The average lifespan of a company on the S&P 500 has fallen to 20 years from more than 60 years in 1960. The power and influence of technology will increase as much in the next 18 months as it has in the last 30 years. Clearly, technology cycles, and the pace of technology adoption, has begun to outpace business planning cycles.
Manufacturers must now manage for disruption, not stability.
Embracing change is the new norm in terms of maintaining competitive advantage. Change may come from many directions. Innovations in advanced manufacturing technologies are breaking the traditional paradigms of assembly and “subtractive” manufacturing. New ultra-powerful, ultralight and ultra-conductive materials can now be manufactured at scale. Embedded artificial intelligence will let collaborative business ecosystems connect, learn and improve, creating the potential for outcomes we can’t yet predict.
These “disruptive innovations” are significantly more challenging than the traditional innovation model. Disruptive innovation is different from “sustained innovation.” Sustained innovation includes regular feature/function updates. Disruptive innovation creates a new market and value network and eventually disrupts a market and value network. It displaces market leaders and alliances.
One way to handle all the change is to embrace open innovation. Traditionally, innovation processes have been organized around internal R&D, to develop products and services from raw ideas, with the occasional “open door” to pull in ideas from outside. As companies devote a larger percentage of their efforts and investments to ecosystem and platform-oriented business models, these ideation and innovation processes must change to support and foster intra-ecosystem innovation. Many of the best known megabrands have created accelerator programs to encourage young, start-up businesses to build ecosystems around their products.
Within traditional “factory walls,” we can improve our organizational agility by networking the enterprise. Better informational connectivity can be achieved via open office plans, best practice programs that bring people together from diverse parts of the company, and encouraging people to work in varied geographical and functional positions. At its core, disruption is an informational problem more than anything else. The answer is to create a network that is both cohesive and expansive. The digitization of modern manufacturing is an essential “backbone” for information-based collaboration and innovation.
We must all understand how technology is changing manufacturing—and use technologies to gain business advantage. We must build new business models and offerings that use technology to match the ways in which our customers are changing.
Human-capital bandwidth is perhaps the most significant problem manufacturers face today.
With disruptive innovation, how can any manufacturer maintain and evolve current product and invest sufficient time on the next generation of products? Think about an automotive OEM considering switching to mixed-material, lightweight structures from steel bodied vehicles. That would impact the skills of the manufacturing engineers and the extended workforce, introduce new joining methods and new logistics models, and substantial, capital-intensive changes to manufacturing tools and facilities.
It’s unlikely any business can sustain the incremental resource cost to manage both old and new technologies during the transition period. Instead, manufacturers must decide what is really “core” and what is not. They cannot afford to be possessive about today’s product, or even today’s intellectual property. The answer will be uncomfortable for many. But it’s an answer that’s relatively straightforward: Manufacturers must partner with suitable external manufacturing sources and engineering services partners to release critical internal resources to develop the products that will ultimately sustain the future of their businesses.
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