Newell Rubbermaid Inc. plans to trim its product line — eliminating low-end plastic storage containers, trash cans and office chair mats — in favor of high-end, innovative products. The company “plans to invest more heavily in research and advertising for more-innovative products,” according to a Wall Street Journal article, aptly headlined: “Rubbermaid Wants to Be Less of a Commodity” (16 July 2008). The innovative products include containers for fruits and vegetables with vented lids to keep those foods fresher.

The primary reason for trimming the low-end of the product line is the rising cost of the petrochemical-based resin used for making plastic products.

As the Associated Press reported:

“Put simply, the forecast for dramatically higher ongoing energy costs means that the world has changed, and we must change with it in order to maintain a healthy portfolio,” Chief Executive Mark Ketchum said in a statement.

Particularly vexing to the company, which also lowered its full-year earnings guidance on Tuesday, are increasing oil and natural gas prices — important components of resin, a key ingredient in many of the company’s plastic products.

“In categories where resin is a high percentage of cost of goods sold and the consumer’s willingness to pay for innovation is low, the economics are no longer viable,” Ketchum said.

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Related: Newell Rubbermaid to drop products, raise prices

U.S. disclosure rules that took effect last year are prompting companies to reveal (in proxy statements) a wide variety of perks provided to CEOs in fiscal 2007. Examples:

• Kathleen Danenberg, Response Genetics Inc.: $86,622 for clothing expenses (since repaid).
• Micky Arison, Carnival Corp.: $115,884 for courtside Miami Heat basketball tickets (he owns the team).
• Bahram Akradi, LifeTime Fitness Inc.: $31,777, for high-speed wireless Internet access (to tap company systems from home).
• Martha Stewart, $5,000 for her yoga instructor.

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Source: The Wall Street Journal 9 June 2008

Year-to-date share performance:

• Merrill Lynch: -27%
• Citigroup: -32%
• Washington Mutual: -45%
• Lehman Brothers: -51%
• National City Corp.: -70%
• MBIA: -71%

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Source: WSJ Market Data Group, The Wall Street Journal 9 June 2008

Is this the start of a rush towards green factories? “MAS Holdings claims to have built the world’s first carbon-neutral garment factory in Sri Lanka,” reports Anthony Townsend at The Institute for the Future. The plant will make underwear for retailer Marks & Spencer in the UK.

While the plant cost 25% more to build than a traditional design (it would have been 15% without some frills due to being a showcase), with rising fuel prices it’s expected to pay for the difference in less than five years.

According to MAS Holdings:

It features the biggest installation of solar panels to date in Sri Lanka, which will provide around 10% of the total electricity required for the plant. The remaining electricity will be mini-hydro, sourced through a green power agreement that MAS pioneered for Sri Lanka earlier this month.

Apparently this is part of Marks & Spencer’s wide-ranging effort to be carbon-neutral by 2012.

We’ve all seen cases over the years where help-wanted ads revealed intriguing bits of competitive intelligence about business plans. Well, here’s a new example: Amazon.com recently posted a job opening for a Senior Wine Buyer to build relationships with wine vendors and add wine to the e-commerce company’s offerings. (Amazon doesn’t sell wine on its site now.) A partial screen-grab of the job posting is below.

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Source: The Wall Street Journal, 7 March 2008

China is often seen as just a low-cost manufacturing outpost, but the new “High Tech Indicators” study by researchers at the Georgia Institute of Technology clearly shows that the Asian powerhouse has much bigger aspirations.

The study of worldwide technological competitiveness suggests China will soon pass the U.S. in the critical ability to develop basic science and technology — and then commercialize those developments.

“Since World War II, the United States has been the main driver of the global economy. Now we have a situation in which technology products are going to be appearing in the marketplace that were not developed or commercialized here [in the U.S.]. We won’t have had any involvement with them and may not even know they are coming,” said Nils Newman, co-author of the study.

Georgia Tech’s “High Tech Indicators” study ranks 33 nations relative to one another on “technological standing,” an output factor that indicates each nation’s recent success in exporting high technology products. Four major input factors help build future technological standing: national orientation toward technological competitiveness, socioeconomic infrastructure, technological infrastructure and productive capacity.

A chart showing change in the technological standing of the 33 nations is dominated by one feature – a long and continuous upward line that shows China moving from “in the weeds” to world technological leadership over the past 15 years.

