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Manufacturers, follow these three phases of innovation

May 10, 2022

Successful innovation in manufacturing is rarely the result of accidental discoveries. Instead, companies that are known as innovators set themselves apart with dedicated processes.

These processes enlist the support of corporate leaders for new product and service development. They seek ideas from all company functions, not just R&D, and identify and experiment with the most promising ideas. And they assess and learn from both ideas that succeed and those that fail — early in the process.

Innovative companies are ones that build cross-functional support for projects, including appropriate resources and talent. They eliminate waste throughout R&D (design, technology development, tooling, prototypes, testing, manufacturing ramp-up, product launch). Most of all, they study customers and how they use the company’s products and services — and those of their competitors.

The three phases of developing an innovation system

The Wipfli Resilient Manufacturers Study identified three critical phases that enable a manufacturing business to develop a system for innovation.

1. Strategy and goals

A manufacturing innovation strategy defines why innovation is necessary for a company’s future, what’s required and how the strategy’s success will be measured (e.g., key performance indicators).

Some 39% of manufacturers have dedicated innovation strategies and goals that are aligned with other strategies; another 42% address innovation via other company strategies. Unfortunately, this leaves 19% of manufacturers without any innovation strategies at all.

The absence of a dedicated innovation strategy creates confusion in the R&D process, leading to product development backlogs, abandoned projects, late launches and lagging sales and profits. Approximately 43% of executives described their companies as innovation leaders; among this group, 48% have a dedicated innovation strategy.

2. Ideation

Many ideation best practices aren’t regularly used by most manufacturers. The most common ways to generate new product and/or service ideas are:

  • Collaboration with customers (frequently used by 66% of manufacturers).
  • Brainstorming (frequently used by 62%).
  • Analysis of product data (frequently used by 61%).

Under-used ideation practices included idea-suggestion systems (64% occasionally or not used), customer focus groups (60% occasionally or not) and customer satisfaction surveys (53% occasionally used or not).

Innovation leaders are far more likely to use many of the ideation practices included in the Wipfli study. For example, 74% frequently use analysis of product data (e.g., warranties, recalls) versus just 52% other manufacturers.

3. Execution

Lean thinking can dramatically impact the performance of R&D/product development processes — especially speed, efficiency and quality. As ideas move from abstract concepts to fully launched products, they pass through multiple complex steps. Well-timed handoffs are required to avoid delays and rework (e.g., when a downstream process begins prematurely).

An effective way to coordinate product-development work is the lean concept of one-piece flow — in which product development is scheduled for design, then moves in one piece through downstream stages (e.g., tooling, prototype, test). Lean principles and tools to support one-piece flow include kanban systems, visual management of resources and work, takt time and standardized work.

A quarter of manufacturers use one-piece flow for all their product development work, and another 49% use it for some. Roughly 13% schedule work independently at each stage, which can result in misalignment (overburdening some engineers while delaying others), and another 13% look to leaders for prioritization or rely on ad hoc scheduling.

Launching new products with speed

Adoption and adherence to innovation strategies, ideation techniques and execution best practices allow companies to efficiently launch new products. Yet a third of manufacturers require at least a year to get new products and services to customers; only 28% can launch in less than six months.

This is a problem because speed to market impacts sales: Half of manufacturers generate more than 20% of annual sales from products and services released in the past 12 months. Two-thirds of innovation leaders generate more than 20% of sales from new products versus just 34% of other manufacturers.

Innovation type also impacts sales and profits. Companies’ current product and service portfolios consist of:

  • Incremental developments (34.7% average)
  • Next-generation developments (22.6% average)
  • New-to-the-company developments (21.5% average)
  • New-to-markets developments (21.2% average)

New products create new revenue and profit streams; new-to-markets products can deliver lasting competitive advantage. Wipfli’s study found that manufacturing innovation leaders’ portfolios consist of 46.5% (average) new-to-the-company and new-to-markets developments versus just 39.8% (average) of other manufacturers portfolios.

Improving innovation

All companies can improve their innovation processes — even innovation leaders. But if your company is struggling with failed projects or trying to replicate competitors’ offerings, there’s no time to waste:

  1. Benchmark your company’s innovation capabilities: Quantify and analyze innovation performances — revenues and profits from new products, time to market, patents, brand awareness, customer retention, etc. How do these performances compare to others in your industry?
  2. Close innovation gaps: Explore principles and techniques to improve R&D. Consider lean innovation concepts and other best practices to optimize R&D/product development processes. Establish aggressive but realistic goals given your current innovation talent and skills.
  3. Get help: If your company doesn’t have a regular influx of new talent bringing new ideas — for processes, products, and services — then look to external experts, like Wipfli, to interject a fresh perspective and guide your innovation efforts.

Wipfli can help your business become more innovative

At Wipfli, our manufacturing and technology specialists understand the many factors that drive innovation and have a full suite of capabilities to help you assess, understand and prioritize opportunities to become more innovative. Learn how you can become an innovation leader and increase your margins and competitive advantage.

Explore our Resilient Manufacturers Study to learn more about what else manufacturers are doing around innovation, automation, growth and resilience. The study reports on a range of manufacturing trends and concerns — from how long it takes manufacturers to get new products and services to customers, to annual turnover rates for managers and frontline employees, to the number of data breaches manufacturers are experiencing per year. Download your copy today.

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Bill Boucher, CPA
Manufacturing, Retail & Distribution Practice Leader, Southeast Regional Leader, Partner
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