We have been confronted again and again with the message that Manufacturing must evolve to and become more innovative. But according to this criteria, where is the future of manufacturing headed? What is the new-growth factory for a company?

In this article I intend to indicate the manufacturing’s evolution through Innovation, the real Innovation in Manufacturing.

There are six salient areas that organizations should work towards a Real Innovation in Manufacturing:

1. Increase Productivity

Increase Operational Productivity through by exploring and implementing well known tools of Operational Excellence such as Lean Manufacturing, Six Sigma, Theory of Constraints (TOC), Business Process Management such as implementing technology such as ERP, a warehouse management system, and of course a transportation management system to get a handle on your transportation department.

Increase Resource Productivity across the full “Supply Chain”. According to Manufacturing Resource Productivity manufacturers can generate new value, minimize costs, and increase operational stability by focusing and prioritizing on four broad areas: production, product design, value recovery, and supply-chain management.

In production, manufacturers should implement programs to improve labor and capital productivity through Operational Excellence. By incorporating energy and materials parameters into product-design approaches, manufacturers could reduce the use of materials that are nonrenewable, hazardous, difficult to source, or expensive.

Changes to product design could increase opportunities for recycling and reusing components and materials at the end of product’s life cycle.

For value recovery, companies can satisfy their resource needs by recycling and reusing materials historically discarded as waste. This process in increased value recovery is achieved with a great reverse logistics program. Those involved in waste management and the use of great technological advances to pave the way by developing services that allow manufacturers to capture value from materials left over after production or after a product has reached the end of its life cycle.

In supply-chain management companies could transform their supply chains into supply circles, emphasizing that materials can be looped back into the production process after they have fulfilled their utility over the life of a product.

With real innovation in manufacturing, manufacturers will need to dedicate much effort to optimizing resources and at the same time rethinking their business models to capture the value residing in resource ownership.

2. Implement a Continuous Improvement Culture

Kaizen or Continuous Improvement is a Japanese term well known and applied by many companies. This is part of Operational Excellence, whose main aim is focused in reduced operating costs, improved processes and working within a permanent culture of improvement. Kaizen and a focus on real innovation in manufacturing creates a standard model for “excellence in organizations through the application of universally accepted principles of operational excellence, alignment of management systems and the wise application of improvement techniques”.

3. Create an Innovation Culture: Innovation in Manufacturing as a core competence of business, organization and culture

How do manufacturers turn “ordinary” employees into extraordinary innovators? How does a manager or executive drive innovation to the core? A company should build and sustain an innovation infrastructure, a deep, corporate-wide capability for innovation, where employees are able to quickly find the resources and the management support that they need to turn their ideas into market success stories. Manufacturers should seek monetizing the imagination of employees, customers, and business partners everyday, everywhere.

According to Innovation to the Core by Gibson and Skarzynsky, within Quality Systems, Six Sigma Black Belts had been trained to wield the weapons of statistical process analysis and continuous improvement. In this manner manufacturers must implant the innovation gene in the company and must train and support “Intrapreneurs” or “Innovation Champion.” By doing so, innovation evolves into a systemic capability inside of the organization. Every single one of the organization’s employees, in every level and in every location, must be trained in the principles, skills, and tools of innovation. This practice of embedding such a culture of innovation in manufacturing greatly enhances the ability to discover new insights, spot unexploited opportunities, and generate novel business ideas.

There are two great examples of real innovation in manufacturing. In 2001, Jeff Immelt, GE’s chairman and CEO, launched a “Cultural Revolution.” He and his team at GE, from the top down, pushed the strategic focus beyond continuous improvement and bottom-line results toward the creation of bold, imaginative ideas. So when Whirlpool’s former CEO Dave Whitwam set out to define his company’s global innovation strategy back in 1999, the exact words he used were “Innovation from Everyone and Everywhere”.

According to several successful companies such as Whirlpool, P&G, CEMEX, GE, some models to instill changes or activities to create a Culture of Innovation in Manufacturing are as follows:

The creation of cross-functional “innovation teams” in each region of the operation. The team is lead by an innovation director. Each team consists of 10 to 12 members from across the company, whose mandate is to generate new ideas and breakout proposals.

The participation of “innovation mentors” and “innovation consultants”, in part time or full time roles, who act as highly skilled advisers to new project development teams.

