Survey: Manufacturing Success Requires a 3-Tiered Approach to Innovation

Automated Guided VehicleDeveloping innovative products is not enough for long-term success for manufacturers. There also has to be simultaneous innovation in processes and business models.

That’s the takeaway from a new survey of more than 380 manufacturing business leaders conducted by the Chicago-based consulting group Grant Thornton. True, long-term success requires a balanced approach to innovation that focuses on all three elements.

Three Types of Innovation

Nearly half of the US manufacturing executives polled in the survey — 84 percent — said they were confident that innovation was possible within their organization, but the respondents disagreed which of the three were most important:

  • Product Innovation (84 percent)
  • Process Innovation  (82 percent)
  • Business Model Innovation (79 percent)

Jeff French, manufacturing practice leader at Grant Thompson, said the results indicated that manufacturing executives understand that no single type of innovation is going to produce the results they want, at least not in the long run.

“Innovation is a lot broader than before,” French said in a news release announcing the survey’s results. “Today, it’s not just innovation in what you manufacture, it’s innovation in how you make it and how you take it to market. As manufacturing evolves and barriers to entry are removed, companies now need to think holistically in terms of innovation. Otherwise, they’re not going to survive the new wave of manufacturing.”

New and Improved Products

Product innovation has always been the prime focus of most manufacturers, especially among executives in manufacturing companies with sales in the $1 billion to $5 billion range.

But while coming up with better products that consumers want is important, if they can’t be manufactured quickly and affordably, or if customers can’t easily gain access to products, all that product innovation is for naught.

Today’s manufacturers face challenges in all three, according to the survey. Business model innovation can create significant delivery challenges, especially now that may consumers are choosing to search for and purchase the products they want online, accessing stores and websites via their smartphones anytime and from anywhere.

This has forced many manufacturers to develop new key performance indicators (KPIs) that reflect this transition from a product-based focus to a service-based focus. Existing fulfillment process will  need to be re-engineered to enable this new paradigm.

Innovation a Slow Process

So far, only 25 percent of manufacturing executives participating in the survey said their company has made significant changes to their business model, although 41 percent said they plan to make such changes over the course of the next three years.

The business model innovations to be addressed are changes in customer needs (28 percent), changes in supplier or partner capabilities (18 percent), and emergency of new technology (17 percent), according to the survey.

Generally, the smaller the manufacturer, the more confident its executives are in their ability to roll with the changes within their industry. The larger the business, the more costly it will be to change factories, production lines, and worker training to accommodate new processes resulting from product, process, and business model innovations.