What makes it difficult for Small and Medium Manufacturers (SMMs) to innovate? This post explores new product development and introduction (NPDI) opportunities for SMMs and presents a few suggestions about paths to successful implementation.
Listen to New Product Development and Launch Opportunities for Small and Medium Manufacturers [8:31 minutes, 4.4 MBytes, Apple QuickTime / iTunes is required]
According to Bill Canis, "More than 60% of small manufacturers lack a defined new product development and introduction process. In most companies, ownership of innovation is distributed throughout the organization, but in SMMs, this function is typically managed by a single senior executive or business owner."
Canis, the acting President of The Manufacturing Institute, an arm of the National Association of Manufacturers (NAM), was quoted in the 19 December 2007 issue of IndustryWeek.
Why Innovation is Important to SMMs
In 2007, many companies made innovation commitments. The NAM report summarizes why innovation is important to SMMs.
"Improvement and innovation go hand in hand. A commitment to innovation and new ways of doing business—in products, processes, technologies and strategies—frees assets and opens up selling opportunities for SMMs. A focus on innovation will keep your company from becoming a stagnant operator (incapable of improvement) or a commodity player (always under price pressures)."
The Quest to Innovate
While SMM efficiency experts may strive to produce undifferentiated products at incrementally lower and lower costs, innovators tend to focus on the design and development of new, differentiated components.
The quest for innovation has become so important that many large companies have begun to import innovation from their partners. Sometimes such an arrangement is formalized and called co-development.
How can SMMs be both a preferred supplier of commodity items and a source of innovative components and products?
Why Successful NPDI is Difficult for some SMMs
When executives ask their organizations to be more innovative and to produce new products, their organizations may tend to temporize - to yield to the current circumstances. For some, resolving today's problems and attending to daily administrative duties tend to overwhelm innovation initiatives.
Beside competing priorities, company leaders may be unsure of what to do because of the multitude of opinions and choices about how to become more successful. There are many advisers, many templates, and a large variety of tools. In addition, many of the common processes and tools are better suited to development groups of 50 people or more.
Existing NPDI Advantages for SMMs in 2008
Because of a flatter organizational structure, SMMs should be able to implement faster than larger companies. Because of proximity to end customers, SMMs should have the insights to make informed new product decisions. When these advantages are combined, SMMs can have a greater potential be the first to adopt the new technologies that will enable them to produce high value components and products.
SMMs already embrace some concepts familiar to NPDI specialists. For example, items 1-3 of "The 15 Best Practices of Today’s SMMs" summary contained in the The Future Success of Small and Medium Manufacturers: Challenges and Policy Issues publication relate to voice-of-the-customer (VOC), product differentiation, and benefits derived from a defined new product development process.
An NPDI Implementation Plan
Here is a portion of a general plan for the transformation of a SMM that produces undifferentiated components to an organization that is also a NPDI innovator:
- Senior management makes the commitment to NPDI and dedicates resources to architect the transformation. Success requires more than a cursory effort. Typically, when internal resources are assigned to such a task, they will not be successful if they can allocate only 10 percent of their time to innovation while maintaining their other daily responsibilities.
- Initially, the innovation leaders receive an appropriate budget to enlist the help of external specialists. In the second and third years, the innovation budget grows appropriately.
- Middle management communicates that they endorse the participation of employees in the NPDI activities. Individual employees are rewarded (not penalized) for participation. The metrics used for employee reviews are modified. For example, a monthly quota may need to be relaxed to accommodate an NPDI effort.
- The innovation leaders are given the authority to recruit other employees to be dedicated to cross- functional, NPDI teams.
- The organizational culture evolves to embrace NPDI efforts that include new risks and new uncertainties.
The transformation will require additional organizational capabilities. The organization has to gain expertise in making decisions about which new product opportunities to pursue (which is also known as the front end of development), building a product development network, and implementing launch and commercialization decisions. Typically, a list of new contributors will include:
- Domain experts that can predict specific industry trends
- Communication specialists
- Regulatory compliance experts
- Knowledge workers that can adapt to changes
- Supply chain experts
- Collaboration facilitators
- Product development and introduction (commercialization) specialists
These resources do not all have to be employees. Dynamic, virtual networks can be very efficient. It is more important to select the appropriate resources and maximize collaboration to plan and implement new product development innovation.
What suggestions do you have for SMMs to actualize an NPDI process?