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Next-Generation Manufacturing Leadership:Learning to Adapt to Collaborative Business Models

Manufacturing Leadership Council/Frost & Sullivan

CONTENTS

Introduction ............................................................................................................................ 3

Next Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business Models ........................................................ 3

Evidence of Organizational Inertia Surfaces ..................................................................... 4

The Need to Develop Knowledge about Collaboration .................................................... 5

Changing Customer Engagement Models .......................................................................... 6

Business Direction/Courage Retains Top Leadership Spot ................................................ 7

Customer SAT Leads Strategic Priorities, but Vision and Financial Performance Rise .... 8

Reducing Cost a Top Initiative, but New Markets rise Strongly ........................................ 9

Strong Uptick Seen in Key Functional Activities ................................................................ 10

Inertia is Evident in Current Organizational Structures ................................................... 11

…But Strong Majority still sees Collaborative Model in Five years ................................. 12

Stronger Emphasis this year on Collaborative Skills .......................................................... 13

New Products take Lead in Innovation Intentions ............................................................ 14

Social Media inches Upward on Engagement Front .......................................................... 15

Social Media holds Place as Future Collaborative Model ................................................ 16

Next-Generation Manufacturing Leadership: Learning to Adapt to Collaborative Business Models

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INTRODUCTION

In May of 2012, the Manufacturing Leadership Council’s Board of Governors authorized a research project entitled Next-Generation Leadership. The intent of the study is to explore how senior manufacturing executives think about their leadership roles today and how those roles may change in the future; how their companies are organized today and how structures may change in the years ahead; and how business activities such as customer engagement are conducted today and will be conducted in future years.

The following report summarizes key findings of a survey fielded to senior-level manufacturing executives, including members of the Manufacturing Leadership Council, in North America in July of 2012. More than 200 completed surveys were returned.

NEXT-GENERATION MANUFACTURING LEADERSHIP: LEARNING TO ADAPT TO COLLABORATIVE BUSINESS MODELS

When manufacturing executives think about what it will take to be an effective leader of their own organization in the years ahead, they know they will have to juggle two balls at once. One ball has to do with constant, fundamental disciplines—growing revenue, making the right product, controlling costs, hiring and retaining the right people, and making a profit.

The other ball isn’t quite so fully formed. It has to do with change—new ways of working, shifting customer and employee expectations, new technologies that can alter even long-established processes and organizational structures, and new competitive threats.

Keeping both balls in the air at the same time may seem like a simple trick that has always been a key test of leadership. In some ways, that’s true. Leaders have always had to be capable of focusing on the present and preparing for the future. Making the right product that delights a buyer and makes a profit is something that has never changed and will never change.

So, what’s different about today’s business environment? Simply put, rapidly accelerating information and communication technologies are changing the rules of business with a speed and an effect rarely seen in the annals of industrial history. We are in a time where we are rethinking business models, the way we structure our companies and organize work, how we define our markets, how we engage with customers, and how we build products for them.

Today, just about everything is on the table, subject to change. And in the center of that table is how we organize our companies, how people work and where they work, how we engage with customers and use information from them and about them, and how we build things. In short, manufacturing today is rewriting its own script. As we do, manufacturing executives know they need to move to a business and operational model that enables them to engage and maximize the use of every resource within their organizations and within their networks of customers and partners.

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Evidence of Organizational Inertia Surfaces

This movement to a more collaborative way of doing business is one of the key findings of the Manufacturing Leadership Council’s third annual Leadership Poll. More than 200 senior-level manufacturing leaders from across the industrial landscape weighed in on how they think about the leadership role, the emphasis they place on strategic and operational activities, how they are organized today and expect to be in the future, and how they expect the rules of customer engagement to change going forward.

One of the key findings in this year’s poll is an apparent inertia in the shift to that collaborative model. While poll respondents are clear in their intent to move to the model, it is evidently no simple task to do so. The need to change cultures, behaviors, and established processes in order to embrace a collaborative way of doing business is hard work that takes time.

When asked, for example, to characterize their current organizational model, the percentage of those respondents indicating that they currently have a collaborative approach was essentially the same as last year’s finding. In the new poll, only 11.4 percent say they have such a structure, compared with 10.7 percent last year. And no statistically meaningful movement was seen in the number of respondents, indicating that they currently have a traditionally centralized command-and-control structure in their companies. Those saying they have adopted a highly decentralized model grew to 14.4 percent, from 9.9 percent last year.

But the trend line toward the collaborative approach appears inexorable. Even though 40.3 percent of poll takers this year say they are holding onto their organizational models—more than the 34.7 percent who said so last year—nearly 60 percent, down from 65.3 percent last year, say they expect their models to be different in five years’ time. And of those who do expect to be organized differently, 72.5 percent this year say the collaborative model is their choice, up from 66.5 percent last year.

Evidently, the road to the collaborative model will not be a straight line and will have stops, even steps backward, along the way. And different parts of the manufacturing enterprise—marketing, supply chain, production—will move at different speeds toward the collaborative idea.

