A recent article in a local South Carolina business publication illustrates the general lack of understanding of “innovation”, arguably the most over-used word in the business lexicon. And exemplifies the challenge many areas of the country have in diversifying away from a focus on branch manufacturing, where regions try to out-compete one another to have the next global company build a large manufacturing facility to spur economic development.
In the Upstate (western most part) of SC, that has been the focus and it has been wildly successful, as it has in other areas of the country. But is that a sustainable model to fuel economic development? The article’s title implies that the Upstate must rely more on “innovation” to fuel long-term growth. So what’s the problem with that, you ask?
Innovation, when discussed at all in the article, is only referenced in the first couple paragraphs and then it is a myopic view of the topic. There is mention of innovation in the transportation sector but there was no clear explanation of why it is important to a local economy to attract companies who will not just manufacture, but make decisions on what products to develop, engineer and develop them. And as a result will hire engineers and other highly compensated technical and managerial staff. On the other end of the spectrum, and for good measure, the article mentions entrepreneurship without ever discussing that topic.
The article seems to imply that embracing innovation in the Upstate means that shiny new company that will engineer and manufacture a radical new transportation system, maybe such as an autonomous car. No doubt that with the auto industry infrastructure and Clemson University International Center for Automotive Research (CU-ICAR) that is a desirable goal, but should that be the only focus? From my experience here, it seems like it is.
First, let’s step back and ask, what exactly is innovation? Is it only an exciting new breakthrough technology like an autonomous car? Is it only associated with that lone inventor in a garage slaving away for years to develop the next breakthrough product and change the world? That is the perception many have, and the article did nothing to dispel that notion.
Innovation is a process that mitigates between two dynamic factors: technology and market needs. Only when a technology and market need match up in time do you have innovation. Innovation is not technology for technology’s sake. That is an invention. Innovation implies that someone will actually pay for your product. In other words, it better meet a customer need. That can be an explicit need, like helping someone do a task faster or better than alternatives, or it might also satisfy an emotional need. Why do you think so many are willing to spend so much money on the latest Apple product? Just because of the technology?
So while talking about autonomous cars being built in the Upstate is sexy and makes great talking points for economic development organizations and politicians, it ignores the other ways that the economy can be diversified right now. For instance, by attracting smaller to mid-sized manufacturing companies to set-up shop in the Upstate or help existing ones improve their ability to innovate. It may not be sexy, but it should be part of the equation.
One challenge the Upstate faces in promoting true product innovation is a result of the focus on branch manufacturing and “lean”. There seems to be a lean manufacturing consultant on every corner. Or a lean manufacturing class offered by multiple manufacturing-centric organizations and universities, all managed and run by those with manufacturing experience, not new product development or innovation management experience. Lean is sold as a way to “innovate”, but its focus is on efficiency, not the messy process of innovation. It is a manufacturing mindset obsessed with efficiency but is a recipe for disaster when it drives a company’s innovation processes.
For the vast majority of existing manufacturing companies, there are many things they can and should be doing to become more innovative. For instance, are they relying strictly on existing knowledge (e.g. existing products), or are they developing new knowledge that can generate new sources of revenue? How do they develop new knowledge? That might mean investing some resources in either new products (defined here as new to them but not new to the market) or possibly new-to-the world, radical products. That might require an acquisition, or hiring new skill sets. If definitely requires a culture that supports innovation and failure, and highly engaged management.
The reality, however, is that the vast majority of innovation opportunities are related to incremental innovation of existing products. There is nothing wrong with that. It is not sexy, but it pays the bills and helps grow the business. But there is a right way and a wrong way to accomplish incremental innovation. It cannot just be changing the color of the packaging.
In the innovation management world, the process that supports making decisions on the right mix of projects is called project portfolio management. It is akin to balancing risk in an investment portfolio. You don’t want to invest in all incremental development projects any more than placing all your bets on a risky new-to-the world product. Most companies have far more ideas and opportunities to develop new products than resources, so effective processes are a key component in making the best investment decisions.
There are many other opportunities for “innovation” that are ignored by most companies. For example, innovating the business model. The reality is that if you look around, much of what is termed “innovative” today has nothing to do with technology or even a fundamental market need, it is a new business model that is able to deliver value better than alternatives. Improving a company’s competitive strategy is another opportunity. For instance, finding ways to either develop products or business models where there is no competition, or how to compete more effectively by attacking competitive weaknesses rather than head-on with a me-too product.
Returning back to the article itself, after the cursory discussion on “innovation” at the beginning of the article, the bulk of the article rolls out the same old discussion of economic development topics associated with attracting branch manufacturing such as land available for building plants, the impact of tariffs, or development of a new technical high school. What does any of that have to do with using innovation to grow and diversify the economy?
There are many different ways to look at innovation and how it can help the Upstate or any other region faced with similar challenges. Those in the media, economic development organizations and politicians need to focus not just on the sexy aspects of innovation, but on all facets of how it can help grow the local economy.
New Product Visions helps companies improve their innovation management practices. We focus on processes, organization, management engagement and culture. Services include consulting, workshops, and MyInnovationCoach training. Jeff Groh spent 30+ years in industry with experience in sales and marketing, customer support, manufacturing and new product development.