Henry Ford once said, “You can have any color you want as long as it’s black”—a slogan that launched the early industrial model. And still today industry relies on economies of scale—and scaling means as little product differentiation as possible within a product line. Industrial efficiency thrives on product commoditization, but in a competitive global market, companies need innovation: product refinements, improvements, and even transformations that better serve the customer. Innovation thrives on differentiation.
Financial markets like both but they dislike risk, so the inclination in mature businesses, when market pressures allow, is toward efficiency and commoditization. However, as any CEO knows, it is up to them, not some formula, to find the right balance between scale and innovation. Letting products get stale is no more a business strategy than letting innovation costs soar.
The question, then, is how best to create the space for innovation amid production processes in which efficiency is a must, and the “business” is first production, sales, margins, cash flow, and other important KPIs.
Finding the right balance between innovation and efficiency depends on the ease with which new designs can be tested and proven and enter the industrial and sales processes. Fortunately, a new toolkit is making innovation easier by cutting the timeline between R&D and market availability. The pace of change and the rate of product improvement, and even market transformation, will only be enhanced by such developments.
Innovation and sustainability
There is a performance gap to be filled between the generations of products that helped create the sustainability challenge and the future products that will help meet it. That gap will be filled by rapid innovation, but, without the tools to control the risks and costs of innovation, doing so will cut against the grain of industrial finance—putting sustainability further at risk.
In the building arena, for example, building stock expansion has long been fueled by the ability to replicate buildings easily. But in an era of high-performance buildings, replicability needs to give way to tailored solutions that allow leveraging of position, natural sunlight, shading, and a host of situational factors, in addition to customized envelopes and mechanical systems, to achieve the targeted indoor temperature. The cost of such buildings was once thought prohibitive.
Today, developments in performance modeling, 3D printing, and digitalization generally are examples of what can cut the cost of custom-designed buildings to parity with traditional ones and help ensure successful innovation. That helps make transformation affordable and brings sustainability within reach.
Toolkit of innovation
1) Computerized product performance modeling: Provides a time- and cost-saving shortcut to confidence in product performance
2) 3D printing: Enables the creation of an object in minutes or hours instead of weeks or months
3) Digitalization: The critical link between computerized performance modeling and 3D printing, and includes new ways of thinking about design and innovation management
Such an approach to innovation management could well be applied not just to digital products, but also to products from industrial equipment to food distribution and retail. The digital product industry, with its concern for the “liquid expectations” of its customers (i.e., expectations that shift quickly and fluidly), may drive a new era of innovation through design not only in the digital tools it brings to the innovation toolkit, but the cultural ones as well.
Innovation and competitiveness
At the macro level, concerns about the inefficiencies of traditional innovation translate into a concern for competitiveness. But while the costs of innovation can weaken competitiveness, so can a failure to bring new products to the market—and that has been known for a long time.
In a 1987 Brookings Institution research paper, a Harvard-based research team examining product development in the global auto industry observed that “in 1986, R&D investment in the United States [auto industry] alone amounted to $6.25 billion, much of it devoted to product development.”
“In an industry such as automobiles, in which products are differentiated and scale and learning effects are important to production,” they continued, “the timely introduction of a successful new product may yield gains in market share, profit margins, and productivity.” In brief, while routine production is key to business success, so is innovation—albeit done cost-effectively.
Automotive industry experience suggests that a choice between production and innovation is a false one. The real choice is between innovation done well and innovation done poorly. Poorly done, over time it can erode an industry. Done well, it can be the foundation of success. Today, a new toolkit—including new approaches to innovation management—can shorten and smooth the road from ideation to production and successful market entry.
It is tempting, as concerns for sustainability grow, to say “not a moment too soon.” Yet, this much is clear: innovation is empowering design to drive further innovation ever faster and more successfully across industrial sectors—good news to any industry working to add sustainability to its list of core imperatives.
