Business Growth Services Initiative

New IRC program intends to spur manufacturing innovation

By Mary Louise Ray

"Faster, better, and cheaper," also known as process improvement, was the key to surviving and thriving in the manufacturing sector in the 1990s. The quest for increased productivity, higher quality and lower cost per unit drove manufacturers to embrace process improvements and standards, such a Lean Manufacturing, Six Sigma and ISO 9000. According to the experts, this was necessary for manufacturers to stay competitive in the new global economy.

After all of the dollars and man hours invested in process improvements during the 1990s, one would think that Pennsylvania manufacturers should be able to crush the competition in the new century.

Well, not necessarily. Process improvements are certainly important, but they are not the whole story of business growth, because global competitors have been hard at work on process improvements, as well. Many offshore competitors already enjoy lower labor costs, so U.S. manufacturers in general, and Pennsylvania manufacturers in specific, are still operating under the pressure of global competition.

For those manufacturers who have adopted process improvement methodologies and have seen the company's bottom line improve as a result, they know that process improvement is a never-ending, iterative process. Nevertheless, how much more productivity can you squeeze from your employees? How much more can you improve your work process? How low can you go on cost per unit? At a certain point, many manufacturers realize that process improvement, while important, is no guarantee for future profitability. Faster, better, cheaper is not enough – you also have to develop new products and services.

Driving growth through innovation
Fostering innovation is now a critical component of a manufacturer's business plan, according to Manufacturing Pennsylvania’s Future: Regional Strategies that Build from Current Strengths and Address Competitive Challenges, a report published in 2004 by Deloitte consulting. The study was sponsored and overseen by the Pennsylvania Industrial Resource Centers Network, the TEAM PA Foundation and the Pennsylvania Department of Community and Economic Development.

According to the Deloitte report: "Innovation, the development of new products, services and business or production processes, is important for companies to survive and grow...Despite the inherent risk in innovation, many companies, especially manufacturers, are pursuing innovation as the cornerstone of their competitive strategy. In a 2003 Deloitte survey of more than 500 manufacturing companies in 19 countries, 'launching new products and services' ranked highest of any factors that companies expect to drive growth...More than 89 percent of respondents ranked product innovation as moderately to highly important for growth. Entering new channels and geographic markets were other critical factors. To satisfy new channels and markets, companies will most likely need to develop new products or find new ways to bring existing products to market.”

Based on these findings, Deloitte recommended that the Pennsylvania Industrial Resource Centers (IRCs) develop and offer “cradle-to-grave” new product development services to their client companies, which would include securing investment capital, product strategy development, market research, intellectual property expertise, and design, engineering and manufacturing support.

Thus, the IRCs Business Growth Services initiative was born.

A state-wide business-growth initiative
Any manufacturer that has worked with one of seven regional IRCs in the past will not be surprised to hear that the IRCs already offer many, if not all of these services to its client companies. So how will the Business Growth Services initiative differ from the status quo?

“Right now, the IRCs tend to help companies with individual projects, one product at a time,” says Petra Mitchell, Vice President, Operations, of the Pittsburgh-based Catalyst Connection IRC. For example, a company might ask an IRC to assist with market research for a potential new product, or make use of an IRC's expertise in workflow when trying to integrate the production of a new product into an existing manufacturing site. The IRCs are not typically involved in the new product development process from “cradle-to-grave.”

The goal of the Business Growth Services initiative, however, is not to partner with companies in every phase of the product development process. Instead, the goals are first, to raise awareness about the importance of innovation, and second, to train companies to put the building blocks in place at their own site to support innovation. According to Jim Shillenn, Executive Director of the Industrial Modernization Center IRC (IMC), the Business Growth Services initiative “will help [personnel] to adopt a systematic change at their company that allows them to do this themselves on an on-going basis.”

The science of innovation
What exactly does it mean to be innovative? How does one go about it? Often innovation is viewed as a vague concept, such as “thinking outside of the box.”

If you are an innovative thinker, does that guarantee successful product development? Probably not. History is littered with examples of people who had a great product idea that they failed to successfully develop, commercialize and sell. In the late 1700s, John Fitch and John Ramsey both made steamboats in America. Yet, we remember Robert Fulton as the father of steam navigation because he was the first person to successfully build and commercialize steamboats in the early 1800s. Antonio Meucci patented the “telectrophone” in 1851, but was unable to find a backer to finance the manufacturing of his device. Alexander Graham Bell patented a similar device, the telephone, five years later – you know how that story ended.

Therefore, it is not enough to have a great idea. You also have to determine a cost-effective means for manufacturing and distributing your product and perhaps find capital to fund product development costs. And there is still more work to be done.

It turns out innovation is not as nebulous as you might believe. “Product development has become professionalized,” according to Tim Deis, Director of Product Development Services at Catalyst Connection. Deis has been working with Mitchell and members of the other IRCs to develop the Business Growth Services Initiative. As in the case of manufacturing process improvement, product development has become an active area of research and study for both academics and industry professionals.

“There has been a lot of research into product development in the past few years,” says Barry Miller, President and COO of DVIRC. “If you are still doing product development today in the same way that you did it 10 years ago, then you can do better. We want to raise the overall knowledge of the manufacturers and let them know that there is a better way out there.”

The IRCs are drawing on the knowledge base of the Product Development and Management Association (PDMA), a non-profit, professional organization that for nearly 30 years has focused on improving the effectiveness of people developing and managing new products and services.

