Advanced manufacturing and its implications for companies - Goran Gross

Göran Roos Chairman, Advanced Manufacturing Council, Adelaide, Australia

Professor, Strategic Design, Swinburne University, Melbourne, Australia Honorary Professor at Warwick Business School, Warwick University, UK

Visiting Professor in Business Performance and Intangible Asset Management, Centre for Business Performance, Cranfield University, UK

Adjunct Professor, Mawson Institute, University of South Australia, Adelaide, Australia Adjunct Professor, ECIC, University of Adelaide

Adjunct Professor, University of Technology Sydney Business School Adjunct Professor, Nanyang Technological University, Nanyang Business School

Senior Advisor, Aalto Executive Education Academy [email protected]

Making the distinction between advanced manufacturing and traditional manufacturing is short-sighted, as technological advances and improvements in manufacturing occur in more mature or traditional industries as well as in emerging ones.

An appropriate advanced manufacturing definition should be dynamic in nature be treated as more of a benchmark. That is, there is a constant iteration of improving manufacturing frontiers, which often are comprised of pre‐commoditized processes and products. Therefore, what is classified as “frontier” is constantly changing, and, likewise, advanced manufacturing is always changing.

Advanced manufacturing is manufacturing that entails rapid transfer of new knowledge (frequently science and technology) into manufacturing processes and products. In essence it entails one or more of the following:

Producing offerings that use new knowledge

Using equipment or techniques in the production process of an offering that embodies new knowledge

Using inputs into the production process that either embodies or use equipment or techniques in the production process that embodies new knowledge

© Copyright Göran Roos 2013

Innovation &

Effectiveness Focus

Imitation &

Efficiency Focus

Innovation &

Effectiveness Focus

Imitation &

Efficiency Focus


Continuous focus on cost reduction and productivity improvement

Continuous focus on integrated innovation and productivity improvement


Instrumentalvalue

Intrinsicvalue

Extrinsicvalue

In the ability to identify changes and promote rapid reactive and proactive responses

In the abilities that produces higher productivity, efficiency and effectiveness in the firm’s operations and processes

In the ability to produce different products and achieve different goals using the same manufacturing plant:

In the ability to be fast


Moura, DA. & Botter, RC. 2012. “Can a shipyard work towards lean shipbuilding or agile manufacturing?” in Rizzuto & Guedes Soare eds. “Sustainable Maritime Transportation and Exploitation of Sea Resources” Taylor & Francis Group. London.

Innovation Management Innovation Strategy &

Innovation Management System

Innovation to Create Value Through

Efficiency Improving Innovations, Technology Based

Innovations, Design Based Innovations, Art Based

Innovations and Hermeneutic Based Innovations

Inn

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Valu

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Eff

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no

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Bu

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Roos, G., “Integrated Innovation – The necessary route to profitability“, in B+I Strategy (ed.), Estrategia, Bilbao, Spain, December, 2011, pp. 51-58 © Copyright Göran Roos 2013

Resources

Resource Deployment System

Owned or ControlledBy the Firm



Additive Additive

Owned or Controlledby the Other Party

Owned or ControlledBy the Employee

MONETARY

PHYSICAL

RELATIONAL

ORGANISATIONAL

HUMAN

MONETARY PHYSICAL REL. ORG. HUMAN

Knowledge

codification,new IP

Building &

developingrelationships

Developing

prototypes

Sales of

man-hours

Sale of IP,

processes &knowledge

Produce

Bynumbers

CRM

Developing

competencethrough use

Relationship

arbitrage

Use of other

company’sassets

Access to

processCo-learning

Sales of

products

Design

&Chemical

effect

New

Processes

New

Knowledge

Investment

in assets

Investment

in buildinglinks

Investment

in brands,image andsystems

Recruitment

training,conditions

Training

Chemical

synthesis

Word of

mouth

Systems

generateIP

Investment

In financialinstruments


An articulation of problems, as yet unsolved, that if solved would dramatically improve the performance of the firm but the firm do not know how to solve them


Preface by the CEO

[innovation strategy and innovation process for the development of the firm in light of its vision and strategy].