The introduction of a company-wide training program aimed at developing and distributing the mind-set and skills of innovation. Support for “innovation champions” in every part of the organization, who are there to guide and mentor any employee who comes up with an idea.

The creation of “innovation boards” in each region and each major business unit to screen and fund the best proposals.

The organization of big communication events called “innovation days” where innovation teams showcase their ideas to stakeholders. These events are necessary to recognizing and celebrating the work of innovators.

The creation of a comprehensive set of metrics to continually measure the company’s innovation performance as well as its progress in embedding innovation as a core competence.

The establishment of a complete IT infrastructure, which integrates all employees into the innovation effort and allows them to track progress on innovation activities across the corporation. Many enterprise social networks, such as Yammer (now embedded in recent versions of Microsoft intranets) are quite helpful at getting everyone involved and get new employees on board quickly to a culture of innovation.

By the experience of these experts, build the kinds of skills, tools, management processes, metrics, values and IT systems that are required to create an innovation culture and with ongoing support, you can take an organization to a real innovation in manufacturing in three to five years.

4. Developing Talent and the Ability to Innovate

While a company is working on implementing a culture of innovation, it is also vital to focus on the development of talent and skills to give employees the ability to innovate.

The report Talent is Key to Future of Manufacturing Industry indicates that the ability to innovate is the capacity for developing creative ideas. The report continues to stress that delivering innovative products and services to global markets will be the capabilities most coveted by countries and companies. Craig Giffi, Vice-Chairman and Consumer & Industrial Products Industry Leader at Deloitte LLP said in this report, “Today, and for the future, the manufacturing game is going to look like a global talent competition, one in which countries and companies contend to find and develop highly skilled workers who can handle the advanced manufacturing processes needed to make innovative, high-value products”. Amen and well said. In fact, I believe that the lack of manufacturers ability to recruit talent, in general, is a core reason there is a deficit in skills which is creating a false skills gap.

In this new manufacturing paradigm of real innovation in manufacturing, companies need to understand that there are certain competencies in Scientists, Engineers, Technology Managers, Technicians, and skilled trades associated with the manufacturing of certain advanced products. If manufacturers and countries lose those competencies it can affect the overall competitiveness of the nations. (Note: Again, this is the reason that beyond talent procurement, we need to create a mindset of “makers” in America by starting first with STEM and awareness for younger generations).

For this reason, is clear that there is a key challenge for manufacturers to invest and engage in strengthening their ability and capacity to innovate.

5. Design and Build New-Growth Factory – Go from R&D to C&D

To systematize innovation and growth in a manufacturing company, according to Scott D. Anthony’s article How P&G Tripled Its Innovation Success Rate, it is necessary to create the right organizational structure for Design and Build New-Growth Factories. This includes large new-business creation groups, focused project teams, and entrepreneurial guides who help teams rapidly prototype and test new products and business models in the market. The teams follow a step-by-step business development manual and use specialized project and portfolio management tools.

Continuing with real innovation in manufacturing, consider applying the model for innovation created and implemented by P&G that allows you to go from R&D to Connect and Develop (C&D). The Connect and Develop innovation model has a clear sense of consumers’ needs. A manufacturer could identify promising ideas throughout the world and apply their own R&D, manufacturing, marketing, and purchasing capabilities to them to create better and cheaper products, faster.

6. Collaboration

To spur innovation, manufacturers are taking a serious look at collaboration. Innovation is not going to happen in isolation. It is necessary to engage in collaborative arrangements with suppliers, customers and partner companies. Manufacturers will work with customers for customized product development and with suppliers for product design.

According to the article, Global Manufacturers Balancing Innovation, Cost Management, there’s a decisive shift by manufacturers towards collaboration in the earliest stages of product development. Jeff Dobbs, KPMG’s global head of Diversified Industrials said in this report that “This inclusive approach to innovation not only disperses potential risks, costs and rewards across the supply chain, but it also lets manufacturers focus on what they do best by leveraging the expertise of external partners and accelerating speed to market.”

The companies that want to achieve real innovation in manufacturing must, on the one hand, transform their operations through an innovation culture so that they may build a New-Growth Factory. In this way, manufacturers will dramatically increase their productivity (operational + resource), and stay within continuous improvement. In the future, the smart companies will have to use their talent procurement and management efforts to optimize all their resources, while at the same time rethinking their business models to capture the value residing in resource ownership.