Since the Industrial Revolution, economic downturns have been followed by surges of innovation. Lean times call for frugality, which for corporations – especially manufacturers – means cutting costs and striving to operate more efficiently. These measures tend to lead to growth fuelled by innovation .
The current economic recovery, fragile though it is, promises to produce an even greater surge of innovation as the pace of technological change accelerates and different technologies are combined more frequently in novel ways. In manufacturing, for example, advances in materials science and electronics have combined to create nanotechnology: the manipulation of matter on the billionth-of-a-meter scale.
This year’s survey found that 72 percent of respondents worldwide believe the “next wave of transformational innovation” in manufacturing is either under way or will begin in 12 to 24 months. And when asked about their expectations for activity levels in different types of innovation, a majority said they expect either an increase or a significant increase in 12 to 24 months.
As expected, the most popular categories were incremental innovation (ie, the expansion or enhancement of existing product lines) and process innovation – both of which are believed to be lower-cost and lower-risk activities than other types of innovation. In each of these categories, more than 70 percent of respondents said they expect to see an increase or a significant increase in activity. However, there was also a strong appetite shown for radical innovation (ie, the development of new product lines), for which the equivalent figure was 59 percent; and even for fundamental research (ie, research with no immediate practical or commercial application but that may yield opportunities in the long term), at 54 percent.
Global manufacturers focus on advanced solutions
This strong commitment to long-term innovation will be vital to global manufacturers going forward, as the cost of manufacturing technology continues to fall and barriers to entry are lowered for smaller players. Component manufacturers, for example, are increasingly seeing their business eroded by 3D printing – a relatively new but rapidly developing technique for manufacturing physical objects from digital design files. A 3D printer composes physical objects by building them up in layers, usually from rapidly setting polymers. It therefore offers a low-cost way to recreate simple products, such as components, in small batches without the need for expensive production lines. One can now buy a 3D printer for a little more than 1 percent of its costs against seven years ago.
To differentiate themselves against new market entrants, global manufacturers may need to provide more advanced solutions. Of course, the more sophisticated the offering, the more closely manufacturers will need to work with their customers, to fully understand their needs and support them as they take advantage of more powerful, but more complex, systems. As we’ll explore later in the report, this is not only leading to greater collaboration from an innovation perspective but to the shifting of manufacturing business models to include more value-added services.
Collaboration becomes crucial
Another key finding of this year’s survey was that collaboration is becoming more important to global manufacturers where innovation is concerned. A majority of respondents plan greater or much greater collaboration on a 12 to 24 month horizon with partner companies, key customers, and suppliers.
In the developed world, leading companies have long recognized that collaboration on certain types of innovation can reduce costs, spread risk and get products to market faster than would otherwise be possible. Such practices date from the 1960s but arguably entered the mainstream in 2003, with the publication of Open Innovation: The new imperative for creating and profiting from technology, by Henry Chesbrough, a professor at the University of California, Berkeley. One of Professor Chesbrough’s key points was that it was no longer possible or desirable for the R&D department of a single firm to attempt to monopolize the knowledge, expertise, and IP of its industry. Rather, he suggested, innovations should be allowed to flow in and out of organizations to where they can be best handled at each stage of their development.
Collaboration on R&D calls into question whether companies are looking to own IP or simply access or exploit it. When asked whether respondents agreed with the following statement: “It is more important to be able to extract value from IP than to own it,” responses varied by region.
Only 16 percent of North American respondents either agreed or strongly agreed with the statement, compared with 36 percent and 55 percent of respondents from Europe and Asia-Pacific, respectively. Nevertheless, most survey respondents recognize the benefit of working more closely with key suppliers and key customers. Sixty percent of respondents predict greater or much greater collaboration with these two groups.