Innovation is the key to a thriving British manufacturing industry

Innovation is the key to a thriving British manufacturing industry

There is a great deal of concern in the UK that this country’s manufacturing sector has dwindled dramatically over recent years.

The latest economic analysis by manufacturing association EEF cautiously predicts growth in the sector by the end of the year, although it does express concern about the impact of specific risks, such as a slowdown in the growth of world trade.

By Maurizio Brusadelli

7:30PM BST 18 Aug 2013

This has become particularly acute since the beginning of the financial crisis, which has led commentators to bemoan Britain’s reliance on the City at the expense of other sectors, and driving many to ask nostalgically “why don’t we make things any more?” So, are reports of the manufacturing industry’s death exaggerated? Recent data shows that all the doom and gloom is a little premature. The latest economic analysis by manufacturing association EEF cautiously predicts growth in the sector by the end of the year, although it does express concern about the impact of specific risks, such as a slowdown in the growth of world trade. And the CBI’s SME trends survey showed that last month small and medium-sized manufacturers’ optimism rose for the first time since April 2012, even though numbers of new orders actually fell in the three months to July.However, despite these positive indicators, UK manufacturing does face some serious challenges. The most obvious is demand, with the ongoing global economic slump reducing consumers’ and businesses’ purchasing power for manufactured goods. While this is, to an extent, beyond the manufacturers’ control, there is a second issue that the sector needs to tackle head-on – international competition. Inescapably, the UK is never going to be the cheapest place to make high-volume goods. On a pound-for-pound basis, it’s always going to be less expensive to set up a site somewhere like Eastern Europe, Asia or South America. So UK manufacturers should be asking themselves how to ensure the UK can compete despite being relatively expensive.

The answer is that the UK has some real strengths, and manufacturers here need to play to them. The country has a wealth of technical skills and knowledge, as well as a strong history of innovation. Innovation is the key. By harnessing UK employees’ technical abilities, and developing strong research and development capabilities here, UK manufacturing organisations can use innovation to achieve a unique competitive position. This entails using R&D and new manufacturing processes to offer consumers new products that will drive demand both in the UK and globally to ensure export growth. For example, at Mondelez International we’ve housed both our coffee and chocolate global R&D centres in the UK (at Banbury and Bournville respectively) to take advantage of the expertise within this country, and that has paid dividends for us in terms of product innovation.

Organisations should also deploy innovation to tackle the relative expense of UK operations, improving manufacturing processes to reduce waste and improve profitability. An example is “platforming” – ensuring that products have some physical consistency so that one production line can make as many products or components as possible, allowing UK manufacturers to be competitive at large production volumes. This is a focus for many car manufacturers– creating similarities in chassis shape between different models. The importance of platforming creates an interesting innovation dilemma; the need to balance creativity with standardisation. Our UK operation could invent a giant snowflake-shaped chocolate bar for example, but as it would probably need a totally new dedicated line, it would have to sell in vast volumes to generate sufficient margins.

So, how can organisations create this competitive, innovative world for manufacturing? It’s firstly essential to invest in innovation, whether that means investing in specific technology, facilities or (most importantly) people; giving your employees the skills they need to innovate. As well as training in the short-term, this means building a sustainable pipeline of talent. Manufacturing and R&D have been overlooked in careers advice for years and the marketplace doesn’t always contain the right skills. So organisations need to be willing to encourage young people into the industry and help shape them into the next generation of innovation.

Organisations can also involve R&D teams to add creative thinking to the process of delivering consistent quality. After employee and product safety, quality is the key priority in the manufacturing process. Ensuring that consumer expectations are met through consistent, repeatable quality is critical to consumer perception, repeat purchase and brand strength. However, as well as delivering this consistency, companies can involve R&D to look at “customer-relevant quality” – how products can be as useful or enjoyable as possible for the consumer. This is why our R&D team is actually called the “RD&Q team.” This kind of consumer insight is a genuine competitive strength in the UK, and this understanding can help ensure UK-manufactured products will be strong sellers around the globe.

Culture is also critical. Manufacturers need to create a culture that fosters innovation, giving employees clear direction on where they can focus their efforts and allowing people to take risks. I’ve always been interested in different approaches to innovation, such as the famous Google initiative of giving engineers one day a week to work on whatever they want. Although this is quite an extreme approach, the core principal of setting aside time to focus on new ideas is something manufacturers should take on board. For example, we have an innovation day once a year at our Banbury site, where staff are encouraged to create and pitch new products and ideas around coffee.

Another way to generate an innovative culture is to bring in people from a diverse range of backgrounds, in terms of different countries, different industries, and different cultures. This helps arm manufacturers with a variety of viewpoints, which will help foster new thinking. Having international expertise within your UK operation also improves the chances of creating products that can be sold abroad.

As well as steps businesses can take, government and academia can help make a real difference to the country’s manufacturing prospects. Universities could offer a greater number of practical qualifications for manufacturing to address the current shortage of certain skills. It would also help to have the government create stronger safeguards for intellectual property in the UK, to provide more incentive to innovate. Facilitating more apprenticeships and industrial placements – extremely effective ways for manufacturers to find strong candidates in the UK – would also be beneficial.

As an Italian coming to the UK, I have found the UK manufacturing sector to be vibrant, exciting and in much better health than some commentators would lead us to believe. I’m confident that the industry here, by creating a culture of relentless innovation, can enjoy a bright and competitive future.

Maurizio Brusadelli is UK and Ireland president, Mondelez International

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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