Indian manufacturing sector after staying out of the limelight for years, bogged down by sluggish growth, the industry has been looking up in the past three years. Its growth has accelerated from 8.7% to 11.3% and is projected to top 12%. What’s more the ‘Made in India’ label is also becoming up market.
Part of the credit goes to innovations in manufacturing. Apart from the need to remain competitive and give customer satisfaction, manufacturers are trudging that extra mile in order to deliver the unexpected. Innovation, the bedrock of the IT industry, has suddenly become the buzzword in manufacturing too.
Experts consider innovation as probably the most underexploited strategy for the Indian manufacturing industry. To become a global powerhouse and remain competitive, manufacturers need to cultivate innovations in product development and processes, technologies and business models.
India’s labor arbitrage cannot last for long. For the manufacturing sector to increase its contribution to the GDP – from 17% to 23% by 2015 – it requires a shift from people cost arbitrage to innovation. And mindsets surely are changing, as the Indian Innovation Survey jointly conducted by CII and Boston Consulting Group, showed.
Innovation is a top strategic focus for most Indian companies. An overwhelming 89% said the importance of innovation has increased significantly over the last 10 years. And 39% felt that innovation today has become critical to their organization.
An overwhelming 91% said innovation was amongst the top three strategic priorities.
Many companies are already walking the path. The best example is Tata’s Rs 1 lakh car. It’s a typical example of dare to try. No other Indian car maker has done this before.
There are examples galore of innovative strategies that have gathered pace since 2004. For instance, SRF Ltd Technical textile, chemicals and polymer films was working on two processes of twisting and clang. Earlier, they imported expensive equipment for these processes. Now they have innovated on some old machines and are doing processes together more cheaply. Similarly, Su-Kam a leading manufacturer of power products has created long life batteries at 25% of the previous cost. They have also made inverters which inform the company when they need servicing.
Similarly auto component maker Anand Group has made innovations in car ACs. The Indian car buyer is satisfied with ACs that take a little longer to cool. So they created ACs at a much cheaper cost, which also makes cars more affordable. Similarly they are working on ACs without compressors.
But how are traditional companies driving innovation? By creating a sense of urgency and articulating ambitious targets; increasing the focus on R&D in selected areas; creating a formal idea management system and creating a culture of collaboration
Most Tata companies allocate budgets to try out new products and process new products and processes. A new award called Dare to try has been instituted which is given to the smartest case of an unsuccessful attempt to innovate. In fact, Tata companies have separate funds for their R&D and small group activities, which are also the key sources for several smaller innovations.
At Sona Group, India’s largest auto accessories manufacturer, the R&D budget ha gone up by 15%. They have worked on a steer by wire technology using solar power. It will be show cased at the Auto Show (2008).
CII also set up the Mission for Manufacturing innovation earlier this year to change mindsets. Its goal is to select firms from five sectors to become leader companies. These firms will be examples of innovation and product development and creates a ripple effect throughout the industry.
Similarly, the Visionary Leaders for manufacturing Programs was started under the Indo-Japan cooperation agreement. Under this, they are training future CEOs on how to create an ecosystem of innovation in their company and become more competitive.
There’s a long way to go before the sector can transform itself. But the spectacular growth rates can fast forward the change.