ABSTRACT
The second driving force is the high and rising cost of investment in new products and manufacturing facilities. Here, I am giving you some examples of companies that have told me, “This is what it costs us to launch a new product.” For example, Phillips, in its attempt to try to break into the telephone switching system, was talking about $1 billion of R&D expenditure before that system was ready. Most of it, by the way, was not in hardware, but in software development. Volkswagen just spent close to
$1.2 billion in developing, gearing up, and launching their new Golf. That was the money spent before a single car left the assembly line. Ciba-Geigy, a pharmaceutical company, talks about a ball-park number of somewhere between $200 and $250 million for the cost of a new drug, from the discovery of the molecule to its actual marketing to doctors. Again, that money is spent before a single prescription is written. And Gillette recently introduced what they call a world product, Sensor. They spent a sum close to $200 million in gearing up, most of it in state-of-the-art manufacturing facilities in the United States.
