Manufacturing   the way we see itCollaborating for InnovationCapgemini’s 2010 Global Survey –How to Make a Leap by Applyin...
CONTENTS    Introduction             3    Executive Summary         4    Corporate Strategy        7    Innovation Perform...
Manufacturing        the way we see itIntroductionInnovation has become an important         companies have made in furthe...
Executive SummaryInnovation is generally described as     be at the heart of numerous strategic   Key Findingsa way of doi...
Manufacturing        the way we see it                                                                                    ...
R&D collaboration is key for top-           Many companies would like to involve      Conclusionline growth in global mark...
Manufacturing    the way we see itCorporate StrategyOverview                                  Key FindingsIn our 2008 “Col...
Alignment of a Strategic                   Alignment of Strategic Approach to Innovation with Growth StrategiesApproach to...
Manufacturing                  the way we see itThe Primary Functional Driver of            Which Functional Area Is the P...
Innovation Performance                                   Overview                                   Key Findings          ...
Manufacturing           the way we see itPrimary Measure of Innovation               Primary Measure of Innovation Perform...
Success Rate of New Products/              Success Rate of New Products Launched over Past Three YearsServices Launched in...
Manufacturing                 the way we see itR&D CollaborationOverview                                  Key FindingsColl...
Number and Locations of                    Current Number of Locations for R&D FacilitiesCurrent R&D FacilitiesJust over h...
Manufacturing           the way we see itStrategy for R&D in the Next               R&D Strategy in the Next Three YearsTh...
Customer CollaborationOverview                                    Key Findings                                           P...
Manufacturing       the way we see it                                     the specification of new products            Cust...
Supplier CollaborationOverview                                   Key FindingsAs a reaction to increasing cost           In...
Manufacturing              the way we see it                                     Reasons for Supplier                     ...
Collaborating for innovation 2010
Collaborating for innovation 2010
Collaborating for innovation 2010
Collaborating for innovation 2010
Collaborating for innovation 2010
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Collaborating for innovation 2010

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Capgemini has found high levels of supplier collaboration in its new report Collaborating for Innovation, which examines trends in product and service innovation across the manufacturing industry.

Most of the companies surveyed said they were effectively carrying out a range of supplier collaboration activities, including the use of information systems (89 per cent), open-innovation environments (80 per cent) and involvement in the innovation process (79 per cent).

The report also found that manufacturers are increasingly turning to collaborative business models, processes and technologies to gain competitive advantage in their innovation efforts across all parts of the value chain, including through supplier, R&D and customer collaboration

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Collaborating for innovation 2010

  1. 1. Manufacturing the way we see itCollaborating for InnovationCapgemini’s 2010 Global Survey –How to Make a Leap by Applying Collaborationin the Innovation Process
  2. 2. CONTENTS Introduction 3 Executive Summary 4 Corporate Strategy 7 Innovation Performance 10 R&D Collaboration 13 Customer Collaboration 16 Supplier Collaboration 18 Recommendations 212
  3. 3. Manufacturing the way we see itIntroductionInnovation has become an important companies have made in further • The embedding of innovationdifferentiator in achieving both embracing and leveraging the culture, as a culture underpinning antop-line growth and cost savings, technologies and techniques of organization beyond the R&Dbut this has often been restricted collaborative innovation in today’s function and across the value chain,by companies’ business models economically volatile environment. including customers and suppliers.and culture. Most companies have • The drivers and obstacles forcontained innovation within their Our 2010 “Collaborating for integrating these “external” partiesdirect circle of influence (apart from Innovation” study provides further in various stages of the innovationsome well-known examples such as insight into the current practices of process.Procter & Gamble and Philips). But a range of manufacturing industries,as competition intensifies and existing together with recommendations for In the interest of making this reportmodels of innovation are not enough moving towards sustainable top-line easy to assimilate, we have presentedof a differentiator, the way to build growth by adopting a “collaborating key findings for each section. We havemarket share and create sustainable for innovation” approach. avoided a lengthy appendix of thetop-line growth in the future will be data, but we are happy to discuss thethrough a new, alternative approach – Study Objectives aggregated results in more detail withcollaborating for innovation. The research was designed to elicit participants and interested parties on the perceptions and insights of a request.Our definition of this term is “making range of manufacturing companiescooperation across organizational on collaborating for innovation and Our Thanks to the Industryboundaries inside or outside a therefore to develop a comparative Completing an in-depth survey suchcompany’s four walls an integral part of view with our 2008 findings. as this is a significant investment,the innovation strategy.” This approach Companies appeared in 2008 to be and we are extremely appreciative oftaps into the wider opportunities adjusting their corporate strategy, all our respondents, who made timeof working with value-chain parties shifting away from cost reduction to to carefully consider their answers.including internal partners, suppliers, top-line growth and accommodating To everyone who participated, manycustomers and even specific entities a growth-focused innovation strategy. thanks.outside the value chain. But how did they measure innovation performance? What was the impact We hope that we have been able toCollaboration can take many forms: on R&D? How