The document discusses how manufacturing companies are increasingly integrating innovation into their corporate strategies and collaborating across organizational boundaries to drive innovation. Some key findings include:
1) Innovation is becoming a more integral part of corporate growth strategies and is embedded in more functions beyond just R&D.
2) Companies are looking at innovation as an important lever for improving business performance and top-line growth, in addition to developing new products.
3) R&D collaboration, customer collaboration, and supplier collaboration are seen as key ways to support localized products while leveraging synergies globally. However, challenges remain in capitalizing on customer insights and shifting supplier relationships from cost reduction to shared value creation.
1. Manufacturing the way we see it
Collaborating for Innovation
Capgemini’s 2010 Global Survey –
How to Make a Leap by Applying Collaboration
in the Innovation Process
3. Manufacturing the way we see it
Introduction
Innovation has become an important companies have made in further •
The embedding of innovation
differentiator in achieving both embracing and leveraging the culture, as a culture underpinning an
top-line growth and cost savings, technologies and techniques of organization beyond the R&D
but 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 for
contained innovation within their Our 2010 “Collaborating for integrating these “external” parties
direct circle of influence (apart from Innovation” study provides further in various stages of the innovation
some 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 report
models of innovation are not enough moving towards sustainable top-line easy to assimilate, we have presented
of a differentiator, the way to build growth by adopting a “collaborating key findings for each section. We have
market share and create sustainable for innovation” approach. avoided a lengthy appendix of the
top-line growth in the future will be data, but we are happy to discuss the
through a new, alternative approach – Study Objectives aggregated results in more detail with
collaborating 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 companies
cooperation across organizational on collaborating for innovation and Our Thanks to the Industry
boundaries inside or outside a therefore to develop a comparative Completing an in-depth survey such
company’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 of
taps into the wider opportunities adjusting their corporate strategy, all our respondents, who made time
of 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, many
customers 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 to
Collaboration can take many forms: on R&D? How successful was repay this investment by providing
open innovation, co-creation with collaboration with suppliers and an interesting study that offers insight
clients and suppliers, crowd sourcing, customers? From these questions, into the way companies approach the
as well as traditional partnerships we identified the key trends and task of successfully leveraging the
and alliances. In addition, there is a challenges, and so built a clear picture creative energies of their employees
great 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 the
the primary functions of R&D, In this edition of “Collaborating recommendations and conclusions
Marketing, 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 to
Capgemini’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 of
was increasingly viewed as a critical the innovative company:
enabler for successful innovation.
However, significant challenges existed •
The consequences of changing
in the form of resources, organization, corporate/strategic imperatives upon
IT and performance metrics. Our innovation as a lever for growth.
second biannual report takes this •
The changing structure and
position as its starting point to assess operation of the R&D function and
the progress that manufacturing its impact on corporate success.
Collaborating for Innovation 3
4. Executive Summary
Innovation is generally described as be at the heart of numerous strategic Key Findings
a 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 manufacturing
radical changes in thinking, products, new ground in product and service companies have improved in their
processes 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 measure
range of stakeholders most notably former competitors, and bringing in innovation from strategy and
shareholders and customers. new capabilities through mergers, then throughout the value chain.
