Crafting a New Agenda for Product Innovation
Manufacturing executives spanning every industry in our manufacturing study view product innovation as a primary engine of growth and customer retention. On average, executives expect the share of revenues attributed to new products and product enhancement to increase by 50 percent over the next three years.
Prowess in science and engineering no longer guarantee new product success, however. Manufacturers recognize that they must offer products and services that provide solutions for their customers. Market leaders will go beyond developing new products for their target markets; they will aggressively work toward creating niche opportunities and value-added services. To combat ever-shrinking product life cycles, many companies are trying to "pull" ideas from their customers rather than merely "push" products into the market. Refer to figure 3 for an overview of the changing strategic directions related to product development.
To meet the varied and complex demands of customers worldwide, leading manufacturers are reinventing their new product development (NPD) strategies to utilize new technologies and increase coordination between R&D, manufacturing and marketing. Market leaders are going beyond employing traditional practices, such as computer-aided design/manufacturing (CAD/CAM), to activities that leverage the entire enterprise. Refer to figure 4 for an overview of the key activities being undertaken by market leaders.
While manufacturers outside North America will aggressively re-engineer their NPD processes in the next three years, North American manufacturers will emphasize information systems and electronic links to enhance coordination and speed the development process. Information technology is a key enabler to breaking down the functional "silos" within organizations and for integrating customer perceived value into products.
Resolving the "Customer Paradox"
The Vision in Manufacturing study uncovers what appears to be a paradox in manufacturing: the emphasis on quality is going up and customer satisfaction is going down. Manufacturers that are moving toward a customer-centric organization—those focused on customers— are most likely to resolve the paradox. They recognize that superior quality is the "ante" to compete. As a result, they are focused on becoming their customers' preferred strategic partners. Market leaders are identifying and anticipating customer needs, as well as offering consistently higher value-added products and services. Whether next door or across the globe, leading manufacturers are reorienting their game plans around satisfying customers. Refer to figure 5 for an overview of the key areas market leaders will focus on in order to win orders.
Differentiation in the era of the virtual customer will require superior marketing and customer service. Most manufacturers do not yet possess these capabilities. The study reveals that most continue to focus on product quality and neglect integrating manufacturing with marketing and sales. While manufacturers say they recognize the importance of superior service, they have not kept pace with rising customer expectations and tight delivery deadlines dictated by complex manufacturing systems. Manufacturers that placed a high priority on incorporating value-added services into their product portfolios in the manufacturing study are currently performing better in these areas.
Gaining customer loyalty is as important as "getting the order." Although market leaders have the advantage of greater brand awareness, established customer relationships and broad product lines, they suffer from weakness in superior market and customer research as depicted in figure 6.
In fact, not even one quarter of all manufacturers currently have world-class capabilities in this area. This strategic weakness may act as a hurdle for manufacturers as they attempt to identify customer needs and penetrate new markets around the globe.
To create a customer-centric organization, process reengineering is on top of the agenda for many manufacturers, but not for market leaders or manufacturers in North America. Instead, they are leveraging information technologies such as data warehousing, customer-integrated data, and electronic commerce to improve marketing, sales, and service. They are using these tools to capture and integrate critical customer information across functions and geographies. This enables market leaders to cross-sell and up-sell products more effectively, to cultivate closer customer relationships and, ultimately, to "lock in" customers. Market leaders are creating repositories of purchase information in data warehouses
that will significantly increase their ability to meet customer requirements anywhere and at any time. Technology also offers speed and flexibility—often crucial determinants of a company's ability to respond to changing market forces and customer demands.