successful was repay this investment by providingopen innovation, co-creation with collaboration with suppliers and an interesting study that offers insightclients and suppliers, crowd sourcing, customers? From these questions, into the way companies approach theas well as traditional partnerships we identified the key trends and task of successfully leveraging theand alliances. In addition, there is a challenges, and so built a clear picture creative energies of their employeesgreat opportunity for various internal of the way forward for innovation and those of their partners.business functions to cooperate within within the manufacturing industries.the innovation process – particularly We also trust that thethe primary functions of R&D, In this edition of “Collaborating recommendations and conclusionsMarketing, Sales and Operations. for Innovation,” the goal is to draw can act as constructive signposts for executive attention to current strengths further improvements, or a prompt toCapgemini’s first “Collaborating and improvement opportunities review existing innovation activities.for Innovation” study, published relating to the process of innovation,in 2008, found that collaboration focused on four overarching aspects ofwas increasingly viewed as a critical the innovative company:enabler for successful innovation.However, significant challenges existed • The consequences of changingin the form of resources, organization, corporate/strategic imperatives uponIT and performance metrics. Our innovation as a lever for growth.second biannual report takes this • The changing structure andposition as its starting point to assess operation of the R&D function andthe progress that manufacturing its impact on corporate success.Collaborating for Innovation 3
  4. 4. Executive SummaryInnovation is generally described as be at the heart of numerous strategic Key Findingsa way of doing or creating something initiatives to develop competitive Our “Collaborating for Innovation”new or in a new way; incremental or and first-mover advantage – breaking research indicates that manufacturingradical changes in thinking, products, new ground in product and service companies have improved in theirprocesses or organizations, resulting offerings, forging cross-boundary ability and confidence to develop,in benefits or increased value to a partnerships, sometimes even with produce, promote and measurerange of stakeholders most notably former competitors, and bringing in innovation from strategy andshareholders and customers. new capabilities through mergers, then throughout the value chain. acquisitions and joint ventures. This appears to be due to moreFor many companies, the ability executive-level attention and support,to integrate innovation into their This has been the case for the broad greater application of performanceorganization beyond the traditional spectrum of manufacturing, which measurement, a wide range ofconfines of the R&D department is a has been hit harder than many other technology-based collaborationkey lever for increasing productivity sectors in the past two years and initiatives across the wider valueand profitable growth, and thereby which is significantly impacted by chain involving both suppliersgaining competitive advantage. both the threats and opportunities of and customers, and the spread ofFor sectors where margins are growing globalization. the innovation culture within antraditionally tight, innovation has to organization. However, this improvement is not without challenges. Capitalizing on customer insights to create profitable new products and services remains difficult for many companies as well as converting IT investments in business benefits realized on a broad basis across the enterprise. Several key themes have emerged from our research. Innovation is increasingly integrated into corporate strategy. Strategic alignment appears to be delivering dividends, as innovation is now a more integral part of our respondents’ corporate growth strategy and has become more embedded in functions beyond the heartland of the R&D division, such as Marketing and Sales, and Operations. This, together with greater board member support and growing external pressures from globalization, has led companies to look at innovation as an important lever to improve business performance, in addition to the more traditional role of bringing new products to market. An integrated4
  5. 5. Manufacturing the way we see it innovation strategy needs to address Study Methodology and Respondent Profile the explicit choices, regarding whom to collaborate with, when and how. The “Collaborating for Innovation” study was carried out by a professional market The use of new technologies such as research agency, using a web-based survey, comprising 41 questions focused on Corporate Strategy, Innovation Performance, and Collaboration with the R&D function, Web 2.0 techniques, collaborative Customers and Suppliers. platforms, social networks and online meetings has revolutionized many Invitations to participate in this survey were sent to board-level and senior executives, aspects of not just individual but as well as middle managers closely involved with, or responsible for, Innovation, also commercial interaction. Some Product Development, Manufacturing, Sales, Marketing and Customer Service. We manufacturing companies are leading approached a range of potential participants including, but not exclusively, existing the way in leveraging these new Capgemini clients around the world. technologies to drive innovation in new channels and new formats. R&D- We collected responses from 189 participants from companies based in 15 countries, driven innovation will continue to use with the respondent distribution of 38% from companies headquartered in North existing and emerging IT technologies America, 39% from Europe, 11% China and North East Asia, 7% Indian and South East Asia, and 5% from Australasia Central/South America and Africa/Middle East. to accelerate the innovation process and improve innovation performance Survey participants were drawn from the following major sectors: in open-innovation environments. These new technologies need to be • Consumer Products and Retail (42%) implemented and introduced in a way • Industrial Products (23%) that maximizes immediate acceptance • High Tech (including Telecom, Medical Devices and Life Sciences Manufacturing) by users rather than increasing (23%) administrative tasks and limiting creativity. • Automotive, Aerospace and Defense (12%) An integrated innovation Industry Representation among Survey Respondents performance measurement