From MAGNET: New Research Supports toe Positive Effect of Co-locating Production and Innovation

This post originally appeared on MAGNET’s  Manufacturing Success blog and is reposted with permission.

New Research Supports the Positive Effect of Co-locating Production and Innovation

A Preview of the MIT Production in the Innovation Economy Report, released February 22, 2013

The preliminary results of a new research report on innovation in manufacturing caught our eye here at MAGNET recently.

In 2010, MIT’s President, Susan Hockfield, launched the MIT Production in the Innovation Economy (PiE) research group  to answer the question: “What kinds of production do we need–and where do production facilities need to be located–to sustain an innovative economy?”

The PiE group also worked to answer these questions:

“How do production capabilities here and abroad contribute to sustaining innovation and realizing its benefits within our own society?”

“How did this new global economy of fragmented research, development, production and distribution come into being? And what does this mean for the future of the U.S. economy?”

The group analyzed these questions in relationship to large U.S. corporations, start-ups companies that had achieved commercialization, and small- and mid-sized U.S. manufacturers (referred to as “Main Street Manufacturers”).

In late February, the group released its thought-provoking preliminary report (the final report will be published in the fall).

The report’s conclusion:

“What’s held manufacturing in the United States…was the advantage firms gain from proximity to innovation and proximity to users. Even in a world linked by big data and instant messaging, the gains from co-location have not disappeared.”

Since the U.S. share of the world market has declined from 34 percent in 1998 to 28 percent in 2010, the PiE group identifies a key danger point to be the declining weight of the U.S. in the global economy, even though the output of U.S. high-tech manufacturing is still the largest in the world.

The group also reports it’s fear that “the loss of companies that can make things will end up in the loss of research that can invent them.”

The group’s research revolved around interviews with 255 manufacturing firms around the world. Besides interviewing companies in Germany, China, Japan and other countries, the group interviewed 178 U.S. firms–37 in Ohio alone, the largest number in any single state.

Based on these interviews the PiE group suggests that small- and mid-size manufacturers in the U.S. depend almost entirely on their own internal resources for growth. It concluded that the innovations of “main street” manufacturers in the U.S. did not lead to greater profits or faster growth. This partly due to the absence of what the PiE group called   “complementary capabilities” that companies can draw on to supplement their own resources when they seek to develop their new ideas.

Comparing U.S. manufacturers to those based in Germany, they found that:

“German manufacturers do not create new businesses through start-ups (the U.S. model), but through transformation of old capabilities. German manufacturers had not only their own legacy resources, but also access to a rich and diverse set of complementary capabilities in the industrial ecosystem: suppliers, trade associations, industrial collective research consortia, industrial research centers, Fraunhofer Institutes, university-industry collaboratives, and technical advisory committees.”

However, the group did find some U.S. examples of the kind of collaboration that might lead manufacturers to profit more from their innovation efforts. Two of these examples were in Ohio:

  • The Timken Company’s collaboration with the University of Akron on a coatings laboratory is cited as a positive model for public/private sharing of research and innovation resources.
  • The report also mentions the recently established National Additive Manufacturing Innovation Institute (NAMII) in Youngstown as an encouraging example of risk-reduction and risk-pooling.

In it’s conclusion, the report suggests:

“If we can learn from these ongoing experiments in linking innovation to production, new streams of growth can flow out of industrial America.”

From MAGNET’s perspective, the PiE group’s conclusions about the need for complementary capabilities seem to confirm the propositions underlying our Partnership for Regional Innovation Services to Manufacturers (PRISM.  The innovative, growth-oriented companies that participate in PRISM benefit from MAGNET’s formal and informal connections to universities, research centers, government resources, workforce and talent development services and many other resources around the region.

If your company is interested in getting more out of its innovation investment, find out more about PRISM by contacting Linda Barita at 216.391.7766. Or visit the PRISM landing page on MAGNET’s website.

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From MAGNET: Market Diversification

Each month we’ll be featuring a blog post from our friends at MAGNET (Manufacturing Advocacy & Growth Network). MAGNET’s mission is to support, educate and champion manufacturing in Ohio with the goal of transforming the region’s economy into a powerful, global player. You can visit MAGNET online at manufacturingsuccess.org.

This post originally appeared on MAGNET’s  Manufacturing Success blog and is reposted with permission.

Market Diversification: What Value Do You Bring? Part 1

Ken Walker, Senior Business Consultant, Program Administrator for Market Diversification

By Ken Walker, Senior Business Consultant, MAGNET

You’ve made “The Decision.”

No, I’m not talking about LeBron leaving Cleveland—I’m talking about the decision to move your company’s products and services into a new market.

Maybe it’s an allied market that uses the same type of products you produce.  Or maybe you’re selling the exact same product but to a different kind of customer, for example consumer instead of industrial.

You’ve decided that, for the strategic growth of your company, you are willing to make the investment necessary. You’ve researched this new market’s key customers and key competitors.  Your organization is primed, ready and willing to conquer this new territory.

