At the onset of the 2008 downturn, ratcheting up innovation was one of the key ways that industrial equipment manufacturers could prevail during a time of economic uncertainty. Today, applying a focus on distinct innovation and product development capabilities not only can help OEMs prevail, but can drive growth by giving them the ability to boost annual revenue by as much as 7 percent, totalling $567 million, in a changing market.
Innovation has always been a primary driver of success in the OEM market. But new customer expectations are redefining how to execute it. A recent Accenture survey analyzed the innovation practices of 351 businesses across eight manufacturing industries, including industrial equipment. It found that 42 percent of the respondents cited their greatest successes in the last two years as those resulting from improving customer experiences through innovation.
Industrial equipment customers increasingly are selecting products and services that offer desired outcomes, higher-value solutions and enhanced experiences. Moreover, many companies are moving from products to service offerings. As a result, leading companies are shifting from supply-side models focused on product features and choices to open-ended demand models that adjust offerings to accommodate changing demand. One industrial company, for example, has launched its own Internet of Things (IoT) cloud with the flexibility to offer a wide range of demand-driven, web-based services, such as remote troubleshooting capabilities for heating engineers, and ground temperature data that helps farmers understand how to improve their harvest and yield.
Such experiences are helping rewrite innovation, transforming it into what Accenture characterizes as a new, innovation-driven growth model, defined by four distinct innovator categories: early innovators, value makers, market share protectors and efficient executors. Among this group, early innovators and value makers produce the highest returns at the fastest rate from their innovation efforts. They are able to do so by focusing on finding new ways to connect with customers through platforms and fluid ecosystems, where products and services are just one dimension of a larger value proposition.
According to the research, early innovators and value makers are three times more likely than their peers to achieve significantly better results in key innovation and product development performance metrics, such as faster time to market. Those that seek to move to the value maker quadrant should adopt an innovation model that is supported by four pillars:
- Establish a solution-centric organization that provides hardware and software applications, services and experiences centered around the customer. Also, ensure that business units—from R&D, engineering and manufacturing to supply chain and sales and marketing—are aligned, equally accountable for, and focused on providing customers with innovative solutions, experiences and desired outcomes.
- Develop an insight platform that goes beyond surveying customer needs by continuously using predictive analytics to gain insights into customers’ unmet needs. Pursuing this strategy will enable the creation of new revenue streams resulting from providing a combination of refreshed products, services and experiences that are based on anticipating changing demand.
- Provide pivotal leadership that drives enterprise-wide change dedicated to an innovation vision that will satisfy the rapidly evolving product and services preferences of customers. Early innovators and value makers are exhibiting such leadership to ensure sustained success.
- Practice open innovation by researching the market for innovative ideas, including those generated by startup companies. In addition, create an incubation environment to leverage such innovation, develop an ecosystem of innovation partners, and apply iterative design processes that refine products and services to meet changing customer preferences.
Growing demand for industrial equipment products and services that provide experiences and outcomes are accelerating the need for effective innovation. OEMs that can apply strategies from the innovation model to anticipate and meet the fast and frequently changing needs of customers can produce stronger returns and grow in a shifting industrial equipment market.
>>Andy Howard, firstname.lastname@example.org, is managing director of the Automotive and Industrial Equipment Group at Accenture. Cedric Vatier, email@example.com, is EALA lead for the Automotive and Industrial Equipment Group for Accenture Strategy.