system is essential. Companies appear to be using a wide Automotive, Aerospace & mix of performance measurements Industrial Defense to assess innovation across and 12% Products within industries, and have improved 23% their processes for measuring the profitability of their innovation Consumer efforts. They also seem to be more Products & focused on clearly demonstrating High Tech Retail 23% 42% a satisfactory financial return. We believe that companies need to work more on developing a solid range of performance indicators, integrating the relevant factors impacting top-line Source: Capgemini growth (such as customer satisfaction, product performance, sales, etc.). This should be done quickly to The revenue (as reported in the last fiscal year) of the companies surveyed ranged demonstrate to stakeholders the from under US$1 billion (37%) to more than US$25 billion (14%). This diversity is also reflected in the number of people employed globally by the companies surveyed, from benefits of collaborative innovation. fewer than 1,000 (23%) to more than 25,000 (20%). Our largest group of respondents came from R&D departments, followed by General Management and Marketing, Sales and Services (MSS).Collaborating for Innovation 5
  6. 6. R&D collaboration is key for top- Many companies would like to involve Conclusionline growth in global markets. customers more effectively in their Even in extremely difficult economicFollowing the end of the recession product development process, but markets, innovation as a way toand entering the growth phase, we they face a number of hurdles. Some differentiate and achieve marketstill expect a number of shakeouts are practical, such as the length of success continues to grow inof companies with large R&D units development cycles or the complexity importance and is being stronglyand increased merger and acquisition of products. Others are more a matter championed by many senior industryactivity (for example, consolidation of manufacturers’ perceptions. Many, executives. As global economiesin the crane industry). This may for example, consider their products to recover and customer spending startsprecipitate further alignment of R&D be too commoditized or too complex, to rise again, Capgemini expects thatunit operations, including process or that they are “too far down” the the scope and set-up of innovationand tool harmonization and shared value chain for customer interaction. efforts will change significantly.ways of working. Depending on the Our work with clients shows that We will see a shift from offeringR&D strategy adopted, we anticipate customer involvement is both standalone products to providinga number of different structural and appropriate and feasible for just about customer value via radical new serviceoperations scenarios, such as specialist any business. Capgemini believes the concepts and business models.outsourcing, co-creation, location current mindset needs to change. This will involve a move away fromcentralization and R&D effectiveness “isolated” R&D-focused innovationprograms. The prevailing innovation Supplier collaboration needs to collaborative value creation, whichmodel is a flexible blend of centralized to shift from cost reduction to has the ability to meet (or exceed)in-house facilities and the completion shared value creation. customer expectations.of needed expertise or capacity with Companies are undertaking a numberexternal partners. Adopted forms of of supplier collaboration initiatives,internal and external collaboration suggesting that suppliers arewill be key to better support localized increasingly being seen as importantproducts while leveraging synergies partners in driving innovation,and standards for cost effectiveness. although the primary importance ofTo shift from cost reduction during being innovative in reducing coststhe recession towards new growth persists. Engineering, Logistics,initiatives, companies will actively Production Processes, and Sales andemploy collaboration concepts and Marketing were the leading areasnew innovation business models. for efficient collaboration. Module and Final Assembly, Sourcing andCustomer collaboration is Procurement, and Service andmore than collecting customer Maintenance were less well regardedinsights – it’s about capitalizing and show room for improvement.on them. To cope with the technological andAll companies are moving towards competitive challenges, manufacturingsome form of customer collaboration; companies must increase activehowever, within many companies there involvement of their suppliers in theis a lack of clarity regarding when or value creation part of the innovationwhere exactly the boundaries are for process instead of just relying oninvolving customers in the innovation delivery of defined components. Asprocess – a key area of weakness. this happens, suppliers’ roles shiftLack of insights about consumer towards risk-sharing models, whichneeds and appropriately interpreted require new collaborative processescustomer feedback appears to provide and tools.significant challenges to manufacturingcompanies. Gathering feedback anddata has little commercial value if thereare insufficient processes in place tocapitalize on these insights.6
  7. 7. Manufacturing the way we see itCorporate StrategyOverview Key FindingsIn our 2008 “Collaborating for Innovation appears to have becomeInnovation” study, Capgemini an integral part of our respondents’concluded that companies perceived corporate growth strategy andto be innovators in their marketswould use the economic downturnas an opportunity to fundamentally increasingly is embedded in other functions beyond the R&D division, representing an evolving approach. “ This crisis made it very clear to us that top-transform their businesses and This, together with increasing C-level line growth will neverestablish top-line growth. An essential involvement and growing external be sustainable if weelement of this recovery position was a pressure from globalization, has ledproactive and prioritized approach to companies to look at innovation as an don’t make innovationinnovation. important lever to improve business a dominant part of our performance, in addition to the more corporate strategy.These transformation plans startedwith sharpening corporate strategy traditional role of bringing new products to market. ” Industrial Products, Executiveto drive the supporting innovationstrategy. The plans for the differentbusiness functions like Marketingand Sales, Operations and R&D alsoneeded to be aligned. So in developingthis 2010 edition, our starting pointwas to look at how successful thisapproach had been.In this section, we were keen tounderstand how companies hadadapted their corporate strategy andpositioned innovation to be ready forthe upturn:• How had companies embedded their innovation strategy in the board agenda to support growth?• What was the level of support exhibited by the board and senior executives?• What impact did this have for key business areas such as R&D, Marketing and Sales, and Operations?Collaborating for Innovation 7