acquisitions and joint ventures. This appears to be due to more
For 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 performance
organization beyond the traditional spectrum of manufacturing, which measurement, a wide range of
confines of the R&D department is a has been hit harder than many other technology-based collaboration
key lever for increasing productivity sectors in the past two years and initiatives across the wider value
and profitable growth, and thereby which is significantly impacted by chain involving both suppliers
gaining competitive advantage. both the threats and opportunities of and customers, and the spread of
For sectors where margins are growing globalization. the innovation culture within an
traditionally 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 integrated
4
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. R&D collaboration is key for top- Many companies would like to involve Conclusion
line growth in global markets. customers more effectively in their Even in extremely difficult economic
Following the end of the recession product development process, but markets, innovation as a way to
and entering the growth phase, we they face a number of hurdles. Some differentiate and achieve market
still expect a number of shakeouts are practical, such as the length of success continues to grow in
of companies with large R&D units development cycles or the complexity importance and is being strongly
and increased merger and acquisition of products. Others are more a matter championed by many senior industry
activity (for example, consolidation of manufacturers’ perceptions. Many, executives. As global economies
in the crane industry). This may for example, consider their products to recover and customer spending starts
precipitate further alignment of R&D be too commoditized or too complex, to rise again, Capgemini expects that
unit operations, including process or that they are “too far down” the the scope and set-up of innovation
and 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 offering
R&D strategy adopted, we anticipate customer involvement is both standalone products to providing
a number of different structural and appropriate and feasible for just about customer value via radical new service
operations 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 from
centralization and R&D effectiveness “isolated” R&D-focused innovation
programs. The prevailing innovation Supplier collaboration needs to collaborative value creation, which
model 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 number
external partners. Adopted forms of of supplier collaboration initiatives,
internal and external collaboration suggesting that suppliers are
will be key to better support localized increasingly being seen as important
products while leveraging synergies partners in driving innovation,
and standards for cost effectiveness. although the primary importance of
To shift from cost reduction during being innovative in reducing costs
the recession towards new growth persists. Engineering, Logistics,
initiatives, companies will actively Production Processes, and Sales and
employ collaboration concepts and Marketing were the leading areas
new innovation business models. for efficient collaboration. Module
and Final Assembly, Sourcing and
Customer collaboration is Procurement, and Service and
more than collecting customer Maintenance were less well regarded
insights – it’s about capitalizing and show room for improvement.
on them. To cope with the technological and
All companies are moving towards competitive challenges, manufacturing
some form of customer collaboration; companies must increase active
however, within many companies there involvement of their suppliers in the
is a lack of clarity regarding when or value creation part of the innovation
where exactly the boundaries are for process instead of just relying on
involving customers in the innovation delivery of defined components. As
process – a key area of weakness. this happens, suppliers’ roles shift
Lack of insights about consumer towards risk-sharing models, which
needs and appropriately interpreted require new collaborative processes
customer feedback appears to provide and tools.
significant challenges to manufacturing
companies. Gathering feedback and
data has little commercial value if there
are insufficient processes in place to
capitalize on these insights.
6
7. Manufacturing the way we see it
Corporate Strategy
Overview Key Findings
In our 2008 “Collaborating for Innovation appears to have become
Innovation” study, Capgemini an integral part of our respondents’
concluded that companies perceived corporate growth strategy and
to be innovators in their markets
would use the economic downturn
as 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 never
establish top-line growth. An essential involvement and growing external be sustainable if we
element of this recovery position was a pressure from globalization, has led
proactive and prioritized approach to companies to look at innovation as an
don’t make innovation
innovation. important lever to improve business a dominant part of our
performance, in addition to the more corporate strategy.
These transformation plans started
with sharpening corporate strategy
traditional role of bringing new
products to market.
”
Industrial Products, Executive
to drive the supporting innovation
strategy. The plans for the different
business functions like Marketing
and Sales, Operations and R&D also
needed to be aligned. So in developing
this 2010 edition, our starting point
was to look at how successful this
approach had been.
In this section, we were keen to
understand how companies had
adapted their corporate strategy and
positioned innovation to be ready for
the 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. Alignment of a Strategic Alignment of Strategic Approach to Innovation with Growth Strategies
Approach to Innovation with
Growth Strategies 100
6% 7% 10% 10%
Innovation is perceived as the 17%
strongest driver to support the
corporate strategy. The majority of 80
companies, 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 aligned
The Consumer Products and Retail Somewhat aligned
(CPR) sector led the list (>75%). In the 40 Not aligned
Automotive, 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 Total
this approach with a structured Aerospace & Products Products &
Defense Retail
organizational set-up. Companies that
have established a Chief Innovation Source: Capgemini
Officer role and/or an Innovation
Center at the corporate level show
better alignment of their strategic
approach to innovation with their
growth strategy.
Effectiveness of C-Level or Effectiveness of C-Level or Executive-Level Sponsorship and Support
Executive-Level Sponsorship for Innovation Projects
Most of the interviewed companies
100
show a strong connection between the 10%
13% 13%
14%
CXO or executive level and innovation 22%
projects. One reason for increased
80
executive support could be that
innovation management is becoming a
fundamental component of executive 50% 46%
73%
Complete and effective support
60
training programs, from in-house to Good support
73% 65%
external executive training and MBA Some support
No support
courses.
