Disruptive innovation in manufacturing delivers customer delight


Disruptive innovation in manufacturing delivers customer delight

The legendary US industrialist Henry Ford is still lauded decades after his death for his far-sighted business vision, his commercial brilliance and his awareness of the importance of innovation.

But the most famous words he never said – that Model T buyers could have any color they liked as long as it was black – are regularly quoted to suggest Ford didn't bother to engage with his customers. Quite the opposite was actually the case. What Ford realized was that price was a key means to establish his fledgling brand in the eyes of consumers, and he manufactured his early models in the same color to reduce costs and keep prices down.

Meeting customer needs isn’t always a straightforward matter of delivering what customers say they want – there are unspoken needs to consider. Customers may articulate requirements that would, in practice, push prices beyond their reach. This post looks at a number of examples of disruptive innovation aimed at delighting customers, and how the potential of manufacturing to deliver against market demands has transformed over time.

In Ford’s case, a combination of volume sales and automated production allowed him to drive down prices still further, so while a Model T cost $600 in 1912, the same model was just $260 in 1925… and from 1926 onward, with the Ford brand now dominating the marketplace, its vehicles came in a range of colors. BMW customers today are able to ask for changes to color, as well as other design features, up to a week before assembly.

Disruptive market conditions can call for more disruptive innovations than simply restricting the product range in order to keep prices down. In recent years, for example, Toyota has transformed its production processes with a raft of measures aimed at simplifying automotive development and, crucially, improving the driving experience.

The search for innovation intensifies

The search for innovation – particularly at the scale required to disrupt existing models – is much in vogue among manufacturing leaders today- and no wonder, given the scale of the challenges they face.

The shock waves caused by China's economic slowdown, following the long-running global market turmoil involving Greece and the EU, have combined with the uncertainties of recovery to create an unsettling environment. The long-running backdrop of low manufacturing margins exacerbates what are significant anxieties.

If there were optimists out there, their numbers dwindled rapidly in August, when the global powerhouse that is Germany unveiled its export, import and manufacturing output figures – all sharply down.

Following on from the emissions scandal which has embroiled Volkswagen, it’s clear that no one individual brand, nor one individual country, has all the answers about how to prosper during times that remain lean for most manufacturers.

Such gloomy news and data have also ratcheted up the pressure on management teams, to ensure that their strategies and their business models are evermore in tune with their customers' desires.

So how are other automotive manufacturers embracing change and adopting disruptive innovations in order to stay ahead in the industry?

Toyota's customer-focused renaissance

It's instructive to look at Toyota – once famed globally for its innovative 'just-in-time' production system. Toyota is in the process of reinventing itself, its structure and its entire corporate mindset to address the new challenges.

Back in early 2011, it unveiled a radical approach intended to revolutionize every aspect of its vehicle development process under the rather chunky acronym of TNGA – Toyota New Global Architecture.

The Japanese manufacturer aimed to dramatically reduce the number of platforms used throughout its model ranges, to introduce shared components and power trains wherever possible, and – most importantly – to improve the driving experience for its customers.

Fast forward four years of detailed planning. In April 2015, Toyota revealed that its TNGA concept has now become a reality in production terms and promised that its future cars will be better to look at – and more engaging to drive. At the same time, however, Toyota admitted that its long-term strategy of appointing individual chief engineers to each new model had backfired, creating 100 platforms and sub-platforms and 800 power-train variants.

Toyota executive vice-president, Mitsuhisha Kato, went even further and revealed that the manufacturer's engineers have now been asked to “drive as much possible, especially outside working hours, to love cars,” and also to benchmark rival vehicles and “study technologies from around the world.”

His words were a brutal reminder to all manufacturers, that the critical benchmark for innovation – whether related to technology, a business model or operating structure – must be the potential to generate and deliver tangible customer benefits.

Change becomes way of life for BMW

It is equally eye-opening to hear from BMW Group, as to what such a customer-centric mindset can achieve once it has become fully embedded within a corporate structure.

The Munich-based manufacturer, in collaboration with its dealer network, now operates such a flexible and integrated sales process that customers can ask for changes to the powerplant, color and equipment levels on their vehicle up to a week before assembly, but without impacting on the previously-agreed delivery date.

Remarkably, BMW says it now delivers up to 120,000 such 'change requests' every month.

Such service levels can only be achieved, of course, with ultra-efficient links between a manufacturer, its dealers, their sales staff and their customers, in what has become known as 'connected marketing.'

Although the BMW system has generated impressive results, there are now even more sophisticated ways that manufacturers can engage with customers, such as improved visibility into data and processes through today’s IT platforms to discover how particular products are used, which are most popular, which need to be fine-tuned, and which need to be replaced, etc..

For a more long-term perception of what the coming decades might hold for adventurous and visionary manufacturers, the US futurist thinker, Thomas Frey, offers some intriguing thoughts in this '2050' blog on behalf of his think tank, the Da Vinci Institute. Clearly, an organization named after one of the greatest Renaissance thinkers isn't afraid to consider bold and disruptive notions.

To some, it may seem a long way from innovative manufacturing to Frey's vision of binary power and flying vehicles, but then the ability to 'think big' has always separated the leaders from the also-rans.

As Ford and other motor industry pioneers worked to realize their vision of a new era for transport, which would transform the lives of their customers, their contemporaries were still wondering how to breed bigger horses and build lighter carts.