syngenta: Research and Development: New Product Development, www.syngenta.com

Research investigates the permutations and combinations that can address agricultural problems. The R&D recruits scientists such as biologists and chemists to identify and develop technologies which can produce new fertilizers and chemicals for control and destruction of diseases and insects. In their lab, chemists investigate thousands of different compounds to see if they have the potential to be a new crop protection agent. Once a suitable compound is identified, it is tested for a period of time in their lab in varying climatic conditions, before the successful agent is then assessed for development. Development involves shaping the research find. At the development stage too, varying tests are conducted on the new find, to evaluate its performance. Once the development team of scientists approve of the results positively, they are put under realistic growing conditions (Syngenta (c-i), 2006).

Such is the severity of their tests, that it takes 9 years or more for a product to reach the consumer. Such is their quality assurance that their product is accepted immediately in the market without a trace of doubt. Though the entire process of the R&D takes phenomenal time for product launch, the costly process is one of the major factors in Syngenta being as successful as it is. The company spends millions on R&D and has a gestation period of nearly a decade before the end result brings smiles on the faces of its stakeholders. The product is patent protected to ensure payback of R&D costs, but this protection only exists for a limited time. Subsequently, Syngenta concentrates on fully patentable products and reserves the right to transfer technology, which it seldom does. After all, it is the labour of decades of experiments, and trial and errors that has finally paid dividend to the company.

This goes to show that Syngenta follows the life cycle of change by first testing the market with its prototype in their farms, and then they introduce a part of their find in market to test its acceptance, before going through the process of mass production for world market. The process of research and development for the next generation products begin in earnest before the new agent reaches a saturation point (Syngenta (c-i), 2006).

• Goals

In research and development, Syngenta’s goals remain:

• To provide most effective deterrent against diseases and insects that damage food products to farmers and others who use them, and at the same time, being inconsequential to human health and environment
• To develop new breed of saplings and seeds that yield higher growth and productivity in various climatic and soil conditions
• In addition to this, the R&D team at Syngenta strives to bring about improvement in farmland biodiversity (Syngenta (c-ii), 2006).

Though the company R&D focuses on development of new products to protect agricultural produce, their research also considers the effect of chemicals and pesticides on the soil in which cultivation occurs. Environment protection is a prerogative of customer support, and something the company proudly elucidates. This demonstrates how, highly productive and profitable agriculture can go hand-in-hand with biodiversity and environmental sustainability. In order to illustrate this, two prime examples of Syngenta’s R&D is the SOWAP (Soil and Water Protection) Project, and project, Operation Bumblebee (Syngenta (c-iii), 2006).

4.2       SOWAP

Soil erosion is a huge problem in arable farming, particularly when ploughed fields are subject to heavy rainfall. In Europe, around 200 million tonnes of soil is washed away by floods into lakes, rivers and roads, causing pollution and reducing agricultural productivity. In collaboration with over 25 project partners across Europe, the team of R&D from Syngenta led a 4-year project, demonstrating how Conservatism Agriculture could reduce soil disturbance and provide permanent soil cover. The team also demonstrated how diverse crop rotation could reduce soil erosion by more than 60%. This was a very strong foundation for the company to improvise and show its capability in controlling extensive damage caused by natural calamities. The 4-year research had yielded tremendous profits for the European nations. When applied correctly, Conservation Agriculture reduced water pollution and improves farmland biodiversity, whilst maintaining crop yields (Syngenta (c-iv), 2006).

4.3       Operation Bumblebee

The menace of Bumblebees diminished drastically after Syngenta offered its expertise in controlling the population of these insects. The population of these insects on UK arable farms has declined by more than 70% over the last 30 years. Syngenta R&D team identified the cause for the increase of these insects and demonstrated the way crops were grown, which led to the loss of vital nectar food resources and increased the nesting sites for bees. The intervention of Syngenta has led to the disappearance of one of the 20 native species, and three more are on the verge of extinction. Operation Bumblebee involved more than 5 years of research by Syngenta into the habitats for bumblebees, butterflies, spiders and other insects on farms. Such time spent on research led to considerable production enhancement and economic development.

The research involved a number of test sites within the UK. The edges of fields were cultivated to create biodiversity sites. Scientists at Syngenta designed a special pollen and nectar seed mixture that included wild flowers and clovers. Farmers were trained to establish and manage these mixtures along the field edges. The impact upon the bee population was clearly visible (Syngenta (c-v), 2006).

5.0    Conclusion

There is absolutely no doubt that R&D plays an important role in the development of business, leading to economic growth. The case of the R&D team in enhancing the production, quality, and sales of its products worldwide is there for all to see. Research and development becomes mandatory for companies seeking to establish their name in world markets. Even though Syngenta pumped in millions of dollars into their R&D and had to wait for decades for their results, the wait proved to be most beneficial. The company is among the top three in agriculture-related business houses today.

6.0    Bibliography

Rudy Ruggles, CBI Journal 8: Connected Innovation, Connectivity Reinvents the Rules of Innovation, 2002, Leader Values, http://www.leader-values.com/content/detail.asp?ContentDetailID=40

Syngenta (a), About Syngenta: Syngenta Company History, 2007, http://www.syngenta.com/en/about_syngenta/timeline.aspx

Syngenta (b), About Syngenta: Research and Development, Why? 2007, http://www.syngenta.com/en/about_syngenta/research_tech_why.aspx

Syngenta (c), What is Sustainability? www.thetimes100.co.uk

Syngenta (c-i), The Role of R&D, www.thetimes100.co.uk

Syngenta (c-ii, c-iii, c-iv, v), The Role of R&D, www.thetimes100.co.uk