Right now, most manufacturers are focused on growth and, in particular, capturing new markets at home and abroad. Yet with supply and labor costs both on the rise, the need for firms to drive profitability at every point of the value chain is just as important as their expansion plans.
This is especially true of innovation, where the cost of products that fail to get to market or that become clogged up in the prototyping process for years on end can have a damaging effect on an organization’s bottom line.
Avoiding these profitability traps starts with treating innovation not as the hunt for a silver bullet solution but as a series of steps built around the ultimate goal of commercialization. [RGP1] Indeed, firms that take this iterative approach invariably outperform competitors when it comes to their ability to design, develop, and launch new products quickly, cost-effectively, and with scale.
Changing the game
Yet even for those currently getting it right, there can be no standing still. In the last few years, rapid technological advances have changed the innovation game yet again. In the words of John Nottingham, co-CEO of business innovation and product design company Nottingham Spirk, “Successful commercialization has long been based on eliminating silos and driving integration. But what we have seen recently is that vertical integration must now include digital capabilities.”
By digital capabilities, Nottingham is referring especially to product connectivity via the Internet of Things (IoT), and as he admits, the irony for his own company was that having focused so rigorously on weeding out silos from their innovation process, they were still treating this as a bolt-on feature at the end rather than a truly embedded element throughout.
The solution is to treat product and digital as synonymous. Or put another way, manufacturers should approach design and development together rather than as separate functions.
The potential impact of this new approach shouldn’t be underestimated. As James Ray, Nottingham Spirk’s Vice President of IoT Development, explains, “Integrating digital capabilities into the product innovation model is actually changing the model itself. The connectivity discussion moves from being a piece in the puzzle to being embedded in the whole process from end to end.”
Ray also identifies three key areas of a manufacturer’s business where positioning digital capabilities at the heart of their integrated innovation stack makes the greatest difference.
The first is on culture. Adopting a mindset that truly enables experimentation without fear of failure gives firms a broader view of the innovation process — one that considers not just how a product is used but how it’s experienced throughout its entire lifecycle. From there, it’s far easier to take something like the IoT and actually integrate it. Initiatives like monthly meetings with all employees, lunch-and-learn sessions, and having the right physical space to foster integration help cement a culture where everyone feels an active part of the process.
The second is around peer-to-peer education. Working alongside a range of digital [RGP2] professionals who bring different knowledge and skills to the table helps colleagues approach their own work differently, leading to new ideas and expanded capabilities. This ability to “learn and teach” is invaluable.
The final impact is on outcomes. Bringing in digital [RGP3] experience from the get-go helps manufacturers identify and overcome different sorts of design challenges before they become a major problem further down the line. It can also unlock unexpected adjacencies, synergies and breakthrough ideas, with the technology deployed in, for example, a medical device also proving valuable in the development of an aerospace product.
A different conversation
The other key knock-on effect of integrating digital capabilities across the innovation model is that it shifts the conversation from being centered around the product to being centered around the customer. Imagine a firm designing a new connected home appliance. By thinking about digital connectivity from the outset, it’s possible to make sure [RGP4] the appliance drives a different kind of customer experience from beginning to end.
The look and feel, for example: The use of a scannable QR code to guide installation and link users straight to the registration site. Features that make service and repair easier.
If manufacturers think about these kinds of things up front, they can be more creative in the design phase and faster to market through development. It can even help make sure they launch the product at the most competitive possible price point.
What’s more, these benefits are only going to increase. As technology continues to advance, the capabilities of the IoT will keep extending too, stretching far beyond simply the connected enterprise. Manufacturers increasingly recognize that the most successful path to growth is built on commercialized innovation. But to truly accelerate along that journey, they must be willing to evolve along the way. It’s time to embrace a new model for innovation that integrates digital capabilities at every step.
The views expressed by the author are not necessarily those of Ernst & Young LLP or other members of the global EY organization.