The reality is that end-market disruption is only going to increase. If you want to play a pivotal role in shaping the American economy for the next decade, you need to consider how to face that disruption with strengthened innovation and vision.
By Jerry Gootee, Mark Heidenreich, Mitali Sharma, and Addison Lanier

You have just been named CEO of an industrial manufacturing company and your first goal is to hit the ground running. The board and Wall Street are watching, excited for what’s to come but also waiting to see where your vision will lead. With the expectations of shareholders, the board, and your employees in mind, you start to think: Where are we now and where do we need to go?

You recognize key strategic decisions are at hand. Can you continue to compete on quality and cost with new competitors nipping at your heels, or is it time to double down on higher value, more difficult-to-replicate solutions, products and services? You could shift your company beyond its roots in traditional manufacturing and create new digitally enabled products and services. Perhaps you choose to rebrand from a materials manufacturer to an industrial producer, developing products that have multiple applications. Instead of threats to what you’ve always done, you see these situations as opportunities to grow and chart a new course for your business.

The key to capitalizing on these and other new business models is a willingness to change. Shifts in demographics, economics, politics, environment, and technology, along with sector convergence and the increasing importance of sustainability, are transforming global end markets.

The traditional linear value chain is rapidly evolving into a fluid ecosystem of supply networks, requiring manufacturers to make new choices about the most reliable and cost-effective way to manage their supply chains. It hasn’t been an easy transition.
As CEO, you understand that a traditional focus on efficiency has helped you to manage your margins, but often reduced your ability to be flexible when circumstances shift quickly. Thus, when the landscape changes, it’s not just disruptive. It can be paralyzing.

“Look for opportunities for vertical innovation which would require a shift, rather than a dramatic transformation of your business model.”

But manufacturers have been innovating long before innovation was a trend. The good news is the same ingenuity, creativity, and determination that has always defined manufacturing can once again pave the way forward. Companies that become more agile, embrace technology, and deeply understand their customers’ needs now and in the future will find no limit to the opportunities that lie before them.

Here are ways CEOs can be the agent of change to brighten the horizon and create opportunity for years to come.

Get to Know End-Market Disruption 

When disruption seems to be everywhere at once, it’s hard to know where to focus your attention. If you’re seeking to serve your customers better, begin by considering how well you know the needs of their customers. As business models in end markets evolve, your customers will need to grow and change to serve them. Keeping up with the pace of business, we can sometimes find ourselves too comfortable in the markets we know best and tell ourselves that now isn’t the right time to take a risk on the unknown. It’s the customers of customers who are often driving innovation as companies search for solutions to support their evolving needs. Understanding the end customer and in turn end market is where the true innovation takes place, allowing us to leverage the insight to build what’s needed for tomorrow.

To understand, you need to listen. If you have systems in place throughout your supply chain and distribution channels that allow you to listen for these insights and share them with the right people in your organization, you’ll be well positioned at all times to create products and services that are in tune with your customers’ needs. Make time to engage in conversations that increase your knowledge, strengthen relationships, and boost awareness of what’s happening in your space. Finally, have a clear and realistic view of yourself and the market in which you operate, and constantly revisit that view for gaps.

Infuse Your R&D Strategy with Market Insights 

Innovation is most effective when it’s closely aligned with your company’s priorities. R&D teams, whether centralized or distributed among your company’s business units, need to be an integral part of your communication. Take those conversations you have with your customers and create a forum in which you can build off that dialogue. Look for opportunities for vertical innovation which would require a shift, rather than a dramatic transformation of your business model.

“Success in manufacturing in the 2020s will require leaders who are willing to set aside once tried-and-true strategies in pursuit of a greater reward ”

COVID-19 has spawned numerous examples of vertical innovation. Companies around the world have adapted existing products to serve as essential supplies while other businesses have modified equipment and processes to build urgently needed medical supplies. Manufacturers have shown that, with the right inspiration and drive, no sector boundary or time limit can hold back innovation.

Take a lead role in this process and bring anyone to the table who can help further the conversation. You may need to take a hard look at your team and its capabilities and introduce new voices that enable you to make more informed decisions. The most important thing is to ensure that everyone engaged in this process is working toward the same common goal.

Don’t Let Your Past Disrupt Your Future 

There is one cautionary note to consider as we analyze the approaches to innovation. It is possible that an idea from the past may be the answer for the future, and old ideas should be met with a fresh perspective. M4.0 leadership acumen is not necessarily focused on the implementation of digital technology alone. Instead it’s focused on understanding that new technologies, new ideas and innovative approaches will always come your way and understanding your business well enough to know how to incorporate them is key. Approaching ideas, whether new or old, with a fresh lens will allow you to capitalize on the disruption ahead. Be ready to revisit ideas you’ve tried before and be ready to hear from individuals from all facets of the company. The beauty in innovation can be found in the minds that we bring together and the ideas that we embrace from all walks of the organization.

You Don’t Have to Do It Alone 

Some problems are simply too big for one company to manage on its own. One response might be to create ecosystems in which companies can partner with other businesses and jointly work on reframing their future to meet market needs. The transition from linear to network-based supply chains will require all ecosystem players to enhance their value contribution to avoid disintermediation. Success in manufacturing in the 2020s will also require leaders who are willing to set aside once tried-and-true strategies in pursuit of a greater reward — the preservation, and ultimately the dynamic growth of an entire industry.   M