Innovation in Manufacturing -- Summary

More and more companies are using the practice as a focal point, or catalyst, for dramatically improving performance and, in some cases, transforming their companies. The next frontier in the maturation of corporate growth initiatives is to harness innovation in more predictable ways. That means developing the deeper capabilities that increase the likelihood of innovation taking place—and of more rapidly linking innovative products, services and processes to profitable growth.

In hotly competitive and increasingly global business environments, companies are examining every aspect of their operations for opportunities to improve performance and to gain competitive advantage. No major business process or function has escaped executives’ scrutiny—from the supply chain to finance to customer relationship management.

Accenture’s ongoing research into the characteristics of high-performance businesses has found that innovation delivery affects all aspects of a company’s entire “competitive essence.” This essence is achieved by balancing, aligning and renewing three building blocks of high performance:

• Market focus and position—Having a winning innovation capability that enhances companies’ ability to know where and how to compete.
  
  
• Distinctive capabilities—Discovering and executing unique business models or processes they can use to differentiate themselves.
  
  
• Performance anatomy—Creating mindsets and behaviors among their people to continually sharpen their offerings and market presence in the face of enormous and swift change.

High performance, for Accenture, means effectively balancing current needs and future opportunities, consistently outperforming peers and sustaining superiority across time. Winning the innovation game over the long term—just as in achieving high performance in this broader sense—requires management and execution of repeatable processes that promote balance, consistency and sustainability.

Accenture commissioned a survey in late 2007, conduced by the Economist Intelligence Unit, of 600 executives at major companies in North America and Europe. Respondents included board members, CEOs, CFOs and other C-level executives, as well as senior managers. Key findings from the survey highlight the challenges that most organizations face as they seek to enhance their innovation execution capabilities and results.

Among the practices that are apparent among innovation leaders in and out of manufacturing, including the companies participating the innovation roundtable, are the following:

• Focus on more structure, less serendipity
• Evaluate multiple innovation dimensions
• Bring greater discipline to managing innovation portfolios
• Cultivate innovation in people

Gap between innovation commitment and execution
More than 60 percent of the companies surveyed are pursuing business strategies that depend on a stream of innovation. Eighteen percent say they are totally dependent on innovation for their long-term success. When asked to distinguish between their commitment to innovation and their ability to execute on it, a noticeable gap emerged. Slightly more than half of the companies believed they were stronger than their competition with respect to commitment to innovation and their CEO’s support. But when it came to frequency and the pace and speed of innovation, respondents thought they were in a weaker position than their competition.

Barriers to innovation
In many organizations, there is a natural tendency to pursue line extensions rather than new businesses, and it often makes sense. But companies too frequently structure metrics, incentives and processes geared towards “safer” line extensions—sometimes at the expense of growth and innovation. Other top barriers were tied to an overemphasis on short-term financial priorities and the lack of an organizational home to nurture opportunities in new markets. The latter issue is particularly troublesome when development responsibility and investment for an opportunity straddles two or more business units.

Revising three misconceptions about innovation
The survey data shows that although innovation is on the radar screens of many companies, there are varying degrees to which companies are able to execute. Some of these shortcomings are related to tactical issues such as a lack of speed-to-market. But a number of misconceptions about innovation linger and can also impede efforts to establish the right strategic direction from the outset. 

• Misconception 1: Innovation equals technology or products
  Technology is certainly a key part of innovation, but it is a mistake to equate the two. Some of the most powerful instances of successful innovation show the limits of this equation. In addition, when many people think about innovation, they focus on new and shiny product offerings in the marketplace. But, multiple innovation dimensions offer opportunities for creating and capturing new value that go beyond technology and products.
  
  
• Misconception 2: Innovation is a long-term project
  Innovation is about creating and capturing new kinds of value in whatever way is most relevant to a particular industry, and over a range of timeframes. In its best sense, it provides a steady flow of new releases over time, not just an occasional blockbuster product or service sometime down the road. It is typically best to think of innovation as a portfolio, and to lay out a set of innovations that will be ready for release over different timeframes.
  
  
• Misconception 3: Innovation happens by chance
  Creativity is indeed a driving force of innovation—ingenious responses to gaps in the market or spoken or unspoken customer needs. Companies that succeed as innovators over the long term, however, find a way to harness that creativity and use it for greater strength with processes, supporting tools and so on to promote repeatability, better management and better predictability.

