Production Innovation: The Key to Competitive Advantage

New research and initiatives make a strong case for implementing an ongoing innovation strategy

As manufacturers continue to gear business strategy towards profitable growth as opposed to just cost-cutting, product strategy is gaining higher acceptance as a means to obtain growth, according to recent Aberdeen Group research. There are a wide variety of product development improvements available that address complexity and contribute to financial goals. Aberdeen has found that by leveraging functionality around product lifecycle management (PLM) companies have the ability to outperform their peers in the arena of fast-paced product innovation, development and engineering while better managing increasingly complex, dispersed design and supply chains.

The Numbers Speak
Over three quarters of companies that Aberdeen surveyed say their corporate strategy places "a lot of emphasis" on increasing product revenue while 98 percent place at least "some emphasis" on top line growth. Aberdeen research also found that approximately one half of corporate strategies place "a lot of emphasis" on decreasing product cost. "The emphasis on cost reduction is higher with Tier 1 and Tier 2 suppliers as compared to OEM's, most likely due to the strength of OEM's to push cost reduction down onto suppliers," says Jim Brown, vice president, Global Product Innovation & Engineering, Aberdeen Group. "Improving innovation is about growing the business, but companies can't lose site of cost. The mandate is to produce more competitive products that better meet customer needs, in a shorter period of time. This needs to be accomplished without increasing product cost. In fact, cost needs to be reduced."

Quality Counts
Not surprisingly, Aberdeen found that product quality is the top priority to reduce product cost, supported by the change process. Involving suppliers in the design process and sourcing from low cost sources helps reduce direct materials costs. Designing for manufacturability helps to improve quality as well as decrease manufacturing costs and improve use of existing assets. "PLM is a 'team sport' as it involves sharing of information around costs and designs in the name of driving down costs," says Brown. "Quality Process Management is high on the list as well relating to the high importance placed on product quality to reduce cost. The notable disconnect is the high priority on decreasing manufacturing cost -- 59 percent according to Aberdeen -- and designing products for manufacturability. "Manufacturers should evaluate their product goals in their corporate strategy, and look towards PLM software to achieve profitable growth," says Brown. Manufacturers that are not using PLM should educate themselves and pilot product development automation, suggests Brown, while the ones using PLM should look for ways to extend their usage to maintain an advantage over the competition. "Know your business," says Brown. "Review your corporate goals, and select actions, capabilities and enablers that will help achieve growth goals. But don't try to implement PLM all at once. Pick and choose a path to the right value for your business, lay the right organizational and technical foundation, and then continue to build on the foundation." Brown also suggests that consumer goods firms that have not explored global design networks should evaluate the benefits seriously. "Remember, product innovation is a 'team sport'. Look for ways to share knowledge, information and workflows within and outside the enterprise to leverage innovation on a global basis.