Steve Loranger on Strategy:
The Value of VBPD

At ITT Industries, we have extremely bright people developing exciting, breakthrough products.

I see it firsthand in my visits to various value centers around the company. I have many years of experience visiting manufacturing and engineering facilities, and I've seen a lot of great work in that time. I'm especially pleased and impressed by what I'm seeing already at ITT Industries; our businesses have done a great job of creating work environments that promote innovation, and our people are working really hard to come up with new products.

Your efforts have helped us move up the list of our multi-industry peer companies in new product sales measured as a percentage of overall sales.  This commitment to innovation is also a big reason we've been able deliver another strong quarter of double-digit organic growth, a positive trend that is noticed by our investors. This doesn't happen in a slow or recovering economy without talented people developing vital products. 

So, it's obvious that the spirit of innovation is strong at ITT Industries. The next step is already under way. Value-Based Product Development (VBPD) brings a very robust discipline to what in the past has been a less-than-systematic pursuit of innovation. I'm a big proponent of running the business "on purpose," and that includes the way we bring new products and technologies to the market.

People looking at ITT Industries from the outside might wonder how we can continue to achieve 10-12 percent annual revenue growth. I believe that VBPD is an integral part of the answer. VBPD helps us develop the right products at the right cost -- products that customers are clamoring for and that actually work to satisfy their stated and hidden needs. It demands extra legwork -- meetings with customers to assess their true requirements, stage-gate reviews to keep projects from going down customer-unfriendly or cost-prohibitive paths -- but we are already seeing undeniable proof that this is the way to go.

Those of you who were able to attend the VBPD Symposium in October saw the early returns from our commitment to this initiative. VBPD is making a tangible difference to our value centers -- and more importantly, to our customers.  Time and time again, I heard our people at the VBPD Symposium say that "It really works!"

We will continue to invest in VBPD training. The VBPD team, with representatives from each of the four Management Companies, will continue to work with the value centers to provide training and coaching support in the stage-gate business process, Nimba Value Model, robust methods and systems engineering.

To date, I believe the concept has taken hold more rapidly in some cases with our engineers and product developers than with our sales and marketing employees. I think these tools hold enormous potential for the entire organization. We will be working to further improve the skills and processes needed to strengthen our new portfolio pipeline.

We will succeed by becoming an organization that listens, absorbs and assimilates our customers’ needs, and uses our high-technology engineering capabilities to deliver products and services that live up to our brand promise: "Engineered for Life." VBPD is one of the most effective ways we have of improving value to our customers and differentiate our company in the marketplace. I look forward to hearing your success stories as we continue to implement these tools throughout the company.

Steve Loranger
President, Chief Executive Officer and Chairman

Steve Loranger addresses more than 500 ITT Industries employees who attended the Value-Based Product Development Symposium in October 2004.