Innovate or die: Top tips for product development in modern manufacturing
Phil Lewis, senior director, solution consulting for Infor, Europe, looks at how process industries can meet challenges associated with modern manufacturing
Even the best innovators have notorious flops. Some companies can overcome blunders because their sheer size makes them unstoppable market forces—but for others, even a single mishandled launch can threaten company-wide failure.
The risks are even greater for process manufacturers, who face a choice between innovating and insolvency. They must launch new and iterative products to excite customers and generate new revenue—yet the path to profitable innovation is paved with challenges: tighter launch windows, fickle B2C and B2B customers, volatile market swings, and demands for unique, customised products.
At the same time, product development is fundamentally more difficult in process industries. In many instances, decisions are based on molecular-level evaluations well before any customer has a chance to incorporate a new material into their products. For too many firms in this sector, years of internal research and testing lead to product launches that meet with lukewarm success—and negligible profits. Equally damaging are the great ideas that aren’t pursued, leaving incalculable profits unrealised.
Process manufacturing executives are rethinking how they develop and launch new products, to minimise risks and maximise profits. They start by defining their requirements for new products:
- Excite the market with a game-changing innovation, which usually requires the longest time to market, greatest costs, and greatest risks—but also the largest potential profits.
- Make the market with new products in an existing category. Since these innovations are often requested by customers, there’s a better chance of market acceptance—but the approach still entails considerable risk (and opportunity).
- Move the market via iterations, renovations, and maintenance of existing goods. This approach offers lower risk, but also lower potential profits.
- Catch up to the market by copying what competitors have already launched, competing for a smaller piece of market share. Not a good place to be with regard to risk or profits; savvy leaders avoid this position, if at all possible.
Once a market approach has been identified, process manufacturers must evaluate new products across a range of factors and metrics, including:
- Costs: Ingredients, research and development, production, marketing, and distribution/logistics costs
- Specifications: Customer, industry, government, and local requirements/specifications/compliance
- Capacity: Facilities, equipment, and corporate knowledge
- Performance: Quality, safety, and time to develop and produce
The overwhelming challenge for process manufacturers is that these factors are not fixed in time. Each factor can change as a product is designed and produced, which then impacts all the other factors. For example, an existing blending operation (capacity) may require an upgrade (costs) to accommodate new ingredients, yet doing so may also impact the speed of production (for better or worse) and characteristics of the product itself (quality and regulatory compliance). Savvy executives rely on a “phased” or “staged” approach to development, in which innovations are sequenced with specific “Go” or “No go” decision points.
A staged approach to product development isn’t new, but new information technologies can make these approaches dramatically smarter and faster. Improved data allows process manufacturers to quantify the costs of innovation, assess product performance and market potential, and project the time required for launch, as well as profitability at each stage of development. Executives can be confident in their decisions to proceed—or not—and give their products the best chance for market success.
A common staged approach involves five progressions:
1. Ideation: Will there be demand for the product? Does the company need the product to reenergize a tired portfolio? Will new ingredients transform an existing product? Can we leverage raw materials in new ways?
2. Define the product: Engineers scope product characteristics such as formula, usage, appearance, and properties. Marketers re-assess revenue potential based on the product’s preliminary design.
3. Create a product plan: Engineers now plan production. Do we have the assets to produce (plants, equipment)? Can we source materials? How long will it take to go from development and testing to production and market? How do we package and distribute the product?
4. Prove the product: This stage is highly quantitative, driven by R&D models, prototypes, and trial batches. Early perceptions based on prototypes are gathered from customers, and engineers run experiments to digitally or physically validate their pre-development theories. This testing also refines cost estimates: Can we profitably source, make, and distribute? A “Go” decision triggers a handoff from development to production, and alerts all support functions (procurement, marketing, finance) to prepare for launch.
5. Make and deliver: Production begins with initial batches compared to design specifications for quality, regulatory compliance, etc. Is the product in the plant the same as the one we designed? Can we efficiently make full production runs of high-quality product? Ongoing review of market reaction (do customers like it?) and research into product characteristics under market conditions (does it retain quality and safety characteristics?) drive additional development decisions.
A staged approach to process industry product development improves the likelihood that a sellable, profitable, high-quality product hits the market on time. It allows executives to re-evaluate product concepts as they become more refined, within a context of real-time business conditions. And by incorporating the latest information technologies with integrated stage-gate functionality— to evaluate product parameters, digitally model product features, assess market trends, and analyse emerging ideas—they do so at a pace that today’s markets require. Lastly, it ensures that product development knowledge is captured throughout the process, whether the product is developed or not. The benefits are big for one product—and are dramatic for a company with a portfolio of evolving products.
Gartner: Leaders Lack Skilled Smart Manufacturing Workers
With organisations rapidly adopting industry 4.0 capabilities to increase productivity, efficiency, transparency, and quality as well as reduce cost, manufacturers “are under pressure to bring their workforce into the 21st century,” says Gartner.
While more connected factory workers are leveraging digital tools and data management techniques to improve decision accuracy, increase knowledge and lessen variability, 57% of manufacturing leaders feel that their organisations lack the skilled workers needed to support their smart manufacturing digitalisation plans.
“Our survey revealed that manufacturers are currently going through a difficult phase in their digitisation journey toward smart manufacturing,” said Simon Jacobson, Vice President analyst, Gartner Supply Chain practice.
“They accept that changing from a break-fix mentality and culture to a data-driven workforce is a must. However, intuition, efficiency and engagement cannot be sacrificed. New workers might be tech-savvy but lack access to best practices and know-how — and tenured workers might have the knowledge, but not the digital skills. A truly connected factory worker in a smart manufacturing environment needs both.”
Surveying 439 respondents from North America, Western Europe and APAC, Gartner found that “organisational complexity, integration and process reengineering are the most prevalent challenges for executing smart manufacturing initiatives.” Combined they represent “the largest change management obstacle [for manufacturers],” adds Gartner.
“It’s interesting to see that leadership commitment is frequently cited as not being a challenge. Across all respondents, 83% agree that their leadership understands and accepts the need to invest in smart manufacturing. However, it does not reflect whether or not the majority of leaders understand the magnitude of change in front of them – regarding technology, as well as talent,” added Jacobson.
Technology and People
While the value and opportunities smart manufacturing can provide an organisation is being recognised, introducing technology alone isn’t enough. Gartner emphasises the importance of evolving factory workers alongside the technology, ensuring that they are on board in order for the change to be successful.
“The most immediate action is for organisations to realize that this is more than digitisation. It requires synchronising activities for capability building, capability enablement and empowering people. Taking a ‘how to improve a day in the life’ approach will increase engagement, continuous learning and ultimately foster a pull-based approach that will attract tenured workers. They are the best points of contact to identify the best starting points for automation and the required data and digital tools for better decision-making,” said Jacobson.
Long term, “it is important to establish a data-driven culture in manufacturing operations that is rooted in governance and training - without stifling employee creativity and ingenuity,” concluded Gartner.