50 Years of Growth, Innovation and LeadershipNext-Generation Manufacturing Leadership:Learning to Adapt to Collaborative B...
Manufacturing Leadership Council/Frost & Sullivan                 Introduction...............................................
Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business ModelsINTRODUCTIONIn May of 2012, th...
Manufacturing Leadership Council/Frost & Sullivan                                         Evidence of Organizational Inert...
Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business ModelsFidoten also says that custome...
Manufacturing Leadership Council/Frost & Sullivan                                         Changing Customer Engagement Mod...
Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business Models                              ...
Manufacturing Leadership Council/Frost & Sullivan                                           2. Customer SAT Leads Strategi...
Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business Models3. Reducing Cost A Top Initiat...
Manufacturing Leadership Council/Frost & Sullivan                                           4. Strong Uptick Seen In Key F...
Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business ModelsSection II: Organization      ...
Manufacturing Leadership Council/Frost & Sullivan                                           6. ...But Strong Majority Stil...
Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business Models                              ...
Manufacturing Leadership Council/Frost & Sullivan                                                                         ...
Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business Models                              ...
Manufacturing Leadership Council/Frost & Sullivan                                                                         ...
Silicon Valley                         San Antonio                                  London  331 E. Evelyn Ave. Suite 100  ...
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Manufacturing Leadership Council

  1. 1. 50 Years of Growth, Innovation and LeadershipNext-Generation Manufacturing Leadership:Learning to Adapt to Collaborative Business Models A Manufacturing Leadership Council White Paper www.manufacturing-executive.com
  2. 2. Manufacturing Leadership Council/Frost & Sullivan Introduction............................................................................................................................. 3 Next Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business Models......................................................... 3 Evidence of Organizational Inertia Surfaces...................................................................... 4 The Need to Develop Knowledge about Collaboration..................................................... 5 Changing Customer Engagement Models........................................................................... 6 Business Direction/Courage Retains Top Leadership Spot................................................. 7 Customer SAT Leads Strategic Priorities, but Vision and Financial Performance Rise..... 8 Reducing Cost a Top Initiative, but New Markets rise Strongly......................................... 9 Strong Uptick Seen in Key Functional Activities................................................................. 10 Inertia is Evident in Current Organizational Structures.................................................... 11 …But Strong Majority still sees Collaborative Model in Five years.................................. 12 Stronger Emphasis this year on Collaborative Skills........................................................... 13 New Products take Lead in Innovation Intentions............................................................. 14 Social Media inches Upward on Engagement Front........................................................... 15 Social Media holds Place as Future Collaborative Model................................................. 16 CONTENTS
  3. 3. Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business ModelsINTRODUCTIONIn May of 2012, the Manufacturing Leadership Council’s Board of Governors authorizeda research project entitled Next-Generation Leadership. The intent of the study is toexplore how senior manufacturing executives think about their leadership roles todayand how those roles may change in the future; how their companies are organized todayand how structures may change in the years ahead; and how business activities such ascustomer engagement are conducted today and will be conducted in future years.The following report summarizes key findings of a survey fielded to senior-level manufacturingexecutives, including members of the Manufacturing Leadership Council, in North America inJuly of 2012. More than 200 completed surveys were returned.NEXT-GENERATION MANUFACTURING LEADERSHIP:LEARNING TO ADAPT TO COLLABORATIVE BUSINESS MODELSWhen manufacturing executives think about what it will take to be an effective leader of theirown organization in the years ahead, they know they will have to juggle two balls at once.One ball has to do with constant, fundamental disciplines—growing revenue, making the rightproduct, controlling costs, hiring and retaining the right people, and making a profit.The other ball isn’t quite so fully formed. It has to do with change—new ways ofworking, shifting customer and employee expectations, new technologies that can alter evenlong-established processes and organizational structures, and new competitive threats.Keeping both balls in the air at the same time may seem like a simple trick that has always beena key test of leadership. In some ways, that’s true. Leaders have always had to be capable offocusing on the present and preparing for the future. Making the right product that delights abuyer and