  8. 8. Alignment of a Strategic Alignment of Strategic Approach to Innovation with Growth StrategiesApproach to Innovation withGrowth Strategies 100 6% 7% 10% 10%Innovation is perceived as the 17%strongest driver to support thecorporate strategy. The majority of 80companies, across all industry sectors, 44% 59% 36%are making the corporate connection 56% 67%between innovation and growth. 60 Completely aligned in all aspects Closely alignedThe Consumer Products and Retail Somewhat aligned(CPR) sector led the list (>75%). In the 40 Not alignedAutomotive, Aerospace and Defense,and High Tech sectors, 47% to 50% 45% 50%of companies are missing such a close 20 34% 33%alignment. 23%We recommend strengthening 0 2% 1% Auto, Industrial High Tech Consumer Totalthis approach with a structured Aerospace & Products Products & Defense Retailorganizational set-up. Companies thathave established a Chief Innovation Source: CapgeminiOfficer role and/or an InnovationCenter at the corporate level showbetter alignment of their strategicapproach to innovation with theirgrowth strategy.Effectiveness of C-Level or Effectiveness of C-Level or Executive-Level Sponsorship and SupportExecutive-Level Sponsorship for Innovation ProjectsMost of the interviewed companies 100show a strong connection between the 10% 13% 13% 14%CXO or executive level and innovation 22%projects. One reason for increased 80executive support could be thatinnovation management is becoming afundamental component of executive 50% 46% 73% Complete and effective support 60training programs, from in-house to Good support 73% 65%external executive training and MBA Some support No supportcourses. 40But 28% of Automotive, Aerospaceand Defense and 44% of High Tech 37% 20companies lack this management 22%support. These companies have 11% 13% 19%uncovered potential for better support 6% 2% 7% 3% 1%of innovation. 0 Auto, Industrial High Tech Consumer Total Aerospace & Products Products & Defense Retail Source: Capgemini8
  9. 9. Manufacturing the way we see itThe Primary Functional Driver of Which Functional Area Is the Primary Driver of Innovation?InnovationIn most companies R&D as wellas Marketing and Sales are theprimary drivers for innovation. In the General Management InformationAutomotive, Aerospace and Defense 16% Technology 5%sector, however, Marketing needs to Research &do a better job of bringing customer Development 38%feedback into the innovation process. Manufacturing/ Operations 11%Compared with our 2008 survey, therole of Marketing and Sales as the Marketing &primary driver for innovation has Salesbeen strengthened, which reflects 29% Purchasing/the tendency to more market-driven Procurementinnovation instead of a technology 1%push. Source: CapgeminiThe Impact of Globalization onInnovation EffortsNot surprisingly given the Automotive, Aerospace and Defensemultinational structure of many of our remains a laggard, with an averagerespondent companies, globalization 13% usage level. The complexity ofis a dominant factor in the innovation these products and the extended valueefforts of organizations across the chain are likely to have a bearing onindustry sectors. About three-quarters the lower use of new technologies.rate the impact of globalization as veryimportant or important. The trend Capgemini expects that manufacturingfrom 2008 is upwards, particularly clients across all sectors will furtherin the CPR and Industrial Products emphasize the use of collaborativesectors.The Use of New Technologies technologies within the innovation process to increase customer intimacy, accelerate the innovation process and “ The main reason for our extensive top-line growthCPR and High Tech companies led improve the fulfillment of customer is that senior executivesthe way in terms of leveraging new requirements across global markets. from R&D, Marketing andtechnologies like Web 2.0 social In addition, R&D departmentsnetworks and virtual worlds like will use new technologies to apply Operations are all drivingSecond Life to drive innovation and agile development methods and our innovation together.validate ideas, scoring an average improve both effectiveness and They own innovation.usage level of 33% and 28%,respectively. Many CPR companies efficiency in distributed development environments. Consumer Products, Executive ”use online consumer forums tocapture product feedback. This couldbe optimized by expanding the useof virtual worlds to gain a betterunderstanding of articulated andunarticulated customer needs.Collaborating for Innovation 9
  10. 10. Innovation Performance Overview Key Findings The ability to measure innovation Overall, we see a mix of performance performance is a key enabler of top- measurements for innovation across line growth. The resulting metrics and within sectors. To demonstrate the support essential decision-making benefits of collaborative innovation, at all levels of innovation activity. companies need to establish a These decisions range from specific consistent range of performance collaborative innovation projects, the indicators, integrating the relevant supporting project business model and factors impacting top-line growth innovation portfolio analysis, through (such as customer satisfaction, product to the translation of corporate strategy performance, sales, etc.). into an innovation strategy. In general, there is improvement,“ I have seen so manycommercially acceptable The objectives of this section were to understand the strengths and results of companies’ innovation efforts, and compared with our 2008 study, not only in the development of successful products/services that meet customerbusiness cases for how the outcomes are measured. needs and generate profits, but also ininnovation put forward and We expected to see a range of the ability to measure the effectivenessthey all just showed what measurements that were: of the innovation efforts – metricswe wanted to see. After to track innovation end to end. This • Integrating the performance of a would point to a reasonably highwe had taken the decision number of business functions. level of confidence in collaborativeto ‘go,’ we never referred • Balancing short- and medium-term