40
But 28% of Automotive, Aerospace
and Defense and 44% of High Tech 37%
20
companies 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: Capgemini
8
9. Manufacturing the way we see it
The Primary Functional Driver of Which Functional Area Is the Primary Driver of Innovation?
Innovation
In most companies R&D as well
as Marketing and Sales are the
primary drivers for innovation. In the General
Management Information
Automotive, 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, the
role of Marketing and Sales as the
Marketing &
primary driver for innovation has Sales
been strengthened, which reflects 29%
Purchasing/
the tendency to more market-driven Procurement
innovation instead of a technology 1%
push.
Source: Capgemini
The Impact of Globalization on
Innovation Efforts
Not surprisingly given the Automotive, Aerospace and Defense
multinational structure of many of our remains a laggard, with an average
respondent companies, globalization 13% usage level. The complexity of
is a dominant factor in the innovation these products and the extended value
efforts of organizations across the chain are likely to have a bearing on
industry sectors. About three-quarters the lower use of new technologies.
rate the impact of globalization as very
important or important. The trend Capgemini expects that manufacturing
from 2008 is upwards, particularly clients across all sectors will further
in the CPR and Industrial Products emphasize the use of collaborative
sectors.
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 growth
CPR and High Tech companies led improve the fulfillment of customer is that senior executives
the way in terms of leveraging new requirements across global markets. from R&D, Marketing and
technologies like Web 2.0 social In addition, R&D departments
networks and virtual worlds like will use new technologies to apply
Operations are all driving
Second 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 to
capture product feedback. This could
be optimized by expanding the use
of virtual worlds to gain a better
understanding of articulated and
unarticulated customer needs.
Collaborating for Innovation 9
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 many
commercially 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 customer
business cases for how the outcomes are measured. needs and generate profits, but also in
innovation put forward and We expected to see a range of the ability to measure the effectiveness
they all just showed what measurements that were: of the innovation efforts – metrics
we wanted to see. After to track innovation end to end. This
•
Integrating the performance of a would point to a reasonably high
we had taken the decision number of business functions. level of confidence in collaborative
to ‘go,’ we never referred •
Balancing short- and medium-term innovation, a significant achievement
to 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. Manufacturing the way we see it
Primary Measure of Innovation Primary Measure of Innovation Performance Effectiveness
Performance Effectiveness
About 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 market
primarily the top line. In the 60 22% 41% Sales from various types of
new products
Automotive, Aerospace and Defense 25% 23%
Product performance
sector, an additional key performance 12%
Manufacturing and operations costs
indicator was development cost, a 40
27% 9% 3% 5% Development costs
reflection 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 Total
Time to market is still a challenge Aerospace & Products Products &
Defense Retail
for the Industrial Products sector,
reflecting the competitive nature Source: Capgemini
of the consumer markets as the
ultimate driver. Industrial Products data has been in use by Marketing approximately 50% across industry
companies have had to become more and Sales for decades, determining segments leverage external experts
agile in meeting fast-changing client precision pricing, placement, or innovation brokers to fuel the
requirements and shorter product promotion and production. innovation process.
lifecycles. Preferred-supplier status is
more readily accorded to companies Companies with a strong drive for To stay competitive, companies
demonstrating faster innovation innovation, as well as a focus on should more actively leverage external
cycles and rapid product replication. effective and efficient new product sources as input for the innovation
In that case, innovation performance development and introduction, should process in terms of both funding
measures should focus on accelerating introduce intelligent measures to and expertise. We recommend
time to market – for example with better track their innovation and its identifying specific projects in the
special events for product launches. outcome. innovation portfolio for outsourcing
– for example, where there is a lack
Measurement of Profitability External Impetus to the of internal resources or internal
Companies appear to have improved Innovation Funnel knowledge. Clear conditions have to
their processes for measuring the Across industries, approximately 50% be defined to maintain internally as
profitability 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 be
clearly demonstrating a satisfactory activities purely internally. The others evaluated in terms of benefits, risk and
financial return. In fact, about 90% are actively looking for external input potential before being outsourced. In
of respondents rated their ability by outsourcing parts of projects or addition, companies should develop
to measure the profitability of new complete projects, by purchasing and maintain an active network of
products or services as “good,” “very innovation services or by working experts to be leveraged for innovation
good” or “excellent,” up from the 2008 with external partners. Between 32% and promotion of products and
level of 81%. This measurement is (High Tech) and 65% (Automotive, technologies.