makes a profit is something that has never changed and will never change.So, what’s different about today’s business environment? Simply put, rapidly acceleratinginformation and communication technologies are changing the rules of business with a speedand an effect rarely seen in the annals of industrial history. We are in a time where we arerethinking business models, the way we structure our companies and organize work, how wedefine our markets, how we engage with customers, and how we build products for them.Today, just about everything is on the table, subject to change. And in the center of that tableis how we organize our companies, how people work and where they work, how we engagewith customers and use information from them and about them, and how we build things.In short, manufacturing today is rewriting its own script. As we do, manufacturing executivesknow they need to move to a business and operational model that enables them to engageand maximize the use of every resource within their organizations and within their networksof customers and partners. Frost.com­­ 3
  4. 4. Manufacturing Leadership Council/Frost & Sullivan Evidence of Organizational Inertia Surfaces This movement to a more collaborative way of doing business is one of the key findings of the Manufacturing Leadership Council’s third annual Leadership Poll. More than 200 senior-level manufacturing leaders from across the industrial landscape weighed in on how they think about the leadership role, the emphasis they place on strategic and operational activities, how they are organized today and expect to be in the future, and how they expect the rules of customer engagement to change going forward. One of the key findings in this year’s poll is an apparent inertia in the shift to that collaborative model. While poll respondents are clear in their intent to move to the model, it is evidently no simple task to do so. The need to change cultures, behaviors, and established processes in order to embrace a collaborative way of doing business is hard work that takes time. When asked, for example, to characterize their current organizational model, the percentage of those respondents indicating that they currently have a collaborative approach was essentially the same as last year’s finding. In the new poll, only 11.4 percent say they have such a structure, compared with 10.7 percent last year. And no statistically meaningful movement was seen in the number of respondents, indicating that they currently have a traditionally centralized command-and-control structure in their companies. Those saying they have adopted a highly decentralized model grew to 14.4 percent, from 9.9 percent last year. But the trend line toward the collaborative approach appears inexorable. Even though 40.3 percent of poll takers this year say they are holding onto their organizational models—more than the 34.7 percent who said so last year—nearly 60 percent, down from 65.3 percent last year, say they expect their models to be different in five years’ time. And of those who do expect to be organized differently, 72.5 percent this year say the collaborative model is their choice, up from 66.5 percent last year. Evidently, the road to the collaborative model will not be a straight line and will have stops, even steps backward, along the way. And different parts of the manufacturing enterprise—marketing, supply chain, production—will move at different speeds toward the collaborative idea. At Campbell Soup, for example, the desire to be innovative is driving much effort around collaboration, but there are differences on how far along this work is within internal organizations such as marketing and supply chain. “We are much more active in innovation as a CPG company on the business side,” says Eric Fidoten, vice president of global supply chain strategy and operations excellence at Campbell Soup, and a poll respondent. “Culturally within the supply chain, there are some inhibiting factors that are changing slowly. The rules of the road need to be worked out.” Among the rules that need work, according to Fidoten, who is a member of the Manufacturing Leadership Council, are how to better manage trade secrets, deciding who owns collaborative ideas that are generated within the company, how to share information more effectively, and putting in place the systems necessary for the greater information load. 4 Manufacturing-Executive.com
  5. 5. Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business ModelsFidoten also says that customer segmentation is very important as an organization goesthrough the collaborative journey. “There are clearly different strategies,” he says. “Wal-Martsometimes isn’t necessarily collaborative. We need to better understand what collaborationmeans to create win-wins.”The Need to Develop Knowledge about CollaborationDeveloping greater knowledge about and expertise in collaboration is clearly on the radarscreens of survey respondents. When asked about the degree of emphasis they will placegoing forward on a range of activities, developing knowledge and expertise in collaboratingwith customers and partners saw more than a 10-point jump, to 43.4 percent of poll takers,compared with 33.2 percent last year. The goal, survey respondents indicate, is to drive newproduct introductions and better service and support, including the creation of new servicesthat can be bundled with product sales.This push is part of a changing customer engagement landscape, and one in which not onlynew information-gathering mechanisms such as social media are at play, but also how thatinformation is fed back into internal business processes to create products customers wantand get those products to market with greater speed.Today, most manufacturers have a fairly traditional engagement model that includes periodicsatisfaction surveys, live customer meetings, and feedback through the sales channel. Theuse of social media today is still a small part of the mix, but growing noticeably. This year’ssurvey shows that today, social media is used by 13.1 percent of respondents, up from just7.9 percent last year. Looking forward over the next five years, however, social media isprojected by respondents to become the most dominant mechanism for engagement.At L’Oréal, top management has identified digital marketing as “the next frontier,” says MorrisLenczicki, vice president of industrial systems applications at L’Oréal USA, and social media willbe a significant part of it.