Winning the ‘Product Innovation Game’: The 2030 Mandate for Manufacturers

Robert Cooper December 1, 2023

To win at product innovation, manufacturers will need to make their NPD processes more robust by integrating Operations staff earlier and by using AI and other Industry 4.0 technologies. 

TAKEAWAYS:
● To survive and prosper, manufacturers must strive to excel at product innovation.
● Manufacturers can use build-and-test iterations to validate new products technically and with customers. Build-and-test iterations can be done early, often, quickly, and cheaply.
● Artificial intelligence can be a game-changer in the new product development process.  

Innovation propels companies to greatness! Consider the transformation in the list of top 10 companies in America over the past three decades. In 1990, all top 10 US firms were in traditional physical products industries (Table 1). Half were in oil and gas or petrochemicals. By 2020, only two of the 1990 top ten—IBM and GE—remain on the list, but further down.

Table 1: Top 10 US companies, 1990 vs. 2020

Two fundamental factors underlie this 30-year shift:

  1. A transition from manufacturing: Only half of the top 10 US firms in 2020 are manufacturers, while the product offerings of the top 10 firms has shifted from older technologies, such as oil and gas or traditional autos, to newer ones, such as IT and electric vehicles (EVs). Even individual companies like IBM, once renown for making computers, now predominantly offer software and services.
  2. An emphasis on successful product innovation: The newer entrants on the 2020 list, such as Apple, Microsoft, and Tesla, surged primarily due to successful product innovation. In contrast, companies that failed to innovate effectively were replaced. For instance, Kodak’s inability to adapt to disruptive innovation—namely, digital cameras—led to its downfall. Innovators like Tesla surged ahead with EVs, while GM fell behind, no longer on the top 10 list.

Innovation will remain the disruptive force moving forward to 2030, even more so than in the past. We now live in the Fourth Industrial Revolution driven by technologies such as artificial intelligence (AI) and machine learning, blockchain, and robotics and automation, which will create huge changes in industry, particularly in manufacturing.

Strategically, manufacturers must adopt some or all of these new technologies, and build them into their products and processes. A less visible but equally vital message is that manufacturers must strive to excel at product innovation in order to grow and prosper. Ironically, Kodak developed the first ever digital camera, but the company’s failure to successfully commercialize it ultimately led to its demise.

Many manufacturers have a long way to go when it comes to successfully commercializing new products. New-product project success rates for physical product firms are now at 25–30 percent1,2—that is, less than one-third of new-product projects succeed commercially!

3    Accelerate the game—remove the waste: Today’s fast-paced world demands accelerated development. Many firms’ NP processes are cumbersome and bulky—there’s too much bureaucracy and “non-value-added work.” As a result, projects move at a crawl. Lean principles (Lean Six Sigma) were widely applied on the factory floor in the early part of this century, and Operations staff know the methodology well.

Operations can lead by example, helping the other business functions streamline the innovation process. Typically, value stream analysis is used to map the entire new-product process, idea to launch.4 Bottlenecks and time wasters get identified, and a root cause analysis is undertaken to determine why. Then time wasters are removed or reduced. It’s an effective method, used often in Operations, but it is not so well known by other functions. Some firms have applied this Lean methodology to NPD with quite dramatic results—up to 40–50 percent savings in time to market.4

4   Be Agile in NPD: Everything changes quickly today: What was true in the early stages of the project is no longer true by the latter stages. A major unexpected challenge in NPD is that things have changed by the time the project reaches commercialization: the customers’ needs have shifted, a competitive product has been introduced, or product requirements are no longer valid. Instead of moving into production quickly, the project grinds to a halt, and it’s back to the drawing board. Late-stage changes in product design create huge costs and time delays.

* North American football.