Innovation is indispensable for success in modern manufacturing. By itself, however, it is not sufficient. When asked what characterizes an entrepreneur Georg Ludwig Rexroth, owner of Rexroth and managing director for many years, said "An entrepreneur is someone who creates something new, plans something new and then actually puts this into practice."
Clearly, Rexroth was emphasizing an important characteristic of innovative companies and people that is as true today as it was then. It is not enough simply to come up with a good idea; that alone is not an innovation. To be successful, you must put the idea into practice.
The Significance of Innovation
Innovations in the state of the art really do change the market. The question, then, is whether innovations can be planned or whether they are more likely to be accidental discoveries. Certainly a systematic approach for developing innovations is preferable to leaving innovation to chance. As Niels Bohr, Nobel laureate in physics, cynically remarked many decades ago, "Prediction is hard, especially if it's about the future." Whether by accident or not, the idea of planning ahead is in any case not trivial.
The desire for growth is inherent in a manufacturing company. Innovations are important for company success because of the close and direct relationship between innovation and growth. Product life cycles have been decreasing for many years, especially in the field of automation, largely due to the incredible pace at which electronics is developing. Products that are still the main sellers today are getting older. They are offering fewer and fewer different features and are selling at ever-lower prices.
Companies typically respond with cost-reduction measures such as streamlining the product portfolio, optimizing the manufacturing processes, or making the products less complex. If the company can attain cost leadership through one or more of these methods, and successfully produce the products at lower price than the competition, then it can increase market share, which is the first step to revived growth. But continuing profitable growth can only be achieved by introducing new products and applications, and by addressing new markets. Generally, it is not enough simply to nurture existing products. New products have to be added to any portfolio. The difference between modest growth and significant growth can only be overcome with innovations.
Cost leadership is the only way of achieving growth with old products. However, as a rule, cost leadership in some product sectors is generally not enough, because cost leadership will always be threatened by innovations from the competition. Those competitors may, through an innovative quantum leap, render superfluous that very product sector in which you are the leader. There are plenty of examples of this in the history of technology, such as mechanical typewriters and clocks.
Megatrends in the Market
Product life cycles are decreasing and the speed of innovation is increasing. In automation, decentralized architecture is becoming more dominant thanks to its greater flexibility. The actual hardware is becoming increasingly replaceable. Software is the differentiating characteristic of the future. Furthermore, these software solutions will soon be able to be used irrespective of the different hardware platforms. Software is fast becoming a free-standing product, one that presents itself and is marketed independently from hardware.
Machine suppliers pass on their own added value to their manufacturer customers and, as has been the case for years in the automobile industry, await the establishment of trusted system partnerships. Modules and systems are delivered to the machines ready to install, replacing complex construction processes and assembly of individual components.
On the basis of this functional integration, the overlying megatrend towards vertical integration, with its standardized interfaces, open architecture and communication standards across all technologies, is gaining enormously in significance. Open systems rather than proprietary ones are being used by many manufacturers, thus offering manufacturers a greater level of security and performance. This, then, is the megatrend in automation that challenges modern manufacturing. Innovation is indispensable to meeting the challenge.
Megatrends in Automation
Reduced product service life
- Increasing speed of innovation
Decentralized intelligence
- Intelligence in the components on site
Separation of software and hardware
- Software is the differentiator
- Software can be used on diverse hardware
Functional integration
- Modules and systems rather than components
Vertical integration
- Universal engineering tools
- Open architecture control systems and communications standards