“L’Oréal has identified a whole new area in digital social media,” says Lenczicki, a surveyrespondent and a member of the Manufacturing Leadership Council. “We’re trying to figureout how to get quick turnaround information that is meaningful and can be used to makedirectional decisions.”He says that L’Oréal still uses traditional ways of engaging customers. L’Oréal New York’sBeauty Center, for example, invites people to try products live, an engagement mechanism,Lenczicki says, that the company will continue to need. “But I also think there will be more useof social media for immediate feedback,” he adds. Frost.com­­ 5
  6. 6. Manufacturing Leadership Council/Frost & Sullivan Changing Customer Engagement Models Better understanding of customers and achieving higher levels of satisfaction with them is the driving force behind changes many manufacturing companies are making to their engagement models. Since the inception of the survey three years ago, customer satisfaction has indeed been the top strategic priority identified by survey respondents. This year, 76.7 percent of survey takers ranked it at the top of their priority list, up from 72.7 percent last year. This priority is significantly more important to respondents than a range of other strategic issues, including leadership vision, culture, and even financial performance. That makes sense, of course, because a loyal and growing set of customers can drive just about everything else. But manufacturers also know that there are other aspects of running the business that are central to success. One of them is what might be called an innate capacity for leadership. And it all has to do with that other, not fully formed ball. Where do I take my company tomorrow and in the days after? Where do I find the strength and stamina to do so? Again this year, a third of survey respondents said that knowing which direction to take the company in and having the courage to do so best describes the leadership challenge to them. 6 Manufacturing-Executive.com
  7. 7. Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business Models 20121. Business Direction/Courage Retains Top Leadership Spot 2011Q. Which statement best describes what leadership means to you? Knowing in which direction to take the company and having the courage to do so 33.2% 35.4% Doing right by customers, employees, and shareholders 31.3% 30% Achieving consistent growth and profitability 11.2% 8.2% Striking the right balance between what we should do and shouldn’t do 4.7% 5.3% Educating others on the right things to do 0.9% 3.3% Inspiring ever yone around me, ever yday 14% 13.6% Relying on my own experience, instincts and judgement to make decisions 3.7% 2.5% Being ahead of the competition 0.9% 1.6% Frost.com­­ 7
  8. 8. Manufacturing Leadership Council/Frost & Sullivan 2. Customer SAT Leads Strategic Priorities, But 2012 Vision And Financial Performance Rise 2011 Q: What degree of emphasis do you place on the following strategic activities? (Responses of 5 on a 1-5 scale) Customer satisfaction 76.7% 72.7% Vision and overall strategy 56.0% 46.4% Financial Performance 48.8% 42.3% Operational excellence 47.9% 40.6% Establishing and maintaining the right culture 47.2% 34.9% 8 Manufacturing-Executive.com
  9. 9. Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business Models3. Reducing Cost A Top Initiative, But New Markets 2012 Rise Strongly 2011Q: What degree of emphasis do you place on the following business initiatives? (Responses of 5 on a 1-5 scale) Reducing costs 43.2% 43.2% Regulator y compliance 37.9% 33.3% Indentifying new markets, customers 37.2% 27.8% New product innovation 32.4% 24.7% Process innovation 32.4% 27.5% Frost.com­­ 9
  10. 10. Manufacturing Leadership Council/Frost & Sullivan 4. Strong Uptick Seen In Key Functional Activities 2012 2011 Q: What degree of emphasis do you place on the following internal activities? (Responses of 5 on a 1-5 scale) Sales 51.6% 41.2% Assembly/production 36.9% 31.8% Design, product development 37.1% 29.4% Ser vice and support 38.6% 32.4% Marketing 31.2% 21.5% 10 Manufacturing-Executive.com
  11. 11. Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business ModelsSection II: Organization 2012 5. Inertia Is Evident In Current Organizational Structures 2011 Q. Which statement best describes how your company is organized today? Highly centralized, with a command-and-control environment. Once executive management decides on a course, ever ybody is expected to fall into line 16.8% 16.9% Somewhat centralized, with corporate controlling most key facets of the business, but divisions, departments and plants have input and some flexibility in how things are done 48.5% 55.5% Highly decentralized, with corporate loimited in size and ser ving administrative functions while individual business units, divisions and departments formulate budgets and strategies 14.4% 9.9% Somewhat decentralized, with corporate and business units in a form of federal structure 8.9% 7.4% Collaborative and virtually distributed, where traditional hierarchies have been eschewed in favor of ever yone working together ; most people have a meaningful voice in how the business is run 11.4% 10.7% Frost.com­­ 11
