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American Manufacturers: It's Time to Innovate or Evaporate
by Robert B. Tucker
A recent issue of Time Magazine contains an article titled
“What Can America Make?” Folks, when general interest
publications like Time start doing articles on the dire state
of American manufacturing, you know this has become a big
issue. The USA lost three million manufacturing jobs in the
last three years, and countless marginal players have ceased
operations. There is, despite an up-tick in factory orders,
still a deep sense of resignation in this sector that asks,
“how can we possibly compete with China when all they
do is produce knockoff products with a wage scale that is
so much lower than ours?”
It’s suddenly an urgent question, and one that has
become Topic A when manufacturers gather. Next week in Miami,
for instance, I’ll address a metals industry conference
whose theme this year is “Saving North American Manufacturing.”
Can it be saved? I think so. Truly it’s time to embrace
innovation in a way that we’ve never embraced it before.
And there are precedents to guide our response.
This isn't the first time
Twenty years ago Japanese manufacturers presented a similar
threat with higher quality products that often sold for less.
Then US business publications screamed cover stories that
asked, “What can America make?” The response was
nothing less than the Quality Revolution in the USA, and manufacturers
embraced Quality Circles, excellence, TQM and other methods,
or they didn’t survive.
This time the world is different, more inner-connected, and
more complex. It’s not “us” versus “them.”
Some of the same firms that howl the loudest about China’s
juggernaut actually have plants in China, and/or import much
of their wares from that country. As an entrepreneurial nation,
we see the progress of individual firms in China, India and
other countries and salute their achievements. After all,
hard work and sacrifice should pay off for anyone with the
smarts to produce what customers want to buy, if only they
will play by the rules and respect patents and intellectual
property rights, etc. Meanwhile, some manufacturers here are
not so easy to admire as they exhibit the attitude that when
the going gets tough, the tough get going -- to the golf course.
Optimism about the state of American manufacturing
Yet just back from travel in industrial America’s heartland,
I’m optimistic about the future of USA manufacturing.
I think we’re beginning to see a response that, while
hardly as widespread as the Quality Revolution of two decades
ago, is nonetheless spirited. “If you can’t manufacture
in the U.S. efficiently and economically, you don’t
know how to manufacture,” says LeRoy Nosbaum, CEO of
$285 million Itron Corp, a Spokane, WA maker of utility meter
readers. But I wonder, how many people in your industry would
be willing to be quoted saying such a thing? Would you?
Companies like Itron are part of the Manufacturing Vanguard.
They are passionately engaged in figuring out how to compete
on their strengths, rather than weaknesses. (I like what Patricia
Panchak, editor-in-chief of Industry Week, says in a recent
column: “Many manufacturers are so worried about competing
on cost, their greatest weakness, that they are failing to
compete on innovation, their greatest strength.”) Vanguard
companies are consistently moving up the value chain and rethinking
their innovation approaches, much like they did their quality
process two decades ago. They are making innovation an embedded,
all-the-time process, and involving everyone in the quest
for better ideas.
In the past 12 months I’ve worked with makers of everything
from garbage trucks to industrial valves, from rubber components
to food and construction equipment, and with industrial process
providers ranging from heat treaters to industrial perforators.
I see that every industry has a few mavericks like Itron that
are out-thinking the competition when others are hunkering
down. Their leaders aren’t content to wring their hands,
or look to Washington for relief. Their mantra is: this may
be the biggest challenge in a generation but let’s roll
up the sleeves and go to work.
Based on my study of 23 Innovation Vanguard companies for
the book Driving Growth Through Innovation, and recent conversations
with manufacturing CEOs, here are four suggestions for kicking
off the Innovation Revolution in your company.
Suggestion #1: Broaden Your Definition of Innovation
You hear a refrain among manufacturers that goes like this:
“I know we’re supposed to come out with whiz bang
new products like they do in other industries, but in the
[insert name of industry here], that’s a tall order.
There’s only so much you can do with a [insert product
category here].” And this usually ends the discussion.
Actually, it should be the beginning of a whole new type
of brainstorm. If you assume innovation is merely a synonym
for new products, think again. What about strategy innovation,
such as entering new markets with your existing products?
What about supply chain innovations? What about value-adding
service enhancements that allow real time responsiveness,
make the customer’s life easier, and otherwise take
on the customer’s problem in ways the competition is
unable or unwilling to do? Such strategy innovations are a
bold new frontier that many firms have never pursued.
