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In the future of manufacturing, what's your strategy?

Can embracing an innovative approach also translate into commercial gains? Experts are of the view that the nation's manufacturing firms will need to focus on developing capabilities in innovation and not merely rely on jugaad.

, ET Online|
Updated: Nov 08, 2019, 04.13 PM IST
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The very fact that India is now ranked 52nd on the Global Innovation Index (GII) 2019 (with a jump of five places over last year) does highlight the increasing popularity of an innovation-backed culture gaining prominence across country's factories and plants.
MSME
Characterized by a slowing economy and a crashing demand across sectors, firms have to come up with strategies and innovations to stay afloat, grow and even outsmart the competition.

Presently, among the many methods being employed by manufacturers, include not just listening to the feedback from the products’ end-users or competitive price positioning, but also leveraging the power of innovation to come up with commercially viable products that get them an extra edge -- setting them apart from the competitors.

Being innovation-led is futuristic
Out of the many business strategies being used by businesses, innovation that literally means, ‘introducing something new’, and in the world of business, stands for the commercial application of an idea, is increasingly being hailed as the way forward. And why not? The concept, as the bedrock of the next-gen manufacturing, does bring a host of benefits to producers, manufacturers and consumers alike. Apart from serving as a springboard for firms to add to their brand image, increased operational efficiency and a significant reduction in operational costs are just a few of the proven benefits that getting innovative brings to enterprises world over.

Innovation fueling next gen manufacturing
The very fact that India is now ranked 52nd on the Global Innovation Index (GII) 2019 (with a jump of five places over last year) does highlight the increasing popularity of an innovation-backed culture gaining prominence across country's factories and plants. There is no denying the fact that till now, riding high on skilled manpower and low production costs, the country today is one of the fastest growing economies in the world. However, going forward, experts hold that sustained growth in the long-term cannot solely be based on the nation’s low-cost advantage. Moreover, to pip China, it’s said that India will need to reorient its manufacturing processes from the bottom up.

Industry experts are of the view that if India is serious about maintaining its industrial growth trajectory over the long term then the nation's manufacturing firms will need to focus on developing capabilities in innovation. A pertinent question that arises here is whether embracing an innovative approach also translates into commercial gains? If PwC’s pan-global study is to be believed, this looks to be the case. As per this study, the top innovators are getting three times as much revenue from new products or services. It further flags that while 92% of industrial manufacturing executives do admit that innovation is important to their future revenue growth, only two-thirds of executives across the sectors believe their companies already have a well-defined innovation strategy.

Why Innovation and sustainability mean the same thing
Believing in much-in-trend sustainability-push that aims to mitigate the ill effects of industrial production on the environment has always been a priority for businesses. It’s to this effect, innovation is said to act as a great enabler. But innovation’s interplay with sustainability throws up a puzzling scenario too- the trade-off between the social benefits of developing sustainable products and the financial costs of doing so. Relevant research shows that, contrary to the belief held by some, sustainability has been a catalyst for organizational and technological innovations.

Further, there certainly is a unanimous view across the industry that becoming environment-friendly results in minimising costs since companies end up reducing the amount of inputs they use. Noteworthy here are the studies by the Harvard Business Review (HBR) and Deloitte that indicate organizations that were leaders in sustainability were, in fact, also leaders in innovation. “Smart companies now treat sustainability as innovation’s new frontier,” states one HBR study that examined sustainability's ability to fuel innovation across businesses.

Another study by Deloitte concludes that while many business leaders still view sustainability as disconnected from the core of the business—however, research suggests that is not the case at all - instead sustainability is found to be strongly tied to the ability of a company to innovate. “Research demonstrates that being a sustainability leader can significantly raise your company’s chances of being a top innovator- sustainability drives innovation, and it does so in a very significant way,” contends the study.

India’s case
Anil Bhardwaj, Secretary General of the Federation of Indian Micro Small & Medium Enterprises (FISME), believes that the bulk of the MSME sector responds to market conditions and consumer needs and presently the voluntary demand from citizens about sustainable products is low due to poor awareness.

“In such a situation manufacturers do shy away from investing to produce or provide sustainable goods or services,” he says. Is this really the case on the ground? When ET reached out to some of the end-users of various items traditionally produced by Indian MSMEs (e.g: handicrafts, handlooms, cotton garments such as towels, etc.), FISME representative’s view seems to hold good.

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For many MSMEs, innovation and sustainability remain a second priority that could be put on a backburner, experts hold.
For a majority of the respondents, cost consciousness seems to be the topmost concern. This makes it evidently clear that there exists a demand-supply relationship, which to some degree explains as to why for a large number of smaller firms, the idea of innovation-backed green manufacturing has largely remained a no go area till date. The above example also highlights that unless a big push in demand for sustainable items is not generated, MSMEs would, as things stand, continue to cherish the idea of jugaad economics (low-cost indigenous solutions), (mis)taking it as a panacea for many of their structural woes.

Further, going innovative does cost money, at least initially, as companies have to align/realign their production patterns and entire assembly lines in accordance with globally followed best practices. The process often requires adhering to strict norms and guidelines laid out by various regulatory and compliance bodies. Meeting such norms also call for initial expenditures. Highlighting this, Satish W Wagh, former Chairman, Chemexcil, holds that the country’s SME sector does not have access to capital to upgrade technology on its own. For such firms, innovation and sustainability remain a second priority that could be put on a backburner, experts hold.

Deciphering manufacturing firms’ psyche, Joyjeet Maity, Vice President, Moglix, adds that Indian manufacturing is still under the ambit of a developing nation with a high ambition of growth. “This growth is mainly in terms of economic value for the direct stakeholders. Somehow, when we talk about the environment and larger society value, the potential of longer economic value or Life Time Value (LTV) is overlooked. I think this myopic view and mindset about economic value is one of the key impediments.” Further, negating the long-held notion that Indian businesses prefer jugaad economics by choice, Maity opines that the so called ‘Jugaad’ mindset is intrinsic to Indian MSMEs but the driver of this behaviour is rather financial and economic, rather than cultural. “The interest to maintain a sustainable environment through clean, green and lean production and manufacturing is always nurtured somewhere within as an ambition among Indian businesses,” he argues.

Innovate or perish
Issues notwithstanding, increasingly Indian players have begun to realise the merits in investing in innovation. It’s no longer seen as an avoidable cost. Instead, the industry, along with the products' end-users, now realise the benefits of the premium placed on new ideas.

On how innovation in sustainability is aiding firms in creating a distinct brand identity, Sanjesh Thakur, Partner, Deloitte India, affirms brands today are tightly connected to the consumer and sustainability is playing a lead role in building their brand image. “They [brands and end consumers] are all interconnected and thus companies need to constantly rethink and innovate. Consumers today are placing a premium for products manufactured through the sustainable supply chain and we see enough examples across categories,” he says, citing, in apparel retail, for example, khadi has a huge influence on the consumer.

At present, there certainly is an increased realisation on how even taking baby steps towards embracing innovation (that ultimately fuels sustainability) can make a big difference in the long run. According to Thakur of Deloitte, businesses can no longer afford to miss the sustainability bandwagon since with increased awareness, innovation-led sustainable manufacturing will soon become a ‘must-have’ for companies. “A corporation's success in the future will depend on its corporate sustainability scorecard,” he forewarns.
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