ATLANTA — Business consultant Roger Kipp, a retired thermoforming expert, said companies need to have a formal system for innovation — which he called a key to economic survival.
"It's a very structured approach to innovation" that requires a change of corporate culture, he said.
Everybody talks about innovation. Kipp put some numbers on it, during his presentation about "innovation engineering" Sept. 12 in Atlanta. His talk was part of a Society of Plastics Engineers Extrusion Minitec, which followed the 2013 SPE Thermoforming Conference in Atlanta.
Kipp, who retired last year, ran McClarin Plastics Inc. in Hanover, Pa., where he was vice president of marketing and engineering. He was named Thermoformer of the Year in 2010. Now he runs a business strategy consulting business in Hanover, Roger C. Kipp Sr. & Associates.
Innovation increases sales and gives you a higher profit margin, Kipp said. "If you're not unique, or meaningful, your only option is to be cheap."
Kipp noted that the idea of innovation is not the same for all companies. Management needs to look at the customer profile. If customers use a strategy of cost-cutting, you have to follow suit and focus on innovation to reduce your manufacturing costs. But if customers are pumping out new products, your innovation focus changes, he said.
Ask what percent of total business is new in the past three years.
Kipp spelled out the impact of innovation by sharing results of a survey by the National Institute of Standards and Technology's Manufacturing Extension Partnership. Bell-curve shaped slides showed "proactive" companies, or those that push the innovation envelope, and "reactive" ones that respond by price-cutting.
"The companies that are on the proactive side report that 37 percent of their annual business is related to some new process, new method, new customer or new product in every three-year period. So you're constantly replacing one-third of your business," he said. "You have to constantly have new business in the pipeline."
These proactive companies are more financially successful than the reactives, Kipp said.
According to the NIST/MEP survey, 84 percent of proactive manufacturers reported sales growth during the past three years. Just 4 percent of the totally reactive companies had sales growth. And the numbers were similar for profitability.
"A lot of this really makes common sense," Kipp said. It really starts to come together when you put it into a strategy, he added.
Shorter product life cycles, and global competition driven by the Internet, means manufacturers have to move quickly to research and develop innovations.
"The idea is to fail fast and fail cheap" before the project gets too far along, he quipped.
Fear is the biggest obstacle, but it's important to get diverse thinking from a lot of employees. "That 'change' word scares the heck out of everybody," he said.
