It’s been a tough 18 months for manufacturers due to COVID, especially when compounded with Brexit and other supply chain disruption causing events. Manufacturers are now poised to thrive not survive, so now is the time to be bringing this discussion of innovation and investment back into the priority list. In NatWest’s Future Fit report published just before COVID, the bank discussed how manufacturers are approaching innovation in their strategy. It has some great insights that I want to summarise here to help manufacturers.
It’s important to get thinking about this if you haven’t already because there’s a big gap between anticipating the future and getting ready for it.
Businesses recognise the importance of leadership but are too occupied working ‘in the business’ rather than ‘on the business’.
Your strategy for the next five years can help you emerge stronger, more resilient, and more profitable. We often talk about the ‘how’ here at NHQ as we’re practical folk but a key point we always try to drive home is that this needs to be owned at the top. It’s shown in the Future Fit report, where 54% of interviewed UK manufacturers say lack of innovation is a significant internal challenge obstructing their business from achieving success.
This innovation applies across the entire organisation, not just in product development.
UK manufacturers have been impacted by a lack of investment support. We’re seeing great initiatives like Made Smarter make strides in changing things but it can be tough to make the investment in IT and digitalisation at times like these. As Warren Buffet said though “buy when others are afraid”. Now is the time to invest, but it doesn’t have to be big. We believe incremental investment and improvement has as much place in a sustainable digital transformation agenda as a radical overhaul. Our tools being pay-as-you-go aligns to the incremental change ethos, whilst the potential to give everyone in the business the opportunity to deploy tools that help boost their productivity can yield radical gains in productivity, appetite, and skills too.
We’ve talked about developer velocity, the close correlation of IT speed and innovation, and the yields high velocity businesses can gain. In the Future Fit report, they identify manufacturing Trailblazers. Traits identified in the Microsoft & McKinsey study, are similar to those identified in the Future Fit report for Trailblazers:
- Forward-thinking strategy
- Innovation high on the agenda
The attitudinal difference was telling as 84% of Trailblazers were confident in their business expansion plans, compared to 60% across the entire group.
100% of Trailblazers think innovation will increase market share, versus 79% of other companies, and 96% versus 77% of other companies think innovation will improve their brand recognition.
Digital transformation is a key enabler of the diversification and proactivity Trailblazers exhibit, helping them achieve more channels to market than their competitors. They worry more about new entrants with fleeter capabilities as key disruptors of their market position.
The report quotes Julian Shine, Managing Director, Shine Food Machinery as saying:
I think it’s the digitisation that’s most exciting. I think the opportunity to dramatically improve our data management from the commercial side through to the design and specification side, right through to the physical cutting of sheet metal, folding of sheet metal and manufacturing. It’s much more possible now to integrate all aspects of the business seamlessly. That’s where our focus is at the moment and will continue to be in the future. Changes in customer behaviour, expectations and demand are certainly all risks. But they’re also an opportunity. As these customers’ expectations change, being agile, being ahead of the curve… these perceived threats then become an opportunity rather than being a threat.
Resilient supply chains
As we’ve seen, the supply chain for most manufacturers has been heavily impacted during the times of crisis and even beforehand only 58% of the manufacturers believed their business ecosystem was resilient. The report includes this prescient quote from Bill O’Conner from Autodesk:
If 60% are saying they are adequately prepared for future disruptive threats, they are wrong. What do they know will happen, where do they get their information about competitors, suppliers and disruptive innovations? I think this is grossly optimistic
Embracing a more digital supply chain is an important strand to your innovation plan as it can help lower your cost base, reduce wastage, and help better manage through times of delays. 67% of Trailblazers see supply chain collaboration with shared / interacting digital facilities as being much more important in future. 58% of Trailblazers said collaboration will have a significant effect on using Big Data to predict customer demand.
Skilled staff shortages are a continuing problem for manufacturers, and the skills shortage for advanced digital skills is significant across the board.
82% say they will be investing in staff/talent over the next five years with this being most likely to be a top priority among Trailblazers.
This can make investing in IT quite difficult. We see the adoption of no-code, AI-powered tools combined with an upskilling initiative as a vital way around this dilemma. You invest in only one or two IT people to manage your cloud infrastructure and then support existing staff in innovating within their role using tech capabilities they learn about and are supported by IT staff. This gives you the scale you need, boosts your productivity, and helps you retain your people.
Many of the respondents were rightly concerned about cyber security risks associated with increased reliance on digital solutions. Manufacturers need to be maintaining strong governance and controls as they move to the cloud and we bake this concept into our product by securely deploying into your cloud environments where you can have as much control as you need. We take approved, secure routes to embed your processes entirely on your dedicated environments hosted by Microsoft, with as many best practices as you put in place. Cyber-security matters and it’s important to think about when you embrace SaaS and moving to the cloud. As Microsoft adopt the same “secure by default” ethos we do, it helps greatly to reduce the cost of being cyber-secure. The integrated and low-cost nature of high-quality security is important as 16% of the manufacturers were worried that the cyber-security aspects of increasing digitisation would be too expensive.
I recommend you read the Future Fit report in full if you have the time as there are even further insights to be extracted. The insights above will have hopefully helped you understand the approach to innovation through digital transformation that your peers are taking, and yields some concrete actions that can help you deliver innovation more effectively.