Introduction

[background, including which role this document plays in the firm’s processes, its significance, what it should govern, for how long it is valid, frequency and timing of updates, who is responsible]

Summary

[short and punchy summary of the innovation strategy that can be used in outgoing communications, especially if the main document is classified as confidential – this is normally a listing of those problems, that if solved, would dramatically improve the performance of the firm, with justifications]

The firm’s development

[short version of the firm’s vision, strategy and objectives]

The objectives for innovation activities at the firm

[overarching, long-term, precise and clear]

The innovation processes in the firm

[brief description including basic principles, the planning and control system, responsibilities]

External changes

[the key trends and changes that affect or may affect the future of the firm]

Knowledge required

[in light of overall objectives and changes in the environment]

Strategic challenges

[the most important long-term potential challenges]

Operational challenges

[existing obstacles to be overcome]

Adaptability

[important measures to increase organisational flexibility and adaptability]

Internationalisation

[international markets, international partners?]

Focus

[overall direction of innovation in the next five years] areas [description of the firm’s innovation areas] priorities [which areas are important] targeting of each area [innovation activities over the next five years] program [description of programs] project [description of projects]

Management and implementation

[key implementation and governance issues]

Administration


STRATEGY Suggestions from all parts of the organisation

& Membership from all parts of the organisation

Innovation Office

Corporate Head of Innovation

CEO

Decision

Innovation Meeting

Innovation Groups

External Proposals

External Proposals


Description Where used Focus Tools Benefits Implementation

Lean A way of working which identifies and eliminates waste to deliver improved value and service

Where fast results are needed Where shorter lead times and

improved flexibility are critical Where large numbers of front line

staff work together Where limited performance data is

available

Process Customer Defect reduction Waste reduction

Traditional management tools

Statistical Tools

High potential cash savings Moderate potential for soft savings Improvement in service delivery

External support required Moderate time from initiation to

results Moderate implementation costs Significant staff engagement

Six Sigma A structured approach to data driven problem solving

To reduce costs or increase volume Where mature data analysis is in

place Where time exists to analyse the

right data Where specific training can be set

up and supported

Process Customer Defect reduction


Statistical Tools

Moderate potential cash savings High potential for soft savings Improvement in service delivery

External support required Long time from initiation to results Moderate implementation costs Some staff engagement

BPR An approach to transforming activity through process change

Where IT is likely to be the main driver of change

Change is often done out of line

Process Traditional management tools


Moderate time from initiation to results

High implementation costs Significant staff engagement for

short periods Kaizen An approach to continuous incremental improvement, creating more value and less waste

Where fast results are needed Where the right group of people

can be coordinated for a blitz approach



Statistical Tools


Short time from initiation to results Low implementation costs Significant staff engagement for

short periods

Benchmarking A comparison with external organisations to highlight and develop best practices

Where time exists to analyse external performance data

Where other improvement strategies are required



Moderate potential cash savings Low potential for soft savings Improvement in service delivery

Short time from initiation to results Low implementation costs Some staff engagement

TQM A way of working which focuses all participants on quality, driving long term success through customer satisfaction

Where refocus on customer needs is required

Where formal management systems are already in place



Moderate potential cash savings High potential for soft savings Improvement in service delivery

External support required Long time from initiation to results Moderate implementation costs Significant staff engagement

EFQM An organisational framework designed to improve competitiveness using the fundamental concepts of TQM

Where self assessment and peer reviews are valued and repeated periodically



Moderate potential cash savings Moderate potential for soft savings Some Improvement in service

delivery

Moderate time from initiation to results

Moderate implementation costs Some staff engagement


Science Art

Medicine Design

Reductionist Approach Integrative Approach

Exploring ModelsChanging Reality

Subjective Understanding

Expressing ModelsQuestioning Reality

Individual Understanding

Explanatory ModelsExplaining Reality

Universal Understanding

Working ModelsImproving Reality

Hermeneutic Understanding

Abstract Presentation of Insights

Practical Presentation of Insights

Emotional

Experience

Practice


Trajectories of Existing Core Technologies

Trajectories for potential substitute technologies

Mastery of relevant Key Enabling technologies


Key Enabling technologies: Nanotechnology,

Micro- and nano-electronics, including semiconductors

Industrial Biotechnology,

Photonics,

Advanced Materials and

Advanced Manufacturing technologies and systems

Mastering of relevant key enabling technologies is absolutely required to ensure that it is possible to produce future innovative products and is therefore a strategic priority to ensure competitiveness.