more mature in CPR where complex Aerospace and Defense) participate
and detailed product performance actively in innovation clusters and
Collaborating for Innovation 11
12. Success Rate of New Products/ Success Rate of New Products Launched over Past Three Years
Services Launched in the Past
Three 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 a
significant 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 Total
primary cause for new product launch Aerospace & Products Products &
Defense Retail
failure. In particular, industry sectors
that sell directly to end-customers Source: Capgemini
cite this as the main reason for lack
of success. Although companies are
increasingly putting marketing in
the lead role for innovation, they
still struggle to understand customer
needs and produce new products that Primary Cause of New Product Launch Failure
effectively 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 address
this challenge. In addition, more 60
14%
structured application of known and 21% Product’s retail price too expensive
Product launched too late to market
proven methodologies – like design- 21%
47% 58% Product launched before market
to-value and voice of the customer 40 39% was ready
– can help improve success rates. In 19% Product failed to meet
customer/consumer needs
many companies the influence of R&D 22%
Poor product quality or
departments and internal priorities are 20 14%
technical performance
still 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: Capgemini
12
13. Manufacturing the way we see it
R&D Collaboration
Overview Key Findings
Collaboration in innovation can be We expect a number of shakeouts
driven from a number of different of companies with large R&D units,
functional angles. In this section, the and increased merger and acquisition
focus is on collaboration within the activity. This may precipitate
R&D function, with different tiers of further alignment of R&D unit
collaboration: 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, and
An important aspect of R&D strategy information systems to support
is the decision to outsource some R&D internal design collaboration. All
activities. This requires a validated internal and external collaboration
choice of sourcing model, as well tools were highly rated.
as close business model alignment
with 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 Enterprise
innovation 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 enable
their 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 models
and effectiveness, while maintaining as well as configuration data. A key requirement was to establish reliable collaboration processes with
a 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 more
questions in this section focused on integrated innovation process.
companies’ current R&D footprint, • Redefinition of the processes to work internally and externally with partners
the balance between centralized in- • Development of the new PLM solution and integration within the information system
house R&D and different models of • Change management and support for the deployment of the new solution
partnerships 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. Number and Locations of Current Number of Locations for R&D Facilities
Current R&D Facilities
Just 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 80
27% 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 locations
R&D operational costs to a minimum, 5-10 locations
53%
while still delivering business value. Focused on 2-4 locations
40 Primarily in 1 location
By 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 Total
resulting from the dependence on Aerospace & Products Products &
Defense Retail
R&D as a core competence and on
specialist partners. Source: Capgemini
North America is still the heartland for
R&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 Operations
terms of infrastructure, knowledge
100
capital, 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: Capgemini
14
15. Manufacturing the way we see it
Strategy for R&D in the Next R&D Strategy in the Next Three Years
Three Years
Interestingly, 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, 80
which reflects the perception that the
development of intellectual property 61%
64%
and knowledge is considered to be 60 71%
52% Increase R&D outsourcing
an important differentiating factor, Increase in-house R&D
33%
even though external collaboration Increase decentralization
has become a standard process. The 40 Increase centralization
Consumer Products and Retail sector
is 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 Total
by leveraging all channels for Aerospace & Products Products &
Defense Retail
innovation.