However, before you go charging off, make sure the “new land” is receptive to your invading horde. In other words, in this new market, is anyone willing to buy what you are selling?

Consider: Why Might Customers Choose to Change?

When you decide to enter a new market, unless its an emerging technology market, it is very unlikely that you are the only supplier to the market. In most instances, existing suppliers will have been established for years. Even in markets where the barriers of entry are relatively low, it’s not easy to get customers to change without a compelling reason.

Here are some important reasons why a customer might be willing to change or add to their supplier base:

Not enough suppliers: Some industries have trouble maintaining a vibrant supply chain. The aerospace industry is an example of this, particularly if they are bringing to market a new plane. If you can meet standards or requirements, like AS9100 certification, a me-too product just might be successful.

Dissatisfaction with current supplier: Poor quality. Overpricing. Late deliveries. Poor service. These missteps can sink a supplier with any customer. For example, Motorola created the cell-phone market. But its lack of vision allowed new entrants to invade this exploding market space. The result: Motorola was marginalized in the market it created. Opportunities such as these can be exploited, allowing your company to be successful with a me-too product.

Supplier diversification: Sometimes customers just want to diversify their supply chain. If a customer is not comfortable having just one or two suppliers for a key component, they may be willing to slice up the pie and let you in.

Price: Customers are always looking for lower prices—and high value.  If you are willing to compete on price, you may be able to buy market entry in some cases—until someone else is willing to undercut you.  And there is always someone else.

Better value: In the end, customers are going to buy your products and services for the value they perceive. In most cases, believe it or not, this value goes beyond price. Yes, you have to be competitive, but if a lower price is all you have to bring, you won’t be at the table long. Someone will undercut you. Or you’ll find out that, in the long run, this market just isn’t worth your effort.

Define Your Company’s Value Proposition

So how do you define your value proposition for a new market or customer?

First, understand your own company’s core competencies. Understand what it is you do better than anyone else in your current industry.

Are you the low-cost manufacturer of widgets?  Do you provide just-in-time service?  Are you the technology leader?  Does your product provide better performance?  Lower cost of ownership? Easier to maintain?

Talk to a number of people in your organization to gain consensus on this important point.  You’ll find different departments may have different perceptions on the reason for your success in your current marketplace.

Once you really understand your company’s key value proposition attribute, translate it into why customers currently buy from you, why customers keep buying from you and why new customers would want to buy from you.

Here are some examples of major corporations, core competencies and how they translated them into value propositions:

Sherwin-Williams

  • Core Competency:  Manufacturer and Distributor of coatings and related products
  • Value Proposition:  Equipment, supplies and solutions to get the job done.

American Greetings

  • Core Competency:  Creating expressive ideas in words and images
  • Value Proposition:  Enhancing consumers relationships through social expression

3M

  • Core Competency:  Applying technology to real world customer needs
  • Value Proposition:  Harnessing Innovation for your benefit

So what is your company’s core competency?   What’s your value proposition?

Once you know and understand these critical attributes, it’s time to effectively communicate them to the new market and go after those new customers.

We’ll cover that in Part 2.

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From MAGNET: Determined Innovators Face Risk to Reap Rewards

Each month we’ll be featuring a blog post from our friends at MAGNET (Manufacturing Advocacy & Growth Network). MAGNET’s mission is to support, educate and champion manufacturing in Ohio with the goal of transforming the region’s economy into a powerful, global player. You can visit MAGNET online at manufacturingsuccess.org.

This post originally appeared on MAGNET’s  Manufacturing Success blog and is reposted with permission.

Determined Innovators Face Risk to Reap Rewards

Everyone wants an advantage.

Relative to their competitors, all businesses want to be seen by customers as the go-to provider.

My favorite race car driver, and boyhood hero, the late Mark Donohue was labeled as always having an “Unfair Advantage” by his competitors. However, if you read Donohue’s autobiography, it becomes clear that he was a member of a very innovative Penske team. They were always conceiving ways to go faster, testing them on the track and at times stretching the boundaries of the rule book. But there was also an underlying theme of hard work. They outworked most everyone else. Sweat equity, some might call it.

In industry, success through innovation is the same. Coming up with innovative ideas is hard work, getting them successfully to market is difficult and always risky.

The more innovative the product, the larger the uncertainty of success—but usually the higher the payoff. Managing this risk while fostering an atmosphere of innovation is a tricky balance to achieve.

Many companies have a formal process to achieve this balance. But sometimes these processes end up creating barriers that squelch innovation by requiring too much to be known at the early stages of development. Really innovative ideas are almost always those that we know the least about at the beginning.

Innovation Tip: Consider adapting a tried and true principle introduced by W. Edwards Deming to help overcome the early innovation jitters, the Plan-Do-Study-Act cycle. Assign a point person or small team to address key concerns and report each week. This lowers anxiety and keeps innovation moving.