   

Through its research and work with clients, Accenture identified three fundamental innovation capabilities that high-performance innovators cultivate in order to generate and sustain consistent value. The framework—including Foundation, Conversion and Consistent Execution—features a multiplier between capabilities. The cumulative impact from all of them helps to maximize the value from innovation.

Develop and Support Your Innovation Strategy
Whether they are responding to specific challenges or operating from a position of strength, manufacturers that are attaining a high degree of maturity in their innovation practices are adept at making innovation central to their overall strategies for growth and high performance. They are clear in their commitment to the discipline of innovation, one that demands formality, organization and support to evaluate ideas and convert them into workable projects and activities. In short, to them, innovation is something done on purpose; it is not a matter of happenstance. They make executing innovation a less serendipitous affair and much more a structured business discipline in an effort to gain measurable, predictable outcomes.

Deliver Innovation to Your Customers
Manufacturers are surfacing and integrating customer needs and desires into their innovation processes with a variety of approaches and tools to promote ongoing research, observation and collaboration. Groups responsible for growth and strategic planning are also taking a more disciplined approach to managing their portfolios. They are incorporating more checkpoints and financial analyses to prudently vet innovation projects as they work through the pipeline—being patient yet dispassionate about their viability and likely profitability—and to manage the overall risk profile of the product and services portfolio. This pruning process is supplemented by a greater attention to downstream issues related to quality, design, finance, supply chain and others that can impede consistent execution of innovation for customers.

Build Innovation in Your People
Attracting and retaining great people is one half of the equation; the other is creating incentives and support within the culture to make innovators, and innovation, thrive. That means handling failure and success correctly. Reassurances about accepting “failure,” despite well-considered attempts, must be more than talk. Ideas need a thorough evaluation and sometimes swift rejection; people on the other hand need to be approached with a view toward the long term and encouraged with practices that cultivate their skills and promote creativity and initiative. Successful innovators are equally attentive to celebrating success, recognizing and rewarding people who have conceived and shepherded innovations through their organizations and brought them to the marketplace.

Make innovation a catalyst for driving high performance
In many cases, manufacturing executives bolstering their innovation capabilities today have been prodded into action through dramatic new pressures—for example, major crises related to new global competition or industry consolidation. In other cases, manufacturers have come to understand that the ways they conceived, evaluated and executed new ideas were simply not bearing much fruit or were marked by a lack of discipline and strong measurements.

Build and sustain the infrastructure to move innovation from “serendipity to predictability”
Manufacturers that are moving up the steps of innovation maturity find their progress depends on robust, end-to-end innovation processes and supporting tools. By instilling formality and structure to what was once a sometimes haphazard undertaking, companies are better able to unleash more predictable outcomes from their innovation efforts.

Establish groups to promote innovation leadership, accountability, coordination and best practices
Increasingly, manufacturers are establishing dedicated offices to provide a primary point of accountability and coordination for growth and innovation, and to spearhead improvements in innovation execution.

Integrate customers into your innovation process
Getting customers in on the innovation process is essential. Customer observations can facilitate a much greater understanding of how the product is used; innovation in turn is often inspired by that observation. It may have nothing to do with adding functionality and technology but rather ease of use and installation or related matters.

Judiciously prune the contents of your project portfolio
Developing an environment where inspired customer- and market-driven ideas can flourish is, of course, important. But just as vital in the larger scheme of things is a company’s ability to assess and manage which ideas and projects earn the right to enter a company’s innovation project portfolio—and how far they are permitted to progress through the development life cycle.

Manage “downstream issues” early in the process
Getting manufacturing processes squared away early in the innovation life cycle is an increasingly important activity. Companies need to spend an adequate amount of time on it, and especially its costs, to make sure that ongoing investment is warranted.

Identify and replicate your innovation “DNA” across the organization
Innovators have a degree of confidence, even courage, to pursue new ideas and initiatives that are beyond their comfort zone and without an undue fear for their careers. Innovators are found across all personnel levels, from senior managers to more junior staff in the organization. And they can be found in all areas of the business, not just in product design.

Create an environment that enables innovation to flourish
Creating a culture where innovation thrives is in part built upon communication—accurate and repeated messages about the company’s strategy and a road map to achieving innovation. It also means demonstrating commitment to their people’s development in the way they deal with the success, or failure, of their ideas.

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