Global manufacturers are reinventing themselves by rethinking their strategies, redoubling their efforts to innovate and looking for new ways to integrate service offerings into their portfolios.
Those are the among the key findings of a new survey conducted by the advisory firm Oxford Economics, which identifies strategies that global manufacturers are adopting to transform their businesses and gain competitive advantage in their respective markets.
The survey of 300 manufacturing executives found that global manufacturers are at an "inflection point," with "market and technological forces ... upending many time-honored assumptions."
As a result, more than 68 percent of the executives said they expect their firms to undergo significant business-process transformation over the next three years.
"Our survey and interviews with market leaders show that manufacturing companies are transforming their businesses in many fundamental ways to respond to market shifts and technology trends," said Lou Celi, president of Oxford Economics Americas.
"The priority for manufacturers today is to make better things-creating innovative and distinct products and services that meet customer needs-while continuing to make things better."
The survey, commissioned by Needham, Mass.-based manufacturing-software provider PTC, identified three broad themes underlying successful transformation initiatives:
- Rethinking strategy and planning. The importance of the decisions on how a company engineers, sources, manufactures and services its products-and coordinates these processes-is becoming more important than operational execution as a competitive driver for most industry sectors. For example, the study found that manufacturing executives are placing increasing importance on the coordination of strategy and planning between engineering and service divisions.
- Adopting the service imperative. Historically, the service dimension of manufacturing focused on repair and maintenance. Market leaders now are blending their products and service capabilities into new performance-based offerings, in an effort to differentiate themselves and to provide a significant revenue boost and a guaranteed annuity stream.
- Fostering innovation everywhere. The emphasis on innovation will grow even more during the next three years, with increased efforts in product strategy and engineering. Reverse innovation is growing more popular, as firms design products for emerging markets and bring them to developed ones.
"True competitive advantage can only be achieved by tightly coupling the engineering, service planning and execution, management, and production processes through which innovation can evolve from conception to execution, and by creating a closed feedback loop to ensure continual improvement and alignment across the business," Celi explained.
According to the study, manufacturers will choose a variety of approaches to transform their businesses, and may adopt multiple strategies in response to market shifts. Among the more compelling findings:
- The concept of "design anywhere, build anywhere, service anywhere" will grow by 125 percent in three years.
- Products get smarter. Smart products, which consist of mechanical components, electronics and software, will see 38 percent growth on the world's stage.
- New service business models come of age. By 2015, the use of performance-based service contracts will be used by 65 percent of manufacturers. In the next two years, 56 percent of firms will embrace remote diagnostics, while the use of 3-D printing and additive manufacturing will grow by 123 percent.
- The supply chain becomes a key strategic asset. The number of manufacturers increasingly leveraging their supply chains will nearly double to 57 percent in three years.
To download a report detailing the research findings, visit PTC's website.