The 2007 statistics show China with a technological standing of 82.8, compared to 76.1 for the U.S., 66.8 for Germany and 66.0 for Japan. Just 11 years ago, China’s score was only 22.5. The U.S. peaked in 1999 with a score of 95.4.

The United States and Japan have both fallen in relative technological standing – though not absolute measures – because of the dramatic rise of China and other nations such as the “Asian Tigers:” South Korea, Singapore and Taiwan. Japan has faltered a bit over time, and if the increasingly-integrated European Union were considered one entity instead of 27 separate countries, it would surpass the United States.

China has been dramatically improving its input scores, which portends even stronger technological competitiveness in the future.

“It’s like being 40 years old and playing basketball against a competitor who’s only 12 years old – but is already at your height,” Newman said. “You are a little better right now and have more experience, but you’re not going to squeeze much more performance out. The future clearly doesn’t look good for the United States.”

Five things that caught my eye:

• After months of scandals, virtual banks in Second Life are being shut down.
• The U.S. Consumer Product Safety Commission plans to shift the target of its toy-safety enforcement efforts from manufacturers (which are mostly untouchable overseas now) to the retailers.
• Google reports that it processes over 20 petabytes of data per day.
• U.S. and Canadian antitrust agencies are investigating whether chocolate makers have colluded to fix prices, trying to offset higher dairy costs.
• iMantri is a new Web site that “seeks to match mentors up with mentees using a niche social network that focuses on goals and competencies.”

GPS navigation devices for vehicles are all the rage, but (pursuant to the Law of Unintended Consequences) they’re also causing problems for residential and rural neighborhoods that would like to keep traffic to a minimum. The problem is really that the GPS devices are too efficient. They find the shortest route between Point A and Point B — even if that happens to send the gas-guzzling vehicle hurtling through a residential or rural area where residents would rather not have so much zoomingly efficient traffic.

Update: The Wall Street Journal has a story on this today, 18 March 2008: “Steered Wrong: Drivers Trust GPS Even to a Fault: Blind Faith in Devices Trumps Common Sense; A Road to Nowhere.”

A Dutch research report says the best GPS device is one that smartly routes the driver around residential areas rather than through them. GPS devices that simply pick the shortest routes through residential neighborhoods are labeled “kid killers.” Ouch.

Vinnie Mirchandani adds: “As GPS units mesh with social networks and become more ’savvy’ about traffic jams and construction sites, expect more drivers to be re-routed even more through residential paths.” He notes this could raise some interesting public policy issues.

Meanwhile, small British villages wish they could be taken off the GPS route maps. As The New York Times recently put it: “Wedmore, like many British villages, has been overrun by trucks following routes set by GPS navigation devices that do not take into account their narrow roads and sharp corners.”

But trucks and tractor-trailers come here all the time, as they do in similarly inappropriate spots across Britain, directed by GPS navigation devices, which fail to appreciate that the shortest route is not always the best route.

“They have no idea where they are,” said Wayne Hahn, a local store owner who watches a daily parade of vehicles come to grief — hitting fences, shearing mirrors from cars and becoming stuck at the bottom of Wedmore’s lone hill. Once, he saw an enormous tractor-trailer speeding by, unaware that in its wake it was dragging a passenger car, complete with distraught passenger.

With villagers at their wits’ end, John Sanderson, chairman of the parish council, has proposed a seemingly simple remedy: getting the route through Wedmore removed from the GPS navigation systems used by large vehicles.

“We’d like them to have appropriate systems that would show some routes weren’t suitable for HGVs,” Sanderson said, using shorthand for heavy goods vehicle.

Some communities have begun putting up signs warning drivers to ignore their GPS devices on rural roads. But signs seem to be less and less effective as people increasingly rely more on GPS systems and less on maps, common sense or their own eyes.

“We’ve heard some very hilarious stories where people just blindly follow the sat. nav. instructions,” said Vince Yearley, a spokesman for the Institute of Advanced Motorists, using British shorthand for “satellite navigation.” “Like if the sat. nav. says, ‘drive into this muddy field,’ they think, ‘that’s weird,’ but they do it anyway.”

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More interesting developments regarding GPS:

Zoombak LLC is selling GPS locators for finding lost pets, as well as for locating where errant teenagers or seniors have driven their cars.

