Four significant external forces are aggressively impacting the manufacturing sector. Firstly the manufacturing sector is struggling to adapt to disruptive factors, including the pandemic, war, geo-political tensions, resource scarcity, and blocked supply routes. Secondly, more than ever, B2B buyers demand digital experiences with deeper interactions, increased personalization, greater transparency, and continuous support. Thirdly to combat this, manufacturers are demanding real-time visibility to improve efficiency and competitiveness and to have better insights into order management, inventories, and delivery times. Finally comes the growing need for sustainable operations. As a result, manufacturers are under pressure to meet new sustainability benchmarks and environmental regulations.
In this PTC Talk, guest speaker Pushkar Kulkarni, Consulting Lead – Nordics for Manufacturing and Logistics at Cognizant, discussed how to manage innovation in uncertain times and how collaboration with Cognizant can improve the process.
The impact of these forces was explored in a recent survey conducted by Cognizant and ESI ThoughtLab. This revealed that the pandemic had shifted the focus and investment away from strategy and focused more on business continuity. The survey also confirmed what we all believed that the pandemic has hurt the economy and our company's performance this year and next. The result is that the industry is re-prioritizing its investments and strategic capabilities. It is looking for the ability to react more rapidly to macro events, enable B2B2C experiences, capitalize on new business models, enhance competitiveness, and adapt to sustainability demands.
As limited visibility of upstream and downstream operations increasingly impacts speed to market and cost-effectiveness, manufacturers are looking for ways to create greater resilience to external supply chain uncertainty. Manufacturers are also struggling to meet buyers' demands for personalized, on-demand experiences and help buyers deliver these next-generation experiences to their customers.
Adopting new business models requires greater flexibility in business and technology processes, such as product-as-a-service rollout at short notice. Manufacturers also seek to protect their margins through more efficient, automated processes and ways of working to boost client retention and respond to competitive pressures. All these facets must be achieved while attempting to meet pressure from regulators, customers, and shareholders to be more sustainable without increasing production costs or reducing profit margins.
So what are the options for manufacturers attempting to meet these diverse challenges in a volatile and highly competitive market landscape? The answer is innovation. When budgets are squeezed, innovation is often one of the first ports of call for those attempting to reduce costs, but when times get tough, the tough start innovating. This innovation can include new products or processes, investing in new business models, diversifying the business beyond its core competencies, and fostering new partnerships.
Why is continued investment in innovation in manufacturing necessary, even in a constrained fiscal environment? Many surveys have informed us that organizations that innovate during a depressed market environment and better placed to take advantage of the opportunities offered when the market conditions improve. It is the experience of Cognizant that, in many cases, whenever there is a shrinkage in the economy or other recessionary factors, conventional wisdom forces companies to look at how to reduce the cost and explore where they are leaking cash. As a result, they place greater emphasis on improving processes to lower the total cost of operations. While that may provide a satisfactory short-term solution, it reduces the organization's capability when the growth rebounds and takes away the necessary resiliency.
According to research from McKinsey into the top 5000 companies in Europe and North America, those that focus on innovation for growth and cost reduction during a recession have a very high level of leverage against their competitors and peers.
One of Cognizant's customers is Grundfos, the pump manufacturing giant. The company began with a standard strategy of manufacturing and selling pumps. However, they soon added service capabilities to their portfolio, recognizing the benefits of a long-term relationship with their customers. This evolved into utilizing digital models and connected operations as a sales methodology. Now they have taken a step further and, in a disruptive change, have started selling water as a service. It encompasses their sphere of influence to such a level that they are now fully integrated with the products and services in the downstream business. For them, that is where innovation plays a significant role.
Cognizant is often asked how they could help industry with these challenges. When the first recession hit, it saw that these challenges impacted many sectors significantly, and to help customers combat this, it developed its Manufacturing Innovation Framework. This focused on four significant dimensions in continuous innovation, customer innovation, collaborative innovation, and Industry 4.0 innovation. By following this doctrine, manufacturers could deal with innovation with a bottom-up strategy looking at the day-to-day operations making it possible to move from the gig economy to develop innovative products, services, tools, or experiences to go further. The added dimension Cognizant can deliver is collaborative innovation by using its large-scale digital ecosystem, which includes hundreds of alliance partners such as PTC.
Linda Di Gangi is a Program Marketing Manager in PTC’s Field Marketing organization. She is responsible for the marketing strategy for European Emerging Markets and India. She first started with PTC's Corporate marketing in 2006 and managed global events including PTC flagship event, LiveWorx. Prior, she worked for an agency and oversaw PR for B2B companies in new technologies. In a spare time, Linda enjoys working out and hiking with family and friends. You can find her on Twitter and LinkedIn.