- Strategic Outsourcing
- Control & Automation
- Contract Manufacturing & Assembly
- Case Studies
- Resource Centre
Disruption & innovation | PP+ blog series | Part one
It’s important to understand the nuances of disruption if you’re to go on making the right strategic choices, and of course, making your mark with your product or innovation.
Ultimately that is the goal, but it needs to be a gradual one. Disruption isn’t an immediate or aggressive approach and “disrupt or be disrupted” in this case probably isn’t the answer. Perhaps “slow and steady wins the race” might actually be a better mantra.
Classic disruption, where a small enterprise enters the market and targets overlooked customers is a strategic choice that requires an inventive but modest offering that gradually moves upmarket to challenge industry leaders. Over time, product quality and innovations improve incrementally, loyal customers (previously underserved) follow, and the rest of the market begins to take notice.
Before long, incumbent organisations are looking over their shoulder at what was never seriously considered a worthy competitor or alternative to their own products and innovations. Similarly, incumbent organisations (for this reason) may need strategies that challenge disruptors and defend their market position.
Either way, it will create a healthy creative space, pushing and driving innovation – something UK manufacturing as an industry should be applying as a priority to their business agendas, especially when so many challenging scenarios have presented themselves in recent years.
The strategy-innovation combination can set you on the right growth path, no matter where you sit in the market.
The disruption theory appears simple on paper, but it’s important to have the right tools within the context of your market and innovation to increase your chances of success.
Firstly, disruptors will want to ensure that they’re not jeopardising their core business competencies, be it research and development, design and prototyping, or simple experimentation – the list is plentiful but will often come down to being innovative and creative in nature, bringing big picture thinking to life.
Where help and access to the right tools is most needed for these organisations is within the disciplines requiring early focus and attention – such as getting the business model just right. Think about the need for tools such as sales and marketing strategy and comms, access to engineering disciplines and groups, funding, academia, or legislation specialists.
Only then can their innovations begin the journey of disrupting a market and its incumbents – moving from the fringe or lower end of the market, or even a new market segment into the mainstream. This combination of product innovation and strategic planning will start to infiltrate an incumbent’s market share and profitability.
The process though can take time, and incumbents can get creative in their defence if they’re on the ball and recognise their potential new competition’s growth trajectory.
Incumbent organisations will need to defend against disruption when it occurs, but overreacting can be a mistake, especially if it means unsettling a still-profitable business. Of course, as the disruptive competitor grows, it may eventually cause the migration of customers from the core. But large organisation leaders shouldn’t attempt to solve the problem before it is a problem.
Their focus should be on strengthening customer relationships by investing in sustaining innovations. In addition, they can build a separate strategy focused on the growth opportunities that may be arising from the disruption.
It is a strategic choice that essentially builds on two separate operations. And the tools they’ll need aren’t at all dissimilar to those that disruptors require in their early stages and stated above. In both cases, the most cost-effective measure is outsourcing those needs.
Incumbent organisations will need to ask themselves what their core competencies are, and what areas of the business can be outsourced, as to not unsettle their current position as market leaders and lose the opportunity to grow their foothold in all areas of the market(s) they serve.
To unlock their potential, disruptors and incumbents alike may require scaling-up coaching at differing levels of investment, sales consultation, and marketing & PR strategy. Furthermore, there will be opportunity to enter international markets where legislative demands bring new challenges and complexity, as well as a need to make efficiencies through design optimisation and access to academia and engineering groups.
The manufacturing requirements of a full or part build of their products and innovations is the ultimate degree of outsourcing that ensures the organisation is concentrating on core competencies and reaping the rewards of a strategic arrangement.
These strategic arrangements build several factors into the plan:
▫ The expertise, people, skills and plant/automation to improve the production process, boost quality and help develop designs in the future.
▫ The security of a financially strong partner.
▫ The complexity and scale of specific needs, not just for today but for the mid to longer term.
▫ The activities associated with purchasing and supply chain management, and the skills to inherit, manage and develop the supply chain.
▫ The outsourcing partner’s experience in several markets and the quality and standing of existing customers.
▫ The necessary ISO approvals and any specific approvals relevant to an industry sector or for a given export geography, such as UL/CSA for the US or Canadian markets.
▫ The engineering skills and innovation to help you develop your products and services. Including skills such as design for manufacture (DFMA) and improving product from a technical and commercial perspective.
▫ Improved lead times and agility, retain design IP and mitigate risk. Many companies have recognised the escalating costs, political unrest and other risks associated with managing a long-distance supply chain, resulting in identifying partners that are much closer to home.
Disrupt or defend, an outsourcing partner lays the path to success and growth, if you choose wisely.