How to Succeed with Industrial Equipment

Makers of industrial equipment must do four things in order to be successful in today’s recovering economy. James Robbins from Accenture explains.

Aw 11754 Engineer Blue Prints

The industrial equipment (IE) market is undergoing major change. Product cycles are shrinking, demand for ‘green’ technologies is growing, and the rise of increasingly powerful, emerging-market entrants is ratcheting up global competition. To succeed in this environment, IE manufacturers will need to adopt new strategies.

The financial crisis in 2008 and 2009 and the subsequent slump hit the IE industry hard. The sector responded by cutting costs and consolidating operations. But, future success will require that companies increase their focus on risk and volatility management. Continued economic uncertainty; greater pressure to rapidly fill innovation pipelines, especially in terms of energy-efficient products; and volatile, contracting demand cycles, will make forecasting and scenario planning critical.

While industrial output in most mature markets remains low, emerging-market manufacturers are growing in their home economies and aggressively expanding internationally. At the same time, new entrants are expected to move up the industry value chain as they shift away from a focus on pure, low-cost commodity manufacturing and begin to compete on service, a key profit driver for leading companies. These developments will require mature-market manufacturers to fully integrate emerging markets into their operating models, as exporting and offshore sourcing no longer will be sufficient to create a competitive advantage.

>> Change and risk Management: David Greenfield presents an overview on the management of change and its evolution and how it ties into risk management. Visit bit.ly/awfeat072

Our research shows that high performers, companies Accenture defines as those that outpace their competitors over economic cycles, are positioning themselves to sustain high levels of growth in the emerging marketplace, develop distinctive capabilities in volatility management, risk management, fast innovation, and green products, and focus on people and leadership management to attract and retain their talent base. This approach offers a blueprint for success.

The Blueprint
In terms of market focus and positioning, high performers are selecting emerging, high-growth geographies that best complement their offerings relative to product and service quality, process complexity, and pricing levels. They also are aligning their target geographies with emerging industry segments, and tracking mega trends, enabling them to identify opportunities that build a unique selling position and expand their strategic advantage.

With this strategic focus, IE companies need to develop a set of capabilities that differentiate high performers from their peers.

1. Volatility management: Thanks to the flexibility and scalability of their operating models, high performers can react swiftly to market volatility. Their use of shared services for cross-business and support functions coupled with globally standardized processes and structures that enable greater flexibility, allow them to counterbalance geographic demand shifts at reasonable cost and optimize the use of their assets.

2. Risk management: Companies also should take a holistic and interactive approach to managing risk that includes a framework linked to their strategic objectives. This needs to be embedded with dedicated resources across the organization. This includes applying standardized analytical processes, enabling structured scenario planning and the ability to connect market intelligence with the risk management process.

3. Fast innovation: To continuously and rapidly innovate, IE manufacturers must infuse innovation throughout their organization. Moreover, research and development functions should be transformed into effective and efficient networks, stimulating an atmosphere of open exchange of expertise and best practices. The networks, too, should include customers and strategic alliances with universities, think tanks, research institutions, and other firms.

4. Green business potential: “Green” revenues constitute an increasing proportion of high performers’ total revenues. To grow, manufacturers will need to increase their focus on developing energy-efficient product portfolios.

By fully leveraging these distinctive capabilities, high performing IE companies not only are able to attract and retain best talent, but to constantly develop their own talent base at the management and leadership level among current staff.

James Robbins, james.a.robbins@accenture.com, is automotive industry & industrial equipment industry North American managing director with Accenture (www.accenture.com), a global management consulting, technology services and outsourcing company.

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