Helping End-Users See

Hidden R&D Value in Lubricants

E-Learning Breeds High-Caliber Salespeople
by Teaching Essential Technical Knowledge

By Holly Fitzgerald, The Lubrizol Corporation

Today’s lubrication technology is more highly advanced than ever before due, in
part, to major investments in research and development (R&D). Although R&D
remains such a cornerstone of innovation and fuels long-term economic growth
in the technology sector, most end-users place the value of lubricants about on
par or below with that of a well-branded bottle of mineral water.

With today’s rapid pace of innovation, it’s critically important for companies to
increase efficiencies and reduce the time within which an idea is transformed into
a finished product and taken to market, not to mention it’s crucial to help
customers see the work and innovation that went into developing these products
throughout every step of the value chain. While this may be readily apparent to
the minds behind the technology, painting a value picture for the customer is
easier said than done.

In the new economy, corporations face challenges yesterday’s managers never

anticipated. Increasing competition in a globalized market, shrinking corporate
resources, maturing markets, rapid shifts in technology and recruitment/retention
of talented people are among the matrix of challenges associated with
maximizing ROI on R&D expenditures.

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Since the 1960s, domestic R&D investment historically has exhibited strong and
generally consistent growth characteristics. Total annual R&D expenditures in the
United States increased from $26 billion in 1970 to $206 billion in 1997,
representing an average annual growth rate of eight percent. Collateral intangible
investments in other areas that impact directly on firm-level innovation – IT and
information systems, supply chain responsiveness, and improving work force
skills – exhibit broadly comparable growth rates.

The situation has changed radically in the wake of recent events. A sluggish
economy reeling from the effects of 9/11 sank into a full-fledged recession,
adversely impacting corporate R&D expenditures. For example, in 2003, the
amount invested in domestic R&D is estimated to have been $282 billion –
representing an actual decline in overall corporate R&D outlays. Total industrial
support for R&D was approximately $194 billion in 2003, basically the same as
2002. This rate is significantly less than what has been experienced in recent
years, a reflection of less-than-rosy economic factors that emerged in the past
year along with uncertainties in the stock market.

In an atmosphere of economic uncertainty, there was actually a decline in overall

corporate R&D funding for the first time in more than a decade – $192 billion for
2003, or 0.7 percent less than 2002. On the plus side of the picture, a new R&D
model – based on “open innovation” – is clearly emerging. So despite the gloomy
domestic R&D dollar figures, indications are that industry is headed for a
vigorous makeover.

An example of enterprises that buck the downward trend by maintaining R&D

expenditures and employ new methods to enhance the perception of value-
added products and services is The Lubrizol Corporation. The company’s current
investment in R&D efforts is pegged at 8 percent of revenues, or $160 million.
Capitalizing on the “open innovation” R&D model, the company has recognized
that an essential part of the total innovation spending package now lies outside

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the traditional R&D domain in areas such as quality control, IT systems and
training.

Many enterprising organizations are leveraging training technology as a basis for

operating and distributing value-added goods and services throughout the entire
value chain. Clearly, one of the most effective methods of helping end-users to
benefit from R&D investments is to transfer R&D knowledge in the form of better
technical product information via the learning function – specifically, e-learning.
What better use of R&D knowledge then to help your end-customer be more
successful in the rapidly evolving global marketplace.

Leveraging the Power of Learning

Customized e-learning solutions are designed to execute business strategies,
drive improved field performance and achieve tangible sales success. E-learning
is no longer simply an educational and training tool. It has become an archetype
of the knowledge economy and a lifelong learning process that aims to develop a
skilled work force. In tandem with the realities of the current economic climate,
the link between R&D and customer perception of value-added products/services
has become a series of shifting paradigms.