In particular KETs have two specific characteristics that separate them from other «enabling technologies»: they are embedded at the core of innovative products and they underpin strategic value chains.


What can you do with this?


Energy Value with Mechanical Processing + Chemical Processing [Biodiesel]

Energy Value with mechanical Processing [Burning Wood]

Mass Value with Mechanical Processing + Chemical Processing [paper]

Mass Value with Mechanical Processing [timber]

Atomic Value with Mechanical Processing + Chemical Processing + Synthetic Biology Processing [Nanocellulose Materials]

Atomic Value with Mechanical Processing + Chemical Processing [Nanocellulose Composites]

Molecular Value with Mechanical Processing + Synthetic Biology Processing [3rd Generation Biorefineries e.g. High Value Raw Materials]

Molecular Value with Mechanical Processing + Biological Processing [2nd Generation Biorefineries e.g. Green Chemicals]

Molecular Value with Mechanical Processing + Chemical Processing [1st Generation Biorefineries e.g. Vanillin]

John Kettle, Göran Roos, Nafty Vanderhoek, Ali Harlin and Bruce Allender, 2012, Is the Australian Pulp and Paper Industry still at the crossroads?, APPITA Journal, In Press

INC

RE

AS

ING

CO

MP

LE

XIT

Y

Increasing

Value Added


The objective of Design is to achieve behavioural change in the user which is: •Desirable from the users point of view [i.e. they are better of in their own opinion after the change] •Beneficial to the supplier •Positively impacting other stakeholders

Observation BrainstormingRapid

PrototypingRefining Implementation

Analysis Genesis Synthesis

Nyberg, M. and Lindström, M. (2005), “Muotoilun Taloudelliset Vaikutukset”, ETLA, Discussion papers No. 982, p. 20. © Copyright Göran Roos 2013

Art has numerous opportunities to add value to business. In consumer goods art can add to the perceived authenticity of the good and thereby increase its value in the eye of the consumer.

This is critical in the luxury goods end of the spectrum.


Innovating in this space becomes a process, the aim of which is to generate, as a creator of an object, in the mind of the interpreter (consumer/customer) a specific set of emotions, intentions and thoughts as well as physical change.

Plutchik, R., 1962, The Emotions: Facts, Theories, and a New Model, New York: Random House © Copyright Göran Roos 2013

Effectiveness Improving Innovations

Business Model Based Innovations


Maximising the value delivered from the stakeholder’s point of view

Value derived from the

deployment of the offering


possession of the offering


appreciation of the offering

Instrumental value

Intrinsic value

Extrinsic value


To have the profit exceed the revenue stream from the primary offering

This is done by accessing multiple profit pools, some of which are created and controlled by the firm.


Roos, G., 2013, The role of intellectual capital in Business Model Innovation – an empirical study , in Ordoñez de Pablos, P.,

Tennyson, R. D. and Zhao, J., eds., Intellectual Capital Strategy Management For Knowledge-Based Organizations, IGI Global.