Through the contributions of members of both academia and the private sector, PDMA (www.pdma.org) has developed a “Body of Knowledge Architecture” to capture and build knowledge in product development within a company. Much of the knowledge, according to Mitchell, has been gleaned from successful product development programs at large corporations. But the product development process is quantifiable and scalable, meaning that small- and medium-sized manufacturers can take advantage of the knowledge gained from large manufacturers.

PDMA's product development architecture is based on the three phases of the product life cycle: the discovery phase, the development phase and the commercialization phase.

The PDMA model further states that a company wishing to develop a successful product development program must have competency in six organizational (knowledge) areas:

• customer and market research: External insight into customers needs, as well as information about markets, competitors, etc.
• technology and intellectual property: Management of the technological aspects or intellectual property involved with developing a new product.
• strategy, planning and decision making skills: Company-wide (as well as at the product family/product line level) strategy development; planning and decision-making skills related to higher level issues, such as resource and capacity issues that can affect existing products, as well as new products.
• people, teams and culture: All aspects of the human side of product discovery, development and commercialization, such as organizational structure, skills training, etc.
• partners and alliances: Relationships with any outside entity that will affect or contribute to product discovery, development and commercialization, including customers,OEMs, suppliers and service providers.
• process, execution and metrics: The nuts and bolts processes and tools required to design, manufacture, market, sell and distribute the product, as well as process and performance metrics.

As you can see by the descriptions, few, if any of these knowledge areas are the exclusive domain of any group within the organization. For example, effectively managing the “partners and alliances” knowledge area would require the efforts of a number of groups in the company's organizational chart, such as customer service, shipping and receiving, marketing, sales, purchasing, engineering and upper-level management.

In other words, hiring a crack engineering team is not a short cut to a successful product development program.

Instead, each of the knowledge areas has specific responsibilities throughout all three of the product development phases. This approach helps companies avoid some of the more common product development traps, such as the engineering group developing a product because they have the technological capability – despite the fact that market research hasn't determined that there is a market for it. Or sales reps promising a product improvement to customers before anyone has determined if the manufacturer has the technological capability to make the change, or if the company can sell it at a price point to recoup development and manufacturing costs, as well as make a profit.

This holistic approach also differs from the product development assistance currently offered by most of the IRCs. “Right now, we look at targets of opportunity, instead of a comprehensive product development program,” says Deis. The goal of the Business Growth Services Initiative is to turn that approach around and help companies improve their proficiencies in knowledge areas that may be weak and build their own integrated product development program within their companies.

Shillenn stresses that companies need not become experts in each knowledge area to embark upon a successful product development program. But having great proficiency in some areas will not make up for weaknesses in other areas. Adds Deis, “Instead of becoming tremendous in one area, we want to raise proficiencies across the board.”

As in the case of process improvement, product development is an ongoing, iterative process. Miller cautions that even if a company's profits are up, that doesn't mean that the company is necessarily on the cutting edge of product development. “One of the red flags is that even though your revenue is growing, it isn't growing at the same rate as the market.” If that is the case, then it is time to reevaluate your business growth strategy and identify which knowledge areas need improvement.

Business Growth Services slated for second quarter introduction
The IRCs state-wide Business Growth Services initiative will be in place and operating in the second quarter of this year, according to Deis. Many of the IRCs plan programs and seminars to highlight the role of innovation in a business growth strategy, as well as to provide information on third-party training consultants and other support services.

According to Mitchell, IRC personnel will receive Business Growth Services training so that “on a state-wide basis, we will have the same model, the same approach.”

To learn more about the IRC's Business Growth Services initiative, contact your local IRC.

Injection moulding company uses IRC resources to manufacture innovative product
“One point we always try to get across,” says Jeff Davis, a Business Development Specialist at the York-based MANTEC IRC, “is that you don't have to be big to innovate.” S E Moulding, Inc. (www. semoulding.com), a custom injection moulding company in Carlisle, is a case in point.

The company may be small (four full-time employees) and young (six years), but they have big plans. New product development plays an important role in their business plan, and they have turned to MANTEC for assistance in several areas, including product development.

According to S E Moulding President Sid Ege, his company had worked with MANTEC in the past to develop a sales team to improve the company's sales program. Through one of these sales representatives, S E Moulding was presented with the opportunity to work on the development of a new medical device, SteriTatt.

SteriTatt (www.steritatt.com) is a single-use, pen-like device that delivers sterile, non-toxic, permanent ink. Developed by radiation therapist James Matera, the device contains low-allergy ink and is used to mark the area(s) on a patient's body where they will receive radiation therapy. SteriTatt's innovative features include the introduction of sterile inks and improved regulation of ink flow. By introducing more ink flow control, the tattoo can be applied more precisely, which enables treatment personnel to align the treatment field with greater precision during each radiation therapy session. An additional benefit is that the more precise tattoos made by SteriTatt can reduce the cosmetic impact the permanent tattoo has on the patient.

S E Moulding turned to MANTEC again for assistance. According to Ege, MANTEC helped the manufacturer to source several suppliers (which included finding the machinery required to produce the product) and to develop the marketing plan. In addition, MANTEC’s personnel provided expertise in engineering and workflow. “They were pretty much part and parcel of the whole project,” sums up Ege.

S E Moulding embarked on the SteriTatt project in 2002 with Matera and other manufacturers (who were responsible for other components and processes required for product production). According to Ege, with MANTEC’s assistance, it took S E Moulding approximately six months to move the SteriTatt from the drawing board to production.

Ege estimates that SteriTatt currently represents 10 percent of S E Moulding's current gross sales.