innovation, a significant achievementto or reviewed the original performance. in recessionary times.business case again! • Reflecting the benefits of different ” Industrial Products, Chief stakeholders (shareholders, employees, customers, suppliers, Product failure in the market is predominantly attributed to insufficient customer data and Financial Officer etc.). analysis, and poor reading of market dynamics – particularly misidentifying the best time to launch in competitive and price-conscious markets. For the CPR sector, this ability is their lifeblood. A more reliable approach to development and launch timing is required and needs to be accompanied by greater customer intimacy; collaborative technologies and social communities can serve as important enablers. However, as internal efficiency rates rise through the use of new tools and techniques (such as lean product development), companies will need to be even more inventive to maintain this level of productivity and profitability. Leveraging appropriate performance metrics and analytics will help to improve both effectiveness and efficiency.10
  11. 11. Manufacturing the way we see itPrimary Measure of Innovation Primary Measure of Innovation Performance EffectivenessPerformance EffectivenessAbout one-quarter of respondents 100 9% 9%rated customer satisfaction, product 14% 13% 23%performance and sales from various 16%types of new products as the key 80 14% 24%benchmarks to measure innovation 9% 40%performance – factors that impact Time to marketprimarily the top line. In the 60 22% 41% Sales from various types of new productsAutomotive, Aerospace and Defense 25% 23% Product performancesector, an additional key performance 12% Manufacturing and operations costsindicator was development cost, a 40 27% 9% 3% 5% Development costsreflection of the industry’s focus on the 5% 10% Customer satisfaction 9%earlier stages of the innovation funnel, 14% 7%with the high costs of development 20 31%centers and high-specification 25% 23% 20%engineering. 18% 0 Auto, Industrial High Tech Consumer TotalTime to market is still a challenge Aerospace & Products Products & Defense Retailfor the Industrial Products sector,reflecting the competitive nature Source: Capgeminiof the consumer markets as theultimate driver. Industrial Products data has been in use by Marketing approximately 50% across industrycompanies have had to become more and Sales for decades, determining segments leverage external expertsagile in meeting fast-changing client precision pricing, placement, or innovation brokers to fuel therequirements and shorter product promotion and production. innovation process.lifecycles. Preferred-supplier status ismore readily accorded to companies Companies with a strong drive for To stay competitive, companiesdemonstrating faster innovation innovation, as well as a focus on should more actively leverage externalcycles and rapid product replication. effective and efficient new product sources as input for the innovationIn that case, innovation performance development and introduction, should process in terms of both fundingmeasures should focus on accelerating introduce intelligent measures to and expertise. We recommendtime to market – for example with better track their innovation and its identifying specific projects in thespecial events for product launches. outcome. innovation portfolio for outsourcing – for example, where there is a lackMeasurement of Profitability External Impetus to the of internal resources or internalCompanies appear to have improved Innovation Funnel knowledge. Clear conditions have totheir processes for measuring the Across industries, approximately 50% be defined to maintain internally asprofitability of their innovation of the respondents indicate that they much intellectual property as possible.effort, or are more focused on still fund and execute innovation These kinds of projects should beclearly demonstrating a satisfactory activities purely internally. The others evaluated in terms of benefits, risk andfinancial return. In fact, about 90% are actively looking for external input potential before being outsourced. Inof respondents rated their ability by outsourcing parts of projects or addition, companies should developto measure the profitability of new complete projects, by purchasing and maintain an active network ofproducts or services as “good,” “very innovation services or by working experts to be leveraged for innovationgood” or “excellent,” up from the 2008 with external partners. Between 32% and promotion of products andlevel of 81%. This measurement is (High Tech) and 65% (Automotive, technologies.more mature in CPR where complex Aerospace and Defense) participateand detailed product performance actively in innovation clusters andCollaborating for Innovation 11
  12. 12. Success Rate of New Products/ Success Rate of New Products Launched over Past Three YearsServices Launched in the PastThree Years 100 2% 8% 13% 11%About two-thirds of the respondents 23%in our study affirmed that less than 32%half the products launched in the past 80 13% 23% 33%three years had been successful in 27% 76+%the market. Even across the various 51-75%industry sectors this range does not 60 26-50%vary considerably. On the other side, 0-25%11% of respondents indicate that 61% 49%they achieve success rates of more 40 41% 51%than 76% – a significant difference 36%in innovation performance and asignificant potential for improvement. 20 18%Respondents indicate that failure to 14% 17% 13% 15%meet customer needs is by far the 0 Auto, Industrial High Tech Consumer Totalprimary cause for new product launch Aerospace & Products Products & Defense Retailfailure. In particular, industry sectorsthat sell directly to end-customers Source: Capgeminicite this as the main reason for lackof success. Although companies areincreasingly putting marketing inthe lead role for innovation, theystill struggle to understand customerneeds and produce new products that Primary Cause of New Product Launch Failureeffectively meet those needs. 100 5%New methods in the innovation 10% 13% 18% 21%process and the more active use of 17%collaborative technologies (Web 2.0, 80 24% 18%collaborative platforms, virtual worlds) 16% 10% 19%provide opportunities to addressthis challenge. In addition, more 60 14%structured application of known and 21% Product’s retail price too expensive Product launched too late to marketproven methodologies – like design- 21% 47% 58% Product launched before marketto-value and voice of the customer 40 39% was ready– can help improve success rates. In 19% Product failed to meet customer/consumer needsmany companies the influence of R&D 22% Poor product quality ordepartments and internal priorities are 20 14% technical performancestill too strong. 5% 6% Development project too expensive or not adequately funded 19% 4% 12% 12% 10% 6% 0 Auto, Industrial High Tech Consumer Total Aerospace & Products Products & Defense Retail Source: Capgemini12
