Global Manufacturing Outlook: Unleashing a flood of innovation

Unleashing a flood of innovation

“To create successful products and services, manufacturers need to innovate with their customers, working to understand their full value chain and using that insight to create solutions that deliver real value.” – Henk Smit, a Partner in the Advisory practice at KPMG in the Netherlands.

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Most manufacturers have no intention of being left behind in the race to attract new customers and enter new markets. And the majority say they plan to invest significantly into R&D and innovation in order to make sure they remain competitive. Whether investing into the development of new products, the adoption of innovative business models or the implementation of advanced manufacturing technologies, the flow of investment into R&D should be staggering. 

With almost half of all manufacturers in KPMG International’s 2016 Global Manufacturing Outlook saying they plan to change their range of services to capitalize on growth opportunities and two-fifths saying they will change their range of products, it seems that many manufacturers intend to focus on shaping their portfolio to respond to shifting market demand and growth potential.

However, we believe that the development of new products and services must be driven by need rather than a desire to showcase a new technology. “Manufacturers must start by thinking about how they can add new pools of value to their customers and then leverage all of the technologies at their disposal to rapidly deliver on that value,” notes Tom Mayor, a Principal with KPMG’s US Strategy practice.

If manufacturers spend what they say they will, it seems clear that the amount of investment about to flow into R&D and innovation will be staggering. More than one-in-five (21 percent) of all respondents said they expect to spend more than 10 percent of revenues on R&D over the next 2 years. Almost half – 49 percent – said they would spend 6 percent of revenues or more.

Manufacturers are also increasing their investment into new manufacturing technologies such as Robotics, Data and Analytics and the Internet of Things (which, combined, form the basis of Industry 4.0). “Taking advantage of advances in robotics, 3D printing and Artificial Intelligence (AI) is critical to driving greater efficiency, lowering costs and improving safety for many sectors and particularly niche suppliers,” notes Harald von Heynitz, Head of Industrial Manufacturing, KPMG in Germany.

In many markets, including automotive, heavy industrials, medical devices and smart buildings/smart infrastructure, we expect to see developments in sensors, communication and cognitive computing start to unlock huge consumer value. Our experience suggests that product manufacturers will be the winners of the introduction of IoT and the leaders will see huge growth potential.

What are leading manufacturers doing to respond?

  • Ensuring their corporate planning process provides the visibility needed to make R&D investment decisions with a view of the best return for the entire enterprise
  • Developing and building innovation processes that prioritize speed, quality and margin
  • Leveraging the value of unique / disruptive technologies, partners and thought leaders in accelerating their innovation and return on R&D investment.

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