If everyone in your industry is pushing the envelope in the
product realm, do what Dell Computer did and innovate in the
strategy realm – by serving customers direct. Or another
example: furniture maker Herman Miller, based in Zeeland,
MI, is bundling more of its products into total solutions
for the end customer, rather than just developing new products.
The combination is harder for competitors to copy. Key: broaden
your definition to include not just products, but services
and service enhancements, processes, technology, and strategy
initiatives that grow top and bottom line revenue.
Suggestion #2: Get Serious About Process Innovation
Process innovation includes TQM, lean manufacturing, ISO,
6 Sigma and dozens of other methods for increasing productivity
and cutting costs. And even though you can’t cost-cut
your way to prosperity, redoubling efforts at process innovation
isn’t today a luxury, it’s a necessity.
Think of productivity growth as an index of process innovation
in your firm. Now ask yourself a tough question: are you satisfied
with the rate of improvement in business practices, space
utilization, manufacturing efficiency? Between 1995 and 2000,
productivity in the manufacturing sector rose by an average
annual rate of 4.3 percent, according to the Department of
Labor, compared with 2.2 percent for the overall non-farm
economy. These improvements are impressive, but they are only
a start. There’s more efficiency and productivity to
be gleaned. Consider: How have you increased productivity
over and above your industry’s average? Successful manufacturing
in the USA will require a relentless focus on process innovation,
but not at the expense of product and strategy innovation.
Suggestion #3: Benchmark Innovative Manufacturers
When was the last time you picked up the phone and invited
yourself to visit a manufacturer that is defying the trends,
and thriving in these times? They are out there, and the time
you spend benchmarking could provide the motivation you need
to come up with your next breakthrough idea. My suggestion:
become active in your trade association and attend conferences
like Industry Week’s Smart Manufacturing 2004 this June,
to gather new ideas and meet progressive manufacturers.
As I’ve often said, there’s no such thing as
a mature market or a commodity product, only tired imaginations.
The greatest asset you bring to your company in times like
these is your ability to inspire fresh thinking experimentation,
and assaulting the “this is the way we’ve always
done it” assumptions. Benchmarking is guaranteed to
enable you to do just that.
Suggestion #4: Unleash the Creativity of Your People
Your skilled workforce is a global competitive advantage
– but only if you see it that way and engage people
creatively. There’s no question that you’re going
to need to produce more and more with fewer and fewer people.
Yet few manufacturers truly tap the mega-asset of people power.
Not so at B. Braun Medical, a $750 million med-equipment
maker in Allentown, PA. Braun went through a massive, comprehensive
automation project to rethink and redesign how it produces
syringes and intravenous clamps. But it used creative suggestions
from workers to reduce error rates to the point that its vastly
superior sterilization process became a competitive advantage
to customers, more important than low priced competitive products.
“The more innovative you are, the higher your pricing
power,” B. Braun Medical CEO Caroll Neubauer told Time.
Appleton Paper, Appleton, WI, goes further. As I describe
in my book, Driving Growth Through Innovation, Appleton involved
all its employees not just for cost-savings ideas, but for
new product and new market ideas. In a recent year, this “all
enterprise approach” generated 700 ideas. “We
already had a suggestion program for cost-saving ideas,”
explains Dennis Hultgren, Appleton’s vice president.
“With GO [Growth Opportunities], we now regularly solicit
ideas from everybody in the company. These people are out
there, they know our technologies, and they are perfectly
capable of thinking up new uses for them. What we’ve
learned is that it’s important to bring everybody in
on it. Everybody wants to contribute if asked, but not everyone
was being asked.”
Conclusion
The recent improvement in factory orders might cause some
to believe that the good old days are returning, and therefore
that taking bold action may not be necessary. That would be
a big mistake. What can USA manufacturers make? Plenty. I’m
convinced that those who are willing to embrace innovation
can make anything and everything now and in the future despite
the uneven playing field. But how they make it will change
dramatically.
Jack Welch, former GE chairman, used to say that if the rate
of change inside your organization was less than the rate
of change outside it, the end was in sight. Even though you’ve
probably got some initiatives going in your company, are they
the right ones? What is one action you will take today to
embrace the Innovation Revolution?
Robert B. Tucker is president of The Innovation Resource,
an innovation consulting firm based in Santa Barbara, Calif.
A frequent keynote speaker at conferences, he is the author
of "Driving Growth Through Innovation: How Leading Firms
Are Transforming Their Futures."
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