Similarly, Brainmail reports “news of a sneaker with a GPS chip inside. Healthcare officials have already expressed some interest in the idea because the technology could help Alzheimer’s patients remember where they’re left their footwear. Equally, the shoes could appeal to paranoid parents that simply want to know where their kids are.” (Source: South China Morning Post)

Car-sharing venture Zipcar’s members can now use their GPS-enabled mobile phone to find the nearest Zipcar, based on their current location. (Discovered via Springwise.com)

Drivers who use GPS devices are less damage-prone than their old-school brethren, which is why a Dutch insurance company is giving them 10% discount on their auto insurance. (Discovered via Springwise.com)

Police departments say that thefts of GPS devices from vehicles are soaring.

MIT is developing an interactive map of Rome that will use dynamic data received anonymously from cell phones, GPS devices on buses and taxis, and other wireless mobile devices to provide more layers of traffic information than most maps provide. (Discovered via Innovation Watch newsletter)

Mobile phone-based navigation is remaking the GPS market, according to Telematics Research Group (TRG). While Garmin and TomTom remain the worldwide market leaders for portable navigation devices today, mobile phone makers Nokia, Motorola, LG, and Samsung are expected to lead the way in the near future. This will happen as the worldwide portable navigation market grows from 50 million units in 2007 to more than 500 million units in 2015, according to the market researchers.

“Over the next few years, the pharmaceutical business will hit a wall.” That’s how a major Wall Street Journal article begins (6 December 2007). The wall sits at the year 2012. The industry is “doomed, if we don’t change,” says Eli Lilly & Co. Chairman Sidney Taurel. The problems:

• Patent protections for the industry’s top-selling drugs will expire, allowing lower-priced generics to rush in. “Generic competition is expected wipe $67 billion from top companies’ annual U.S. sales between 2007 and 2012.”
• The industry’s science engine has stalled. “The century-old approach of finding chemicals to treat diseases is producing fewer and fewer drugs.” New blockbusters are lacking.

The industry is still profitable and will continue to produce new drugs — but “at too slow a rate to sustain its size and cost structure.”

That explains the recent spate of layoff announcements.

The future is said to be biotechnology (vs. chemicals) to develop drugs to treat diseases, which is why pharmaceutical companies are snapping up biotech companies and/or creating in-house biotech units. (They’re also getting into the generics business.)

By the way, this paradigm shift is bad news for chemists. See: “As Drug Industry Struggles, Chemists Face Layoff Wave,” The Wall Street Journal (11 December 2007).

Update: A new study says there are too many pharmaceutical sales reps taking up physicians’ time.

Many executives believe that the quarterly game of giving Wall Street “earnings guidance” provides various benefits: visibility, reduced stock volatility, better valuations. But thorough research by McKinsey & Co. indicates that the practice doesn’t actually work — there’s no evidence that it produces the expected benefits — but carries its own costs.

The two costs:

• It takes up valuable management time to prepare the guidance reports (i.e., it’s a distraction).
• The practice produces too much emphasis on short-term performance.

In my opinion, that short-term mindset gets in the way of long-term strategic thinking and thwarts important investments in areas such as innovation, human capital, environmental sustainability, safety, and competitive intelligence. This short-term mentality — called “short-termism” — could be the No.1 problem in American business.

Oh, and McKinsey’s researchers found that, when some companies stopped providing the quarterly guidance, there were no dire consequences.

The conclusions of McKinsey’s study:

[T]o maintain good communications with analysts and investors, companies that currently provide quarterly earnings guidance should shift their focus away from short-term performance and toward the drivers of long-term company health as well as their expectations of future business conditions and their long-range goals. Companies that don’t currently issue guidance should avoid the temptation to start providing it and instead focus on disclosures about business fundamentals and long-range goals.

The current trend — more and more companies discontinuing quarterly guidance and substituting thoughtful disclosures about their long-range strategy and business fundamentals — is a healthy one. In this way, companies will better signal their commitment to creating long-term, sustainable shareholder value and encourage their investors to adopt a similar outlook.

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Source: “The misguided practice of earnings guidance,” by Peggy Hsieh, Timothy Koller and S. R. Rajan, originally published in McKinsey on Finance (March 2006)

Related:
Should CEOs of Public Companies Offer Earnings Guidance?
Companies Consider Ending Quarterly Earnings Guidance (.pdf)
Breaking the Short-Term Cycle (.pdf) 
Weighing the pros & cons of earnings guidance 
Opposition Builds to Earnings Guidance
Investors want to end earnings guidance 
Time to Deal With ‘Short-Termism’