A few weeks a go I wrote a blog about why innovation must be part of the Route to Growth. In this blog I will to cover the same themes, with examples from manufacturers
A key growth opportunity for manufacturers is selling new products and services into new markets. What does that mean in practice?
I recently spoke to one machinery manufacturer with ambitious growth plans: they want to double in size over the next three years. Innovation is central to these plans. They have new product launches – this year and next – which they expect to drive this growth.
And where will they sell these products? For this company, their main growth opportunities are in South East Asia. But their competitor has a large footprint in this market. So the company has to innovate to ensure there is sufficient technical differentiation between them so they do not have to compete on price.
Another company I spoke to said that if they looked at their sales history sales growth is very much driven by new products, especially in markets like the US where customers are keen to buy into innovative new products.
Most manufacturers are engaged in innovation – and this is far broader than product innovation – what other innovations are UK manufacturers involved in?
Process innovation is of particular importance to UK manufacturers, many of whom compete on the ability to deliver high quality goods in short timescales. One company I spoke to talked of the importance of streamlining production processes to reduce lead times, and provide a quicker turnaround for the customer. Another said that streamlining processes had driven substantial improvements in productivity and the number of products they got ‘right first time'.
A process engineering company I spoke to told me that for their company service innovation was key to being competitive. They pride themselves in a flexible approach and supply bespoke solutions, through consultation with their customers. This means their prices are often higher than those of competitors, but the highly-customised machinery and processes they provide can result in significant long-term savings for their customers.
Another company I spoke to said that people management innovation had been crucial to their precision engineering company during the recession. It had enabled them to hold onto employees and had made the business more responsive to changes in demand.
Although manufacturers are engaged in innovation, it can be difficult and risky. Some key problems include access to skills, facilities and finance
One medium-sized company I spoke to said that a key issue for them was a lack of access to technical skills, particularly because the company is trying to grow. In particular they have issues accessing production engineers and people with specific sectoral knowledge combined with the ability to think creatively.
Another company – with 40% of their workforce engaged in R&D – said that skills were a long-term issue, and not just for innovation. Although they had enough skilled people for the time being, most of their workforce was quite old and they were concerned about the number of young people entering the industry.
Access to commercial research facilities was a problem for an SME manufacturer I spoke to, though the Catapult centres might provide a solution to this, but the company has some concerns about the protection of their Intellectual Property and business know-how.
Manufacturers are taking steps to overcome the challenges they face.
For example, the process engineering company I spoke to told me they had invested heavily in skills and ongoing development of their employees.
One company that makes healthcare products said that they regularly work with universities and they see this as an important way to get “more bang for their buck” when it comes to R&D, something which is crucial to them, as they are a smaller player than their main competitors. However, they said they would like better links with universities but feel that universities need to do more applied research and need to be better linked in to companies.
Another company I spoke to said they had ongoing engagement with universities which they saw as important for informal networking; staying up to date with technology developments; and building links with skilled researchers.
I will blog further on manufacturers' experience of policy at a later date.