Industrial Companies Not Innovating Enough

Industrial companies are struggling to produce innovative products at a time when it's most needed in support of the troubled U.S. economy.

According to a survey of 600 executives in manufacturing and other industries that is part of a new report on the state of innovation produced by Accenture and The Manufacturing Institute, there is a gap between companies' innovation commitment and their ability to execute it. More than half (53%) surveyed felt their commitment was stronger than peers. But, nearly half (41%) also viewed their execution as weaker, and over one-third (36%), their innovation pace slower.

Moreover, the survey commissioned by Accenture in late 2007, and conducted by the Economist Intelligence Unit, found that close to half (45%) of respondents said their company tended to pursue line extensions versus new business growth, and 31% thought changing the organizational culture was their greatest innovation-related barrier.

If ever there was a time when industrial companies, one of the key drivers of innovation, should be the best at what they do, it is now. In the current economic climate, companies can no longer afford the luxury of hits and misses in innovation, but rather will need to harness it in more predictable ways to aid company and economic growth.

Our report, nearly a year in the making, suggests that companies must develop more structured processes to help them mature into established high-performance innovators. They also will need to incorporate checkpoints in these processes, giving them the flexibility to stop off-target projects before too much capital, time and resources are invested in them.

There are several stages that industrial companies undergo in their quest to reach innovation maturity. Initially, they experience sporadic innovation as a result of executing few standard processes driven by ideas from only a few experts. As they progress, repeatable, structured processes, incorporating insights and ideas from multiple sources, including market intelligence, their workforce and customers become standard practice. And, once innovation maturity is achieved, companies are able to shape new business models around innovation, produce highly-predictable market-leading products and maximize their return on investment. Innovation becomes part of an organization's fabric and evolves with market needs.

Avoid Innovation Myths

In their quest to achieve innovation maturity, industrial companies should avoid three important myths identified in the report that can hinder their journey. They are:

1. Innovation only applies to technology and products -- In fact, technology is part of innovation, but, so are customer service and consumer experiences. Twenty years ago, consumers might stop in a gas station for "coffee-to-go" that cost 50 cents. Today, some coffee innovators have succeeded at price points 10 times that amount. Just as coffee innovators have elevated the coffee-drinking experience by tapping into consumer wants, it is more important than ever that industrial companies tap into the voice of the customer to elevate the quality and level of innovation in their products.
2. Innovation is a long-term project -- Innovation really is about creating and capturing new kinds of value in whatever way is most relevant to a particular industry over a range of timeframes. In the best sense, it is a steady flow of new releases over time, and not an occasional blockbuster product or service. Industrial companies should view innovation as a portfolio, laying out a set of initiatives to be released over short- and long-term timeframes.
3. Innovation happens by chance -- In fact, innovation is a discipline, not a random chaotic process or black box of creativity. Indeed, creativity is a driving force of innovation that ingeniously responds to gaps in the market or spoken or unspoken customer need. High-performance innovators use it to strengthen processes, repeatability, predictability and better management.

No organization is perfect in withstanding the thinking and influence of these myths. The challenge and opportunity for companies is to identify weak areas, apply structured levers to push the innovation envelope and continually step up innovative performance.

U.S. Manufacturers Offer Ideas

Our report concludes with ideas from U.S. manufacturer participants in a recently-held innovation roundtable. Some of the participants, representing companies that range in size from global concerns to small firms, included Honda Manufacturing of Indiana, The Manitowoc Co., Myron Zucker, Inc., Ingersoll Rand Industrial Technologies, Vermeer Corp., Cummins Inc., J.M. Huber Corp., and Corning Inc.

Some of the key suggestions include:

• Create an Innovation Office -- Establish a function within the company that provides a point of accountability and coordination for growth and innovation execution. According to the survey, more than one-third (37%) of respondents said their company did not have an organizational home to nurture opportunities in new markets.
• Constantly Balance Portfolios -- Develop and refine processes that identify gaps in product portfolios, such as competitive vulnerabilities, both from a product and geographic standpoint, to balance the portfolio mix.
• Conduct a Day-in-the Life Experience -- Spend a day with the customer to gather data and insights that will be invaluable in generating and incorporating the customer's ideas into their products, services and approaches.
• Reward Creativity -- The people companies employ personify the engine of innovation. It is more important than ever that their creativity be reinforced and rewarded. Twenty percent of respondents felt creating the proper incentives to maximize creativity was a key innovation barrier.
• Don't be Afraid to Fail -- Understand that few ideas make it out of the pipeline, and reassure those involved that failure can be part of the process. Twenty-six percent of respondents thought failing to learn from mistakes was a barrier in their company.

Some roundtable participants related experiences reinforcing the fact that sometimes companies not only must innovate to remain a competitor, but to survive. Some of the best innovation has grown out of the basic need to stay in business. Today, the economy is in survival mode. The more industrial companies innovate, the more they will be able to achieve profitable growth and support our fragile economy.

James Robbins is the North American Automotive and Industrial Equipment Industry Lead for Accenture. Accenture helps industrial equipment companies strengthen their capabilities to drive economic profit. For a copy of the report, please contact: [email protected]