  13. 13. Manufacturing the way we see itR&D CollaborationOverview Key FindingsCollaboration in innovation can be We expect a number of shakeoutsdriven from a number of different of companies with large R&D units,functional angles. In this section, the and increased merger and acquisitionfocus is on collaboration within the activity. This may precipitateR&D function, with different tiers of further alignment of R&D unitcollaboration: operations, including process and tool• Internal collaboration based on harmonization, and shared ways of working. “ Our biggest challenge for R&D is not changing R&D communities within the strategy, organizational organization. Is this a function of In-house R&D is increasingly a redesign or improving organizational structure (centralized consolidated function with a strong or decentralized), IT tools or majority of companies maintaining supporting tools. It’s funding? only a handful of distinct facilities, about getting the open-• Internal collaboration among R&D, with North America still the preferred innovation way of Operations, and Marketing and location. Perhaps as a result of this working accepted by Sales, developing a more integrated consolidation, there was a high degree of confidence regarding the ability to our researchers and innovation process. secure ongoing funding. developers.• External collaboration with suppliers and customers in the current value chain. Complementing this is the recognition ” Industrial Products, Executive of the value of collaborating beyond• External collaboration with third organizational boundaries. Compared parties outside the current value with 2008, satisfaction levels increased chain – capable of providing real for key tools such as open-innovation “disruptive” innovation. environments to collaborate with external innovation parties, andAn important aspect of R&D strategy information systems to supportis the decision to outsource some R&D internal design collaboration. Allactivities. This requires a validated internal and external collaborationchoice of sourcing model, as well tools were highly rated.as close business model alignmentwith suppliers. Following the open-innovation concept, companies have Case Study:started outsourcing R&D, enabling Snecma Launches New PLM Solution to Support Collaboration in the Extended Enterpriseinnovation to be leveraged earlier in In response to economic challenges and new organizational patterns in the Aerospace industry,the value chain. Snecma, a leading manufacturer of aircraft and rocket engines, launched a project called “Virtual Plateau” with strong integration among OEM and Tier 1 partners.So how can companies outsource The objective was to establish a new Product Lifecycle Management (PLM) platform in order to enabletheir R&D to increase their flexibility true collaboration with all internal and external stakeholders involved in the engines programs. The platform would provide secure access to data, a central repository of technical data and CAD modelsand effectiveness, while maintaining as well as configuration data. A key requirement was to establish reliable collaboration processes witha focus on meeting the needs of customers and suppliers around the digital mock-up as the central reference for product configuration.customers and consumers? To shed Real-time collaboration needed to be enabled in order to accelerate communication and development activities.some light on the future strategy and Capgemini has been supporting Snecma in this project on three major aspects:structure of the R&D function, the • Internal collaboration among R&D, Operations, and Marketing and Sales, developing a morequestions in this section focused on integrated innovation process.companies’ current R&D footprint, • Redefinition of the processes to work internally and externally with partnersthe balance between centralized in- • Development of the new PLM solution and integration within the information systemhouse R&D and different models of • Change management and support for the deployment of the new solutionpartnerships and outsourcing, and More than 1,800 individuals are impacted by this ambitious project, and the expected benefits are 5%the IT mechanisms used to support to 10% reduction of the development costs for new engines thanks to improved collaboration among all partners.collaboration.Collaborating for Innovation 13
  14. 14. Number and Locations of Current Number of Locations for R&D FacilitiesCurrent R&D FacilitiesJust over half the respondents (52%) 100 6% 8% 8% 10%operate a highly centralized model 14% 3% 4% 3% 3%with only one primary R&D facility, 8% 8% 10% 14% 15%up from 35% in 2008. An additional 8027% operate a contained model with 21% 27%only two to four locations. This tight 27% 16+ 26%focus has no doubt helped to keep 60 11-15 locationsR&D operational costs to a minimum, 5-10 locations 53%while still delivering business value. Focused on 2-4 locations 40 Primarily in 1 locationBy contrast, only 11% of companies 61%supported a decentralized model with 52% 52% 48%R&D facilities spread across multiple 20(>10) locations. This model was 19%more prevalent in the Automotive,Aerospace and Defense sector, possibly 0 Auto, Industrial High Tech Consumer Totalresulting from the dependence on Aerospace & Products Products & Defense RetailR&D as a core competence and onspecialist partners. Source: CapgeminiNorth America is still the heartland forR&D facilities for 29% of companies,followed by Western Europe (22%).However, India is catching up fast,providing a favorable environment in Location of Current R&D Operationsterms of infrastructure, knowledge 100capital, and government policies and 11% 5% 6% 10% 8%regulations. 2% 4% 3% 5% 9% 15% 16% 80 17% 24% 12% 5% 7% 9% 8% 6% 3% Spread across more than 2 regions 5% 60 10% 6% 7% Australia/NZ India & SE Asia 25% 20% 20% 22% Africa & Middle East 26% Eastern Europe 40 Western Europe 7% 5% 9% 6% Central & South America 4% North America 20 28% 33% 29% 27% 26% 0 Auto, Industrial High Tech Consumer Total Aerospace & Products Products & Defense Retail Source: Capgemini14
