For manufacturers, innovation is crucial. Innovation drives sales, productivity, process performance, new product introductions—and ultimately, job growth and profitability. But innovation in the manufacturing industry isn’t easy. It takes time, resources, and skills, and can’t always be driven along predictable paths.
So for those interested in innovation, the annual Innovation Monitor survey from The Manufacturers' Organisation EEF has become compulsive reading. This year more than usual, perhaps, given its focus on the outcomes from innovation in manufacturing, and on which factors make the difference between success and failure.
The bottom line: while the manufacturing industry remains a highly innovative sector of the economy, innovation is hampered by a number of challenges—some obvious, others less so.
Let’s take a look.
Innovation in manufacturing has a definite ROI
94% of manufacturers engage in innovation. Two-thirds of those manufacturers engage in product innovation, with the remainder engaging in the innovation of processes and services, or their distribution channels.
Why do these manufacturers innovate? Satisfying existing customers remains the main reason for innovation in manufacturing, with 69% of manufacturers citing this as a driver. The next two most important reasons are to enhance margins, and seek to export markets.
And the key point is this: while innovation in the manufacturing industry has various objectives, in large part this investment in innovation does deliver on those objectives—especially in terms of productivity growth, margin enhancement, and export markets.
My view: innovation in manufacturing works—but are manufacturers innovating enough?
Innovation in manufacturing remains a challenge
Perhaps not. For innovation in manufacturing is undoubtedly resource-intensive. Not just in terms of the specific skills that it calls for, but also in terms of the employees, equipment, and finance that it pulls in from the rest of the business.
Put another way, much innovation in manufacturing is ‘homebrew’ innovation, typically using equipment normally used for production purposes (79%), employees whose normal roles are not defined as R&D (73%), and manufacturers’ own internal finance (86%).
Top of the shopping list in terms of what manufacturers say that they would like to have—but can’t—are such things as access to external expertise, employees whose prime role is either solely or largely R&D, and equipment that has been purchased solely for use in R&D.
My view: are too many manufacturers trying to do innovation ‘on the cheap’?
Innovation in manufacturing is a race
Given these resource constraints, many manufacturers were worried about an ‘innovation gap’.
Compared to previous surveys, more manufacturers than ever were worried about not keeping up with their competitors when it comes to innovation. And typically, it is smaller and medium-sized manufacturers who express this fear most.
That said, a growing number of manufacturers were accessing government-backed ‘self-help’ schemes design to plug this gap: Knowledge Transfer Partnerships, the R&D tax credit, industry- or technology-specific ‘catapult’ centres, and various collaborative innovation schemes.
Most manufacturers who have used such government-backed schemes reported that these did at least partly help to overcome the barriers to innovation that they face—especially in terms of skills, or access to specialist equipment and knowledge.
My view: free handouts—especially of cash—are a pipedream. But practical help is another thing. And it seems that more manufacturers than ever are taking advantage of such help.
The bottom line
Innovation isn’t easy, and it will place a strain on the business.
But it does often deliver on its goals, especially when carried out to boost productivity, better serve existing customers, or drive export growth.
Help is available. But are enough manufacturers taking advantage of it?