Positioning of THIS business within the company’s strategy

Description of the Product-Service-System/Solutions offering

Value Proposition for each of the target customer segments, target consumer segments and other definitive stakeholders

Description how the target customer segments, target consumer segments and other definitive stakeholders capture value from the offering

What competitive advantage does the offering enable or contribute to within the target customer segments, target consumer segments and other definitive stakeholders

Value attribute, attribute preference and attribute performance for each of the target customer segments, target consumer segments and other definitive stakeholders

What requirements must be fulfilled by the target customer segments, target consumer segments and other definitive stakeholders in order to be able to benefit from the offering

Description of how the Product-Service-System/Solutions offering should be implemented at the target customer segments, target consumer segments and other definitive stakeholders to ensure the targeted benefits (value)

Place, role and strategy of THIS business in the business ecosystem of which it is part

Technology base of the Product-Service-System/Solutions offering

Design base of the Product-Service-System/Solutions offering

Art base of the Product-Service-System/Solutions offering

Counselling (Hermeneutic) base of the Product-Service-System/Solutions offering

Outgoing logistics and Distribution Channel choice for each of the target customer segments, target consumer segments and other definitive stakeholders

Incoming logistics and supply chain choice

Relationship width, depth and frequency for each of the target customer segments and other definitive stakeholders

Value Configuration (Value Chain, Value Shop, Value Network)

Resources, Competitive Advantage and Resource Deployment Structure (IC Navigator)

Cost structure

Revenue Models © Copyright Göran Roos 2013


References and sources in main document © Copyright Göran Roos 2013


© Copyright Göran Roos 2013 References and sources in main document


Experienced

Entrepreneurial

Leadership with

Ambitious Goals

Depth

Decentralisation

Knowledgeable, Loyal

Low turn-over

Employees

Focus

Integrated

Innovation

Globalisation

Specific Closeness

to the customer

High Performance

High Quality

Product-Service-System

Offering

Risk reducing and Innovation driving partnerships with

research and expertise centres

Roos, G. and Burton, K., “Integrated Innovation driven by emerging technologies”, Adelaide Thinker in Residence 2011 Innovation Process: Underpinning Subject Matter Report, February 1st 2012, Department of the Premier and Cabinet, Adelaide, Australia © Copyright Göran Roos 2013

Dominate Global Segments Global market footprint + specialisation = market leadership

Stay away from large, price-driven volume markets

Compete through superior value not cost

Knowledge Domain Leadership Masters of (mostly incremental) innovation

Obsessed with leading edge knowledge (frequently technology)

Very strong, mostly domestic, knowledge development network [internal plus external]

Operational effectiveness Sophisticated production networks

Careful choice of outsourcing and offshoring [less then you think]

Close connection between R&D and Manufacturing [co-location]

Highly flexible work arrangements worldwide

Continuous improvement, 100% quality 100% of the time, >95% recyclability/reusability


Stewardship/Custodian: Long-term survival and intergenerational transfer as key objective

Profit is an inevitable consequence of serving customers better than anyone else

Focus on long-term sustainability with key stakeholders: customers; employees; suppliers and community at large

Companies as communities: high degree of mutual trust and loyalty leading to an implicit life-long contract contributing to a high performance work place culture

Leadership through example: Domain knowledge

Passion for the business

Flat hierarchies and informal channels of communication Bottom-up management style

High degree of cross departmental cooperation


Computerised information: Software and databases

R&D and other intellectual property products

Brand equity, firm specific human capital, organisational capital

Machinery and equipment

© Copyright Göran Roos 2013 Department of Industry, Innovation, Science, Research and Tertiary Education (DIISRTE), 2012, Australian Innovation System Report 2012, Commonwealth of Australia

2

2.2

2.4

2.6

2.8

3

3.2

3.4

3.6

3.8

4

Australian score

Global best performing country score

OperationsManagement

Performance Management

PeopleManagement

Extracted from slide No. 17 in Green, R., 2011, Future of manufacturing – management, innovation and productivity, Presentation, Australian Chambers Business Congress Gold Coast Convention Centre, June 1-3 2011 © Copyright Göran Roos 2013

17% Improvementequals

Effect of increased factor inputs on output Independent of sector, ownership type, profitability, past productivity growth, size

Source: Green et al. 2011 © Copyright Göran Roos 2013

My responsibility as an employer is to make you the employee more employable during your tenure with me

My responsibility as an employee is to make you the employer more successful during my tenure with you

We both want more firms that are more successful

We differ on how to distribute the economic profit and social good that results from a successful firm
