Apr 30 2013

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A New Model for Manufacturing Innovation

The Austrian Economist Joseph Schumpeter argued that industries must incessantly revolutionize their economic structure from within. I interpret this statement to mean that manufacturers must continually strive to innovate with better or more effective processes in order to build new products. Many examples exist. Innovation in the Telecommunications and Information Technology (IT) industries have really changed the way we communicate and share information. Manufacturing innovations includes various automation, Lean and other cost reduction strategies. And, an ease of use to replicate operations processes across sites has helped to ensure higher global quality standards and greater control, visibility and synchronization across operations.

What is Innovation?

Innovation means to develop new solutions or apply new processes that meet new customer needs or add value to the existing products and services to optimize their value or productivity. As a result, innovation can be an excellent catalyst for growth. As products and services are manufactured with improved quality, durability and safety, which are typically enabled by advancing technology and organizational strategies, overall market demand will often expand as a result.

Innovation impacts economics, business profitability, product design, technology or engineering best-practices. Further impact occurs when innovation creates improved efficiency and effectiveness in the business, comfort and convenience of consumer goods, often driven by enhanced technology (Go Green) and safety (Aerospace & Defense).

Innovation Constraints

When shop floor operations at global manufacturers consist of integrating heterogeneous processes and production methodologies, it can be difficult to manage innovation – effectively blocking all of the potential benefits.  It is in these situations where manufacturing leaders have emerged with effective strategies to simplify their process frameworks such that process improvement can be accommodated faster and more easily. One approach is to unify shop floor operations with a Center of Excellence team and an IT framework, which can then ensure comparable and measurable manufacturing standards on a global scale. As they say, you can’t improve what you can’t measure.

Sources of Innovation

Peter F. Drucker noticed that the general source of innovation is tied to changes in industry or market structure, which can result from changes in local or global demographics, changing tastes, new technology, etc. Innovation can often appear random, coming when you least expect it. Figure 1 depicts a more traditional model that illustrates how an invention could trigger innovation, which must then be transitioned into the marketplace. Today, I would argue that this model is too simple. It really misses the upside of process innovation. A new process that cuts 10 percent of your operating costs could be quite significant in the consumer goods industry where margins are thin.

Figure 1: Traditional linear model of the processes of technological change


Regardless the source of your innovation, traditional theory suggests that if you are to achieve successful innovation, the following factors must exist:

  1. Clear goal definition with excellent alignment of actions to goal
  2. Mutual participation across stakeholders
  3. Accurate monitoring of results
  4. Open, trustworthy communication
  5. Access to current, accurate information.

I would argue another factor must also exist: your organization’s ability to change, starting at the process level. If you identify an opportunity for innovation but can’t get the new process in place, then no benefits can be achieved and all your work was for nothing. Once your innovation has been implemented, the entire process should be re-evaluated for further continuous process improvement. Figure 2 illustrates a more modern perspective on the process of innovation, demonstrating the fluid and dynamic need for change as part of your quest to achieve manufacturing innovation.

Figure 2: New manufacturing innovation model, a continuous loop of technological change


Measuring Innovation

Innovation can (and should) be measured on an organizational level, in form of balanced scorecards. The implementation of manufacturing intelligence solutions is often justified by this single function, as part of a manufacturer’s quest to achieve better visibility across operations. This approach can cover several aspects of innovation, such as business measures related to profitability, innovation process efficiency, employees’ contribution and motivation, as well other stakeholder benefits. Measured values depend on the specific industry and business, and might include new product revenue, spending in R&D, accelerated time to market and greater access to fuel strategic growth in emerging markets.

What is pivotal is that innovation aligns with corporate strategy and global manufacturing performance in order to ensure continuous growth and return on investment. A well-defined innovation program with an IT infrastructure that not only supports frequent process changes and other innovations but encourages it will lead to an aggressive growth strategy and sustained competitive advantage for many years to come.

Werner can be found on Google+.

Permanent link to this article: http://www.apriso.com/blog/2013/04/a-new-model-for-manufacturing-innovation/

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