Source: Capgemini
R&D Collaboration Activities
We asked respondents to assess the
effectiveness of a range of IT-based •
IT to support internal design Interestingly, in particular Consumer
collaboration tools. The results show collaboration: 77% said “very Products and Retail companies were
very high satisfaction across the good” or “good,” also an increase very positive users. High Tech and
various channels and across most from 2008. to a lesser extent Industrial Products
sectors and indicate the degree to •
Collaboration within the were consistently less enthusiastic
which 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 greater
The following summary records the and 12% rated it as “excellent.” importance attributed to intellectual
percentages of respondents rating each property rights and an internal culture
•
Collaboration within the
collaboration 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. Customer Collaboration
Overview Key Findings Percentage of New Products
The role of customers in innovation As we have seen from the barriers Shaped by Customers During
is likely to increase in the near future, indicated in the Innovation Development
as their opinion is ultimately the one Performance section, lack of insight Just under half (46%) of respondents
that really counts. It is also likely into consumer needs and interpreting said that less than 20% of new
to change, with the growing use of customer feedback are key obstacles products originated from ideas
techniques 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% putting
entirely clear where the boundaries of the customer is critical in providing the contribution between 20% and
this customer involvement lie. People the starting point and validation 39%. These relatively low figures
tend to connect co-creation with the mechanism for a successful new correspond to the fact that many
earliest stages of the new product product or service. It can also be innovations still fail due to the
development process (notably idea regarded as a key indicator of success, inability to meet customer needs
generation) or the later stages (in as important as the quality and (see earlier discussion in “Innovation
effect, 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 by
interaction can be useful throughout the and proactive contribution of the sector, with Industrial Products
product development process. PepsiCo’s customer in the innovation process companies claiming higher rates
Mountain Dew “DEWmocracy” case is a and the degree to which companies than other sectors and CPR being
key example; customers were involved are successful in leveraging the the least successful in gathering or
in developing new products (“Help intelligence gained. Although it is incorporating customer ideas into
create the new Dew”), contributing clear that companies have put in place product development. In the case of
opinions ranging from the taste, processes and systems for customer Industrial Products, this is likely due
color, look and feel, to the marketing interaction, and there are positive to the reduced number of customers
campaign 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 in
every step of the way. certain.
But no matter where the involvement Percentage of New Products, Launched Over Past Three Years, Shaped by
Customers During Development
happens, stronger collaboration
with 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: Capgemini
16
17. Manufacturing the way we see it
the specification of new products Customer Collaboration
“ When our end users
became 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” or
innovation initiatives, it
representative customer insights across “excellent”) use a range of mechanisms
had the effect of ‘shaking markets. for collaborating with customers such
up’ the value chain. As as:
a result, we’ve gained Experience shows that many
companies would like to involve •
Working with customers to
significantly more insight
customers more effectively in their co-develop products/services (lead
from their contribution, new product development process, customer concept).
which has helped to but they face hurdles such as long •
Predicting and capitalizing on
improve 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. Supplier Collaboration
Overview Key Findings
As a reaction to increasing cost In this section, we asked participants
pressures and complexity, companies to assess the effectiveness of the
are continuing to concentrate on contribution of their suppliers’
core competencies and outsourcing innovation initiatives, in terms of
non-core functions. This is now also the reasons and functional impact.
increasingly applicable to R&D, as
outsourcing affects more and more
We discovered that companies are
undertaking a number of supplier
“ We partner with other
external parties for our
types of operational and administrative collaboration initiatives, which innovation funnel but not
functions. By outsourcing R&D suggests that suppliers are being always with companies;
and adopting the open-innovation seen more as partners in driving
concept, 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 and
frequently see early supplier The overall picture clearly indicates Defense, Marketing Executive
involvement in R&D, but suppliers that supplier collaboration has become
often still have a straightforward a standard in all industry sectors
contractor role: They execute what has and that companies employ various
been conceived by the innovator in models of supplier collaboration to
the chain. This approach significantly fulfill the market demand.
reduces the latent benefits of open
innovation, and limits the possibility
of high-value disruptive innovations
from other parts of the value chain.
So how can companies outsource
their R&D to suppliers to increase the
flexibility and effectiveness of R&D,
while maintaining a clear focus on
customers’ and consumers’ needs? We
believe companies need to assess the
criticality of their innovation programs
and decide on an appropriate maturity
model of sourcing (for example,
Capgemini’s Global Sourcing of
Services model) for each program. A
significant variable is the opportunity
for leverage both for and from
suppliers.
Once an outsourcing decision has
been made, suppliers must be selected
based on their ability and willingness
to take over part of R&D. Business
models need careful alignment and,
for current suppliers, the change
from contractor to developer will be
significant.
18
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 effect
of 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 Selection
to suppliers is that improving innovation capacity. Seventy-three percent of companies
we dropped down the rate the control over intellectual
list of top innovators, All were consistently rated as “very property as a very important or
as measured by R&D important,” “important” or to a important parameter when selecting
lesser extent “somewhat important,” partners for collaboration in their
expenditure. But in practice indicating that the supplier role is innovation initiatives. This reinforces
we significantly increased viewed as essential in supporting the fact that manufacturers prefer to
our 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: Capgemini
Collaborating for Innovation 19