innovation in manufacturing: from product innovation to productivity

Innovation in Manufacturing:From Product Innovation to

ProductivityVah Erdekian, LGO Industry Co-

DirectorLMP Summit, October 27, 2011

Overview

• Product and process innovation• Product lifecycles• Industry example• Advanced manufacturing• Why Manufacturing?

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Innovation drives disruptive outcomes and major breakthroughs (1)

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For products:

Innovation drives disruptive outcomes and major breakthroughs (2)

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Or for processes:

Impact of Innovation on Industry or Product Life Cycle

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Level of innovation needed is a function of product life cycle (T) / “clock speed” Determining working capital and assets/resource allocation is critical

Production of American watch industry (M. Harrold)

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Impact of product and process innovation on the American watch industry, 1850s-1880s

• User friendly interfaces (setting time and winding)

• Reliability• Size• Availability• Cost

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European, early 1800s

American Waltham 1870s

US watch market share by company (M. Harrold)

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Production and employment in the late 19th Century American watch industry

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Peak employment of ~100K in

late 1920s

Lack of product innovation in 1920s/1930s

• Self-winding capability and electric watch designs were disappointments

• Mainspring design and life expectancy had not changed for 50 years

• Request for tariff protection ended unsuccessfully

• Before decade ended significant number of “American watches” were made in Switzerland

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American Waltham early 1900s

Swiss wristwatch 1940s

Trends of watch size market share (M. Harrold)

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Impact of