In general, the benefits of e-learning as an integrated-solutions function include:

• Improved learning effectiveness
• Reduced travel time/costs (by an average of 35 to 45 percent and 50 to 80
percent, respectively)
• Ability to meet the needs of geographically-dispersed employees
• Consistency of knowledge and skills delivery
• Cost effective individualized instruction for employees
• Instantly available ongoing support
• Accelerated speed-to-profit through rapid deployment of learning
• Effective sales-force development resulting in heightened performance
levels

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Moving to Market through Learning
Lubrizol has recently announced commercially available e-learning to expand the
market’s understanding of newer high tech lubrications and the value they bring
to businesses by introducing a new Web-based tool to its Knowledge 2 Market
(K²M) learning services program. The program is designed to equip field sales
staff with the technical information and selling skills they need to serve their
customers better. The objective of the e-learning process is to demonstrate a
product’s true value, beginning with R&D efforts and carrying through to the end-
users, which, in most cases are Lubrizol’s customers’ customers. The bottom line
is to help customers and end-users increase their profitability by learning the fine
points of lubrication technology – incorporating knowledge of fluid additives in
particular – from the experts.

This customized learning approach provides information on how to use the

lubrication technology R&D churns by translating technical terminology into user-
friendly terms to solve customer problems. To be successful, the learning system
must be integrated as a core business strategy that is dynamic, not static. And
while 70 percent of the Fortune 1000 cite lack of training as a growth hindrance,
knowledgeable managers also recognize the need to strategically develop the
organization’s skill set in order to accelerate growth.

Blending Technical Knowledge with Sales Field Expertise

The immediate challenge in the K²M paradigm is to align the consumer’s
perception of a product’s value with its advanced lubrication technology, which, in
turn, is the product of intensive R&D efforts. The key is effectively communicating
a product’s added benefits throughout the entire value chain: from product
development and sales/marketing to the distributor and end user. At each level of
the value chain, product differentiation is enforced through methods designed to
develop consistent message formats that provide product knowledge and
application skills appropriate for targeted audiences.

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Up to Speed in Days or Months vs. Years
Successful salespeople never give the impression they’re selling. They seem to
know the right thing to say and when to say it. Their years of experience, accrued
familiarity with specific customer needs and thorough product understanding
distinguish them from their peers.

Through new learning technologies such as the K²M – which features online,
lube selling scenarios that mimic real life – companies can more effectively
identify and enable sales superstars through the delivery of a learning system
based on a mixture of traditional and technology-supported approaches. This
multi-forum learning program as a whole employs a blend of Web, classroom
presentations and situation-specific PlaceWare modules. These components
exploit the expertise of field and lab lubrication specialists by transferring their
knowledge to field reps who then apply it in providing practical solutions to
specific customer problems.

The new online courses introduce students to virtual customers who ask relevant
product/performance questions they must answer correctly before advancing.
The Web site also houses an expansive current library of technical reference
materials that can be accessed and printed by category for field use.

Fully accredited by the International Association of Continuing Education and

Training (IACET), the K²M system’s online course tools provide access to
lubrication experts who can boil down the need-to-know basics. The program
blends technical knowledge with the virtual selling situations to assist
salespeople, marketing professionals, distributors and installers in knowing their
products and closing sales based on the product’s “real” value to the customer.
Students can also ask questions or get further information from company experts
via phone or e-mail support as well as through online discussion groups.

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Value-Added Dimension
In order to succeed in the lubricant market, sales reps must be able to explain
product features/functions, understand how equipment works and be able to
troubleshoot lubricant-related equipment problems. All this allows them to serve
customers more effectively. Understanding lubricant technology through such
programs as K²M and possessing the ability to use that knowledge to explain a
product’s value-added features to consumers provides a firm foundation for
product differentiation while allowing customers to capitalize on their investment.

In the end, training time translates into mutual profitability for the end-consumer,
lubricant company and its reps, since up-to-the-minute R&D/product information
is available instantaneously. The training technology dramatically improves
operational performance by reducing costs while simultaneously increasing
selling/support service effectiveness as reps interface with customers.

The Future Is Now

As a result of new learning resources such as K²M, the time between new
product development and product rollouts is collapsing exponentially. Major
product innovations are invariably the result of long-term, well-funded R&D
programs. And the shape of the R&D enterprise will no doubt continue to evolve
as successful organizations implement procedures that promote flexibility. The
continuing paradigm shift of research down through the supply channel will
continue to influence the dynamics of “research-to-development-to-
implementation.” And the deployment of innovative learning technologies such as
K²M will promote an enhanced perception of value associated with the R&D
effort.