To learn more, contact Robert Schmidt.

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From MAGNET: Addressing the Skills Gap and Improving the Bottom Line

Each month we’ll be featuring a blog post from our friends at MAGNET (Manufacturing Advocacy & Growth Network). MAGNET’s mission is to support, educate and champion manufacturing in Ohio with the goal of transforming the region’s economy into a powerful, global player. You can visit MAGNET online at manufacturingsuccess.org.

This post originally appeared on MAGNET’s  Manufacturing Success blog and is reposted with permission.

Addressing the Skills Gap and Improving the Bottom Line

The skills gap in the manufacturing workforce continues to be a challenge. Employers constantly bemoan their inability to get qualified workers, educators convene employers to better understand what they are looking for and develop new programs, and job seekers experience frustration when they are not selected due to lack of skills. It is time to start looking more closely at potential solutions, the role that employers can play, and the value to employers.

Recently reports of successful strategies are starting to emerge. The lessons learned from these successes should be explored for replication and duplication. How do you define and measure success in a way that resonates with all the stakeholders?  Typically, successful placement in vacant positions is one clear measure. Another is assessing the Economic Impact of the placement on the company and measures that affect its bottom line.

One example of a project that did both, is a training program managed by MAGNET in 2011.  The project was designed to determine if the attainment of skill certifications matched to employer requirements would result in a pool of candidates to fill current or projected vacancies in entrylevel positions. Four Ohio sites were selected. The local team was headed by an educational provider and partnered with the local One-Stop that assisted with recruitment of participants.  Selected employers were involved from the beginning. They committed to providing input in the content and delivery of the program, as well as hiring completers to fill vacancies.   Employer involvement includedplant tours, classroom presentations, delivering some of the training, and conducting mock interviews. Program outcomes included attainment of a National Career Readiness Certificate (NCRC) and the Manufacturing Skill Standards Council (MSSC) Certified Production Technician credential.

Participating employers expressed their satisfaction with the project and the majority of completers were placed followed training. Follow up was conducted with the employers to gather not only their perception of the project, but also the Economic Impact on key factors affecting their bottom line. Preliminary data provided by six of the companies, indicated over $2M in retained sales, $ 250,000 in increased sales, and over $ 6M in investment in plant or equipment as a result of hiring skilled workers. Additionally, ten jobs were created. Factors included: reduced OJT (On-the-Job-Training) time, improved retention, and increased production due to more quickly promoting incumbent workers as their positions were filled with the new hires.

Although a small project and a small employer feedback sample, this model holds promise as a way to help companies quantify the value of this approach. If employers are able to clearly identify the required skills, and if the training providers can match those with certifications that validate the skills, job seekers can more successfully be prepared, placed and retained. Employers have to be part of the solution and training providers have to be willing to adapt their delivery content and strategies to meet both employer and job seeker needs.

Measuring the economic impact on the company provides a quantifiable way for employers to determine the ROI of their time and effort at the beginning of the job preparation process.

 

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From MAGNET: Fail Fast, Fail Cheap

Each month we’ll be featuring a blog post from our friends at MAGNET (Manufacturing Advocacy & Growth Network). MAGNET’s mission is to support, educate and champion manufacturing in Ohio with the goal of transforming the region’s economy into a powerful, global player. You can visit MAGNET online at manufacturingsuccess.org.

This post originally appeared on MAGNET’s  Manufacturing Success blog and is reposted with permission.

Fail Fast, Fail Cheap

By Robert Schmidt, Growth & Innovation Advisor, MAGNET

We need to be innovative—you know, try new things! Building on those that seem to work and quickly eliminating those that don’t work out as we had envisioned.

The proven method I use in this case would be the “Fail Fast, Fail Cheap” (FFFC) method.

How do we go about this? Simply stop spending time and money on developing new processes, products, or  marketing messages without trying it out. You want to find out if your concept is a good one? Find out in a fast, easy, and inexpensive way. Bottom line is: The key to fail fast fail cheap is to spend minimum resources to get the concept off the paper (or your mind) and into the application so you can tell if it needs to be changed, destroyed, or finalized.

FFFC follows Demings “Plan, Do, Study, Act” model. In a rapid succession of learning cycles you try out your idea, learn from that experience, modify and try again- all on a shoestring budget.  Fast trumps elegant early on.

An example would be to develop a look-alike or “Frankenstein” prototype made from on-hand or commercially available materials. The Frankenstein prototype gathers critical feedback from potential customers/users. Their reactions (likes, dislikes, concerns) help you determine if investing further resources makes sense and guides your step of development. Its much like taking on an entrepreneur mindset, forcing creativity and short time goals due to a limited budget.

Do you have a proven system for testing your new ideas? Let us know!

Want to learn more about the FFFC method? Contact Linda Barita at 216-391-7766 or visit MAGNET’s Product Design & Development landing page to learn more about how our engineers can help you learn how to “Fail Fast, Fail Cheap.”

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