  12. 12. Manufacturing Leadership Council/Frost & Sullivan 6. ...But Strong Majority Still Sees Collaborative Model 2012 In Five Years 2011 Q. Which statement best characterizes how you would like to see your company organized five years from now? Same as it is today 40.3% 34.7% Differently 59.7% 65.3% Q. If differently, what form would you like your company’s organization to take in five years? Centralized in terms of systems and processes, but decentralized in terms of decision-making 10.0% 17.7% Decentralized in most respects, with Corporate providing financial ser vices as well as shared ser vices 16.5% 15.8% Collaborative, in which employees, partners, suppliers and customers are part of an overall virtual ecosystem contributing to the business 72.5% 66.5% 12 Manufacturing-Executive.com
  13. 13. Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business Models 20127. Stronger Emphasis This Year On Collaborative Skills 2011Q. Looking forward over the next couple of years, what degree of emphasis would you place on the following areas in terms of development knowledge and expertise? Social Media 10.2% 6.9% New technologies, including cloud computing 19.8% 19.7% Greater collaboration with customers, partners 43.4% 33.2% Digital factor y techniques to link design and production 22.7% 19.8% Ser vices that can be associated with sold products 20.2% 12.9% Sustainability or "green" techniques and technologies 19.2% 18.6% Better use of customer data 28.6% 26.2% Frost.com­­ 13
  14. 14. Manufacturing Leadership Council/Frost & Sullivan 2012 8. New Products Take Lead In Innovation Intentions 2011 Q. Looking forward over the next several years, what will be your priorities in terms of improving innovation in the following areas? New product introductions 42.4% 33.6% Doing right by customers, employees, and shareholders 31.3% 30% Customer ser vice and support 41.5% 37.6% Product design and development 33.2% 33.5% Marketing/brand development 31.4% 19.3% Product idea generation 30.6% 25.7% 14 Manufacturing-Executive.com
  15. 15. Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business Models 20129. Social Media Inches Upward On Engagement Front 2011Q. How does your company involve its customers, suppliers and partners in its business today? We conduct periodic satisfaction sur veys and build the results into improvement plans 15.7% 24.7% In addition to sur veys, we conduct in-person meetings as well as focus groups to obtain feedback 31.9% 30.8% We are increasingly using social media (Twitter, LinkedIn, Facebook, etc.) to involve these groups on a continuous basis 13.1% 7.9% Relationships are mostly transactional and feedback is anecdotal 19.0% 18.9% Input and feedback are mostly through the sales channel 19.4% 18.9% Frost.com­­ 15
  16. 16. Manufacturing Leadership Council/Frost & Sullivan 2012 10. Social Media Holds Place As Future Collaborative Model 2011 Q. Looking forward over the next five years, what engagement model would your company prefer? One that is highly collaborative, with social media as a primar y mechanism 24.7% 25.1% More live events 11.6% 7.9% Pretty much the same as today 18.4% 26.0% More executive involvement with key customers 21.1% 19.4% Providing greater visibility into the companys operations and processes through IT dashboards and portals 24.2% 21.6% 16 Manufacturing-Executive.com
  17. 17. Silicon Valley San Antonio London 331 E. Evelyn Ave. Suite 100 7550 West Interstate 10, Suite 400, 4, Grosvenor Gardens, Mountain View, CA 94041 San Antonio, Texas 78229-5616 London SWIW ODH,UK Tel 650.475.4500 Tel 210.348.1000 Tel 44(0)20 7730 3438 Fax 650.475.1570 Fax 210.348.1003 Fax 44(0)20 7730 3343 877.GoFrost • myfrost@frost.com http://www.frost.comABOUT THE MANUFACTURING LEADERSHIP COUNCILThe Manufacturing Leadership Council, now a key element of Frost & Sullivan’s value proposition,offers an integrated portfolio of leadership networking, information, and professional developmentproducts, programs, and services for industrial executives worldwide. The Manufacturing LeadershipCouncil’s mission is to help senior executives define and shape a better future for themselves, theirorganizations, and the industry at large. The Manufacturing Leadership Council’s integrated portfolioconsists of the Manufacturing Executive website, an online global business network; the ManufacturingLeadership Council, an invitation-only executive organization; the annual Manufacturing LeadershipSummit conference; the Manufacturing Leadership 100 Awards program; and the ManufacturingLeadership Journal. For more information, visit us at http://www.manufacturing-executive.com/index.jspa.ABOUT FROST & SULLIVANFrost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionaryinnovation that addresses the global challenges and related growth opportunities that will make or break today’smarket participants. For more than 50 years, we have been developing growth strategies for the Global 1000, emergingbusinesses, the public sector and the investment community. Is your organization prepared for the next profoundwave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthroughbest practices, changing customer dynamics and emerging economies? Contact Us: Start the DiscussionFor information regarding permission, write:Frost & Sullivan331 E. Evelyn Ave. Suite 100Mountain View, CA 94041Auckland Dhaka Miami ShenzhenBahrain Dubai Milan Silicon ValleyBangkok Frankfurt Mumbai SingaporeBeijing Hong Kong Moscow Sophia AntipolisBengaluru Iskandar/Johor Bahru Oxford SydneyBogotá Istanbul Paris TaipeiBuenos Aires Jakarta Pune Tel AvivCape Town Kolkata Rockville Centre TokyoChennai Kuala Lumpur San Antonio TorontoColombo London São Paulo WarsawDelhi / NCR Manhattan Seoul Washington, DCDetroit Mexico City Shanghai

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