I have spent most of my life working in the manufacturing sector. My first experience began as a young boy in my Grandmother’s sewing factory. After eating sugar cubes and Lance crackers while my Dad helped her out at night, she thought it was time to start earning my treats and put me to work sweeping her factory floor. Memory sometimes gets the best of you, but I could swear I was only six years old. I did not mind because along with the treats she would throw a couple of quarters my way.
I never looked back and soon worked summers for my Dad full-time to earn the money to feed my motorcycling hobby. This continued as I went to work for him after high school, before attending college a few years later. I give you this background because I wanted to share that manufacturing is in my blood from all of the years I spent growing up and working in it. It is something I am very passionate about, and I believe it is the backbone of our economy. I have seen a lot of changes through the years as tariff structures have changed and trade agreements have been put in place.
I have spent a large part of my career consulting and working with a variety of companies, including many manufacturers. One of the things I have come to believe is that while implementing process improvement methodologies like Lean Enterprise and Six Sigma are extremely powerful, they do not always make the difference between success and failure for a manufacturing company.
“Constant improvement in operational effectiveness is necessary to achieve superior profitability. However, it is usually not sufficient.” - Michael E. Porter
This brings me to the topic of my blog. (Thanks for bearing with me.) This country has an incredible base of manufacturing that still exists. Many manufacturing companies still succeed in commodity markets and try to compete on being the low cost provider. There are some market segments were this strategy is still viable due to transportation costs, proximity or time to market. However, there are just as many, if not more, situations where competing on cost is a losing strategy or competing in a commodity market results in very low margins, making it hard to reach profitability needed to reinvest in the business for growth.
The solution is to innovate and compete on value, not cost. I have always liked the 3M business model and their 30% rule, which is thirty percent of business revenues must come from products introduced in the last four years. It pains me to say that most of the manufacturing companies I have worked with do not allocate anywhere near this level of resources to develop new products or services.
Doug Hall, owner of the Eureka Ranch, says, “If you are not unique, you better be cheap!”
So that brings me to the question, how is your innovation engine running in the manufacturing industry? Let me ask you a few basic questions to ponder:
- Do you have a line item in the budget for Innovation or R & D?
- Do you have a department or individual responsible for Innovation?
- How many new products did you introduce to the market last year?
- What percentage of your sales comes from new products or services?
- Are your margins growing or declining?
- Is your customer base growing or declining?
- What percentage of your customers do you make money on?
If you are not happy with the answers to these questions, or think there is room for improvement, it is time to start thinking about developing an innovation strategy for your company. So, what is holding you back?
Let us look at what Kaihan Krippendorff sites as the barriers to innovation in an organization:
1. Failing to observe that our environment has changed and that new opportunities or risks have emerged.
2. Having observed that the environment has changed, failing to orient ourselves to the implication of this change.
3. Having oriented ourselves, we lack a clear aspiration and so are not compelled to take action, which might alter our current course.
4. Though we have a clear aspiration, we fail to conceive of a good solution.
5. We conceived of an exciting out-of-the-box solution but will not consider it either because we ourselves find it unreasonable or because our teammates view the idea as crazy.
6. We are willing to consider the solution but, after analysis, choose not to adopt it.
7. Though we chose a strategy, we fail to commit to it.
So I leave you with this for now: think about your answers to the first set of questions. Remove any barriers that are stopping you and using your strategic thinking time to create a plan to tune up your innovation strategy.
We will spend more time in the future looking at ways to jumpstart your innovation engine.