Small manufacturing company leaders, you are in an elite group. In the 20th century you have been credited with inventing air conditioning, the FM radio, the hydraulic brake, the microprocessor, the personal computer, quick-frozen food, the safety razor, soft contact lens, the vacuum tube and the zipper. These inventions that we depend on today resulted from innovation.

But in this century it’s getting more difficult for manufacturers to create that breakthrough product. “Companies can make incremental improvements to their existing lines–the ‘new and improved’ approach– but as a longterm strategy that doesn’t bode well for a company’s longevity,” says WMEP’s CEO Mike Klonsinski. “If you innovate too much in your own box and if ‘new and improved’ does nothing for the market or your customers, you could innovate yourself out of existence,” he says. Instead, Klosinski recommends broadening your definition of innovation to include processes, services and business strategies.

Process Innovation Leaders

Japanese automaker Toyota has so finely honed its production process through applying Lean concepts that it’s the benchmark for every company trying to eliminate waste. So much so that the Toyota name has become synonymous with Lean Manufacturing. The company reached this point through their very strong commitment to Lean and the belief that there is always room for improving their processes. This belief permeates the entire company and encourages innovative thinking to make what is the best even better. Toyota is so confident of its innovative process the company holds guided tours for its competitors.

Service Innovation Leaders

It’s not always about cost. Customers can always find someone cheaper. But service can be the winning edge you need. Lots of companies make computers but only Dell offers customers the most painless way to purchase them through a customer service line that helps them build their own PC. There are thousands of booksellers. But only amazon.com offers customers exemplary service. FedEx offers up-to-date information about your package all along its route. You can follow-up about your shipment on-line or through phone support. This service reinforces their reputation as the leading express delivery service.

Strategy Innovation Leaders

Sweden’s TetraPak used to make packaging products. Today the company designs packaging solutions. TetraPak provides the machinery and customers make their own packaging using TetraPak’s aseptic materials. The savviest part of this new strategy is that it reduces transport and inventory costs for TetraPak and its customers, and it’s much harder for customers to switch suppliers.

It took lean implementation in one Chicago-area company to make them rethink their basic business strategy and open them up to growth opportunities. American Licorice in Alsip used to just make candy. Today, James Marturano, director of World Class Manufacturing at the plant, says American Licorice is an extrusion company. And customers are knocking on the company’s doors to manufacture new products for them.

Strategic Repositioning

All of these stories are great examples of Strategic Repositioning. Strategic Repositioning allows companies to leverage their strategic competencies in order to be more competitive. “Strategic Repositioning focuses on top-line revenue growth instead of middle-line process improvements that cut waste,” says Klonsinski. Manufacturers who employ this innovative strategy of Strategic Repositioning can avoid the common problem of commoditization in this current cost-competitive environment.

A company’s strategic competencies are strengths that: 1) are valuable to your customer, 2) differentiate you from the competition, and 3) are difficult to copy. This powerful dynamic helps companies to harness their own strengths in new and profitable ways by truly differentiating themselves from the competition and maximizing their market potential.

Inspiring Innovation

Innovation doesn’t just happen. It is a management process. As leaders you need to instill it in your company’s culture.
These four steps will help:

1. Create a process for innovation. Research from Bain & Company says the most successful companies have clearly defined internal processes that they adhere to.
    
2. Establish go-no go points and enforce them. Make sure you can measure forward progress on your innovation efforts. Also, if that forward progress is stymied, decide when it’s time to cut your losses and commit your resources to other projects.
    
3. Set performance measures for key employees. Rewarding people for innovative thinking helps encourage it.
    
4. Most importantly, embrace failure. Not all innovative ideas will pan out. That’s the nature of innovation. Employees will keep innovating after failures, if they perceive their jobs aren’t at risk for trying. You can enforce that culture by communicating and celebrating both successes and failures. Also, you never know when today’s failure could lead to tomorrow’s success.

When resources are scarce let customers drive innovation. Listen to their concerns and problems. The solution may not be another product but a process or service that would not cost a lot to deliver. Do a thorough customer analysis as part of your strategy.

“Innovation isn’t a one shot deal - you must change your mindset from a maker of goods to a provider of solutions. You must continually discover solutions for new and existing customers in multiple markets,” says Klonsinski.