At Campbell Soup, for example, the desire to be innovative is driving much effort around collaboration, but there are differences on how far along this work is within internal organizations such as marketing and supply chain. “We are much more active in innovation as a CPG company on the business side,” says Eric Fidoten, vice president of global supply chain strategy and operations excellence at Campbell Soup, and a poll respondent. “Culturally within the supply chain, there are some inhibiting factors that are changing slowly. The rules of the road need to be worked out.”

Among the rules that need work, according to Fidoten, who is a member of the Manufacturing Leadership Council, are how to better manage trade secrets, deciding who owns collaborative ideas that are generated within the company, how to share information more effectively, and putting in place the systems necessary for the greater information load.


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Fidoten also says that customer segmentation is very important as an organization goes through the collaborative journey. “There are clearly different strategies,” he says. “Wal-Mart sometimes isn’t necessarily collaborative. We need to better understand what collaboration means to create win-wins.”

The Need to Develop Knowledge about Collaboration

Developing greater knowledge about and expertise in collaboration is clearly on the radar screens of survey respondents. When asked about the degree of emphasis they will place going forward on a range of activities, developing knowledge and expertise in collaborating with customers and partners saw more than a 10-point jump, to 43.4 percent of poll takers, compared with 33.2 percent last year. The goal, survey respondents indicate, is to drive new product introductions and better service and support, including the creation of new services that can be bundled with product sales.

This push is part of a changing customer engagement landscape, and one in which not only new information-gathering mechanisms such as social media are at play, but also how that information is fed back into internal business processes to create products customers want and get those products to market with greater speed.

Today, most manufacturers have a fairly traditional engagement model that includes periodic satisfaction surveys, live customer meetings, and feedback through the sales channel. The use of social media today is still a small part of the mix, but growing noticeably. This year’s survey shows that today, social media is used by 13.1 percent of respondents, up from just 7.9 percent last year. Looking forward over the next five years, however, social media is projected by respondents to become the most dominant mechanism for engagement.

At L’Oréal, top management has identified digital marketing as “the next frontier,” says Morris Lenczicki, vice president of industrial systems applications at L’Oréal USA, and social media will be a significant part of it.

“L’Oréal has identified a whole new area in digital social media,” says Lenczicki, a survey respondent and a member of the Manufacturing Leadership Council. “We’re trying to figure out how to get quick turnaround information that is meaningful and can be used to make directional decisions.”

He says that L’Oréal still uses traditional ways of engaging customers. L’Oréal New York’s Beauty Center, for example, invites people to try products live, an engagement mechanism, Lenczicki says, that the company will continue to need. “But I also think there will be more use of social media for immediate feedback,” he adds.




Changing Customer Engagement Models

Better understanding of customers and achieving higher levels of satisfaction with them is the driving force behind changes many manufacturing companies are making to their engagement models. Since the inception of the survey three years ago, customer satisfaction has indeed been the top strategic priority identified by survey respondents. This year, 76.7 percent of survey takers ranked it at the top of their priority list, up from 72.7 percent last year. This priority is significantly more important to respondents than a range of other strategic issues, including leadership vision, culture, and even financial performance.

That makes sense, of course, because a loyal and growing set of customers can drive just about everything else. But manufacturers also know that there are other aspects of running the business that are central to success. One of them is what might be called an innate capacity for leadership. And it all has to do with that other, not fully formed ball. Where do I take my company tomorrow and in the days after? Where do I find the strength and stamina to do so?

Again this year, a third of survey respondents said that knowing which direction to take the company in and having the courage to do so best describes the leadership challenge to them.


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1. Business Direction/Courage Retains Top Leadership Spot

Q. Which statement best describes what leadership means to you?

Knowing in which direction to take the companyand having the courage to do so

Doing right by customers, employees, and shareholders

Achieving consistent growth and profitability

Striking the right balance between what we should do and shouldn’t do

Educating others on the right things to do

Inspiring ever yone around me, ever yday

Relying on my own experience, instincts and judgement to make decisions

Being ahead of the competition

31.3%30%

33.2%35.4%

11.2%8.2%

4.7%5.3%

0.9%3.3%

14%13.6%

3.7%2.5%

0.9%1.6%

20122011




2. Customer SAT Leads Strategic Priorities, But Vision And Financial Performance Rise

Q: What degree of emphasis do you place on the following strategic activities? (Responses of 5 on a 1-5 scale)

Customer satisfaction

Vision and overall strategy

Financial Performance

Operational excellence

Establishing and maintaining the right culture

76.7%72.7%

56.0%46.4%

20122011

48.8%42.3%

47.9%40.6%

47.2%34.9%


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3. Reducing Cost A Top Initiative, But New Markets Rise Strongly

Q: What degree of emphasis do you place on the following business initiatives? (Responses of 5 on a 1-5 scale)