  15. 15. Manufacturing the way we see itStrategy for R&D in the Next R&D Strategy in the Next Three YearsThree YearsInterestingly, more than 50% of 100 5% 7% 11%respondents indicate that their 19%companies want to increase in-house 35%R&D over the next three years, 80which reflects the perception that thedevelopment of intellectual property 61% 64%and knowledge is considered to be 60 71% 52% Increase R&D outsourcingan important differentiating factor, Increase in-house R&D 33%even though external collaboration Increase decentralizationhas become a standard process. The 40 Increase centralizationConsumer Products and Retail sectoris most likely to use collaborative 12% 10% 11%innovation models, no doubt due 20 22% 7%to the need to market specific, 19% 22% 18%quickly changing, innovative product 15% 6%portfolios. This can only be achieved 0 Auto, Industrial High Tech Consumer Totalby leveraging all channels for Aerospace & Products Products & Defense Retailinnovation. Source: CapgeminiR&D Collaboration ActivitiesWe asked respondents to assess theeffectiveness of a range of IT-based • IT to support internal design Interestingly, in particular Consumercollaboration tools. The results show collaboration: 77% said “very Products and Retail companies werevery high satisfaction across the good” or “good,” also an increase very positive users. High Tech andvarious channels and across most from 2008. to a lesser extent Industrial Productssectors and indicate the degree to • Collaboration within the were consistently less enthusiasticwhich IT has become a pervasive and organization’s R&D facilities: 69% about these tools and infrastructures,effective mechanism for collaborating. rated this as “very good” or “good,” possibly because of a greaterThe following summary records the and 12% rated it as “excellent.” importance attributed to intellectualpercentages of respondents rating each property rights and an internal culture • Collaboration within thecollaboration tool as “good” or better. historically focused on specific unique organization cross-functionally: technology platforms. These sectors 80% said “very good” or “good.”• Open-innovation environments could better leverage this kind of to collaborate with external connectivity. In the past two years, many companies innovation parties: 79% said “very have adopted effective networks good” or “good.” This tool, used to leverage specialist external to find scientists/experts to assist expertise, complementing both the in resolving innovation problems, consolidation approach to in-house recorded a significant increase from R&D functions and the trend towards 2008. a more partnership-driven model for• Shared work spaces for data and outsourcing. However, although many documents: 71% rated this as “very companies recognize the positive good” or “good.” impact, the broad availability and• Exchanging product data with day-to-day application of the above- external partners via system mentioned technologies are in many interfaces: 79% said “very good” or cases still to be achieved, as our “good.” experiences show.Collaborating for Innovation 15
  16. 16. Customer CollaborationOverview Key Findings Percentage of New ProductsThe role of customers in innovation As we have seen from the barriers Shaped by Customers Duringis likely to increase in the near future, indicated in the Innovation Developmentas their opinion is ultimately the one Performance section, lack of insight Just under half (46%) of respondentsthat really counts. It is also likely into consumer needs and interpreting said that less than 20% of newto change, with the growing use of customer feedback are key obstacles products originated from ideastechniques such as co-creation and for the innovation function. It is generated or shaped by customers,crowd sourcing. Currently it is not well documented that the role of with an additional 26% puttingentirely clear where the boundaries of the customer is critical in providing the contribution between 20% andthis customer involvement lie. People the starting point and validation 39%. These relatively low figurestend to connect co-creation with the mechanism for a successful new correspond to the fact that manyearliest stages of the new product product or service. It can also be innovations still fail due to thedevelopment process (notably idea regarded as a key indicator of success, inability to meet customer needsgeneration) or the later stages (in as important as the quality and (see earlier discussion in “Innovationeffect, customization). functionality of the product itself. Performance” section).However, it is likely that customer This section looks at the managed Of course the results varied byinteraction can be useful throughout the and proactive contribution of the sector, with Industrial Productsproduct development process. PepsiCo’s customer in the innovation process companies claiming higher ratesMountain Dew “DEWmocracy” case is a and the degree to which companies than other sectors and CPR beingkey example; customers were involved are successful in leveraging the the least successful in gathering orin developing new products (“Help intelligence gained. Although it is incorporating customer ideas intocreate the new Dew”), contributing clear that companies have put in place product development. In the case ofopinions ranging from the taste, processes and systems for customer Industrial Products, this is likely duecolor, look and feel, to the marketing interaction, and there are positive to the reduced number of customerscampaign for this product. So customers responses regarding their use, the and the higher degree of customer-must be regarded as a valuable efficiency of these structures in terms specific engineering. In many cases,innovation collaboration partner, at of this leading to new products is less customers are directly involved inevery step of the way. certain.But no matter where the involvement Percentage of New Products, Launched Over Past Three Years, Shaped by Customers During Developmenthappens, stronger collaborationwith customers will help companies 1% 100 5% 2% 3% 2%better meet customer needs and 6% 5% 10% 11% 8%therefore increase the success rate of 9%innovations. 23% 80 18% 24% 29% 25% 80-100% 60-79% 60 18% 26% 40-59% 20-39% 28% 32% Less than 20% 40 59% 49% 46% 20 34% 27% 0 Auto, Industrial High Tech Consumer Total Aerospace & Products Products & Defense Retail Source: Capgemini16
  17. 17. Manufacturing the way we see it the specification of new products Customer Collaboration“ When our end usersbecame involved in our or they act as pilots. For Consumer Products companies, it is much more difficult to find a structured way to get Activities More than 80% of companies claimed to successfully (“good,” “very good” orinnovation initiatives, it representative customer insights across “excellent”) use a range of mechanismshad the effect of ‘shaking markets. for collaborating with customers suchup’ the value chain. As as:a result, we’ve gained Experience shows that many companies would like to involve • Working with customers tosignificantly more insight customers more effectively in their co-develop products/services (leadfrom their contribution, new product development process, customer concept).which has helped to but they face hurdles such as long • Predicting and capitalizing onimprove our product development cycles or complex customers’ unmet needs. products. Additionally manufacturers’launches. • Using open-innovation ” High Tech Company, perception is that their products are too commoditized or that they are “too far down” the value chain to interact environments to collaborate with customers. Chief Marketing Officer • Using the company’s information with customers. Our work with clients leads us to believe that customer systems to support collaboration involvement is appropriate and with customers. possible for just about any business. This is an indication of the pervasiveness of Web 2.0 mechanisms. Engaging with Customers A strong majority of respondents (77%) believed that their engagement with customers was “good,” “very good” or “excellent,” representing an increase from 2008 levels for most sectors with the exception of High Tech. Customer Insight Lacking When asked what’s preventing customer collaboration for improved innovation, respondents said: • Customer feedback, communication and insight • Improved R&D function and facilities • Collaboration with external parties Clearly there’s work to be done in this area, as a significant number of executives said they were “unsure” about the barriers to customer collaboration.Collaborating for Innovation 17
  18. 18. Supplier CollaborationOverview Key FindingsAs a reaction to increasing cost In this section, we asked participantspressures and complexity, companies to assess the effectiveness of theare continuing to concentrate on contribution of their suppliers’core competencies and outsourcing innovation initiatives, in terms ofnon-core functions. This is now also the reasons and functional impact.increasingly applicable to R&D, asoutsourcing affects more and more We discovered that companies are undertaking a number of supplier “ We partner with other external parties for ourtypes of operational and administrative collaboration initiatives, which innovation funnel but notfunctions. By outsourcing R&D suggests that suppliers are being always with companies;and adopting the open-innovation seen more as partners in drivingconcept, companies can leverage innovation, although the importance also with educational and other public institutions.innovations earlier in the value chain.In our work with clients, we of being innovative in reducing costs persists. ” Automotive, Aerospace andfrequently see early supplier The overall picture clearly indicates Defense, Marketing Executiveinvolvement in R&D, but suppliers that supplier collaboration has becomeoften still have a straightforward a standard in all industry sectorscontractor role: They execute what has and that companies employ variousbeen conceived by the innovator in models of supplier collaboration tothe chain. This approach significantly fulfill the market demand.reduces the latent benefits of openinnovation, and limits the possibilityof high-value disruptive innovationsfrom other parts of the value chain.So how can companies outsourcetheir R&D to suppliers to increase theflexibility and effectiveness of R&D,while maintaining a clear focus oncustomers’ and consumers’ needs? Webelieve companies need to assess thecriticality of their innovation programsand decide on an appropriate maturitymodel of sourcing (for example,Capgemini’s Global Sourcing ofServices model) for each program. Asignificant variable is the opportunityfor leverage both for and fromsuppliers.Once an outsourcing decision hasbeen made, suppliers must be selectedbased on their ability and willingnessto take over part of R&D. Businessmodels need careful alignment and,for current suppliers, the changefrom contractor to developer will besignificant.18
  19. 19. Manufacturing the way we see it Reasons for Supplier The High Tech respondents said they Collaboration Initiatives work well with suppliers to reduce We gave our respondents a range of costs and improve product quality, parameters regarding their company’s but there appears to be room for ability to carry out collaboration improvement in other aspects, notably initiatives with their suppliers: access to required knowledge and reducing product costs, improving improving innovation capacity. product innovation, providing access“ An anomalous effectof outsourcing R&D to new markets, accelerating time to market, improving product quality, access to required knowledge and Control over Intellectual Property as Important Criterion during Partner Selectionto suppliers is that improving innovation capacity. Seventy-three percent of companieswe dropped down the rate the control over intellectuallist of top innovators, All were consistently rated as “very property as a very important oras measured by R&D important,” “important” or to a important parameter when selecting lesser extent “somewhat important,” partners for collaboration in theirexpenditure. But in practice indicating that the supplier role is innovation initiatives. This reinforceswe significantly increased viewed as essential in supporting the fact that manufacturers prefer toour business value! overall innovation goals across the partner with companies that have ” High Tech Manufacturer, innovation value chain. However, it also points to a wide set of pressures not only specific expertise, but also have systems to manage intellectual Executive being exerted on suppliers. It is property, to ensure that it is not shared possible that these expectations will with competitors. be translated into suppliers adopting their own innovation initiatives, thus Western Europe (84%), North developing a virtuous circle, but the America (81%) and Asia-Pacific (76%) roadmap is likely to be challenging. are perceived to exert effective controls Importance of Intellectual Property Control as Criterion during Partner Selection 100 10% 15% 17% 22% 34% 80 Very important 43% Important 60 Somewhat important 58% Not important 66% 64% 40 59% 37% 20 24% 17% 13% 7% 10% 1% 3% 0 Auto, Industrial High Tech Consumer Total Aerospace & Products Products & Defense Retail Source: CapgeminiCollaborating for Innovation 19

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