Reducing costs

Regulator y compliance

Indentifying new markets, customers

New product innovation

Process innovation

43.2%43.2%

37.9%33.3%

20122011

37.2%27.8%

32.4%24.7%

32.4%27.5%




4. Strong Uptick Seen In Key Functional Activities

Q: What degree of emphasis do you place on the following internal activities? (Responses of 5 on a 1-5 scale)

Sales

Assembly/production

Design, product development

Ser vice and support

Marketing

51.6%41.2%

36.9%31.8%

20122011

37.1%29.4%

38.6%32.4%

31.2%21.5%


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5. Inertia Is Evident In Current Organizational Structures

Q. Which statement best describes how your company is organized today?

Section II: Organization

Highly centralized, with a command-and-control environment. Once executive management decides on a course, ever ybody is expected to fall into line

Somewhat centralized, with corporate controlling most key facets of the business, but divisions, departments and plants have input and some flexibility in how things are done

Highly decentralized, with corporate loimited in size and ser vingadministrative functions while individual business units, divisions and departments formulate budgets and strategies

Collaborative and virtually distributed, where traditional hierarchieshave been eschewed in favor of ever yone working together ; most people have a meaningful voice in how the business is run

48.5%55.5%

16.8%16.9%

14.4%9.9%

11.4%10.7%

Somewhat decentralized, with corporate and business units in a form of federal structure

8.9%7.4%

20122011




6. ...But Strong Majority Still Sees Collaborative Model In Five Years

Q. Which statement best characterizes how you would like to see your company organized five years from now?

Q. If differently, what form would you like your company’s organization to take in five years?

Same as it is today

Differently

Centralized in terms of systems and processes, but decentralized in terms of decision-making

Decentralized in most respects, with Corporate providing financial ser vices as well as shared ser vices

Collaborative, in which employees, partners, suppliers and customers are part of an overall virtual ecosystem contributing to the business

59.7%65.3%

40.3%34.7%

10.0%17.7%

16.5%15.8%

72.5%66.5%

20122011


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7. Stronger Emphasis This Year On Collaborative Skills

Q. Looking forward over the next couple of years, what degree of emphasis would you place on the following areas in terms of development knowledge and expertise?

Social Media

New technologies, including cloud computing

Greater collaboration with customers, partners

Digital factor y techniques to link design and production

Ser vices that can be associated with sold products

Sustainability or "green" techniques and technologies

Better use of customer data

20122011

19.8%19.7%

10.2%6.9%

28.6%26.2%

19.2%18.6%

20.2%12.9%

22.7%19.8%

43.4%33.2%




8. New Products Take Lead In Innovation Intentions

Q. Looking forward over the next several years, what will be your priorities in terms of improving innovation in the following areas?

New product introductions

Doing right by customers, employees, and shareholders

Customer ser vice and support

Product design and development

Marketing/brand development

Product idea generation

31.3%30%

42.4%33.6%

41.5%37.6%

33.2%33.5%

31.4%19.3%

30.6%25.7%

20122011


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9. Social Media Inches Upward On Engagement Front

Q. How does your company involve its customers, suppliers and partners in its business today?

We conduct periodic satisfaction sur veys and build the results into improvement plans

In addition to sur veys, we conduct in-person meetingsas well as focus groups to obtain feedback

We are increasingly using social media (Twitter, LinkedIn, Facebook, etc.) to involve these groups on a continuous basis

Relationships are mostly transactional and feedback is anecdotal

Input and feedback are mostly through the sales channel

31.9%30.8%

15.7%24.7%

20122011

19.4%18.9%

19.0%18.9%

13.1%7.9%




Q. Looking forward over the next five years, what engagement model would your company prefer?

One that is highly collaborative, with social media as a primary mechanism

More live events

Pretty much the same as today

More executive involvement with key customers

Providing greater visibility into the company's operations and processes through IT dashboards and portals

20122011

11.6%7.9%

24.7%25.1%

18.4%26.0%

21.1%19.4%

24.2%21.6%

10. Social Media Holds Place As Future Collaborative Model

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ABOUT THE MANUFACTURING LEADERSHIP COUNCIL

The Manufacturing Leadership Council, now a key element of Frost & Sullivan’s value proposition, offers an integrated portfolio of leadership networking, information, and professional development products, programs, and services for industrial executives worldwide. The Manufacturing Leadership Council’s mission is to help senior executives define and shape a better future for themselves, their organizations, and the industry at large. The Manufacturing Leadership Council’s integrated portfolio consists of the Manufacturing Executive website, an online global business network; the Manufacturing Leadership Council, an invitation-only executive organization; the annual Manufacturing Leadership Summit conference; the Manufacturing Leadership 100 Awards program; and the Manufacturing Leadership Journal. For more information, visit us at http://www.manufacturing-executive.com/index.jspa. ABOUT FROST & SULLIVAN

Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today’s market participants. For more than 50 years, we have been developing growth strategies for the Global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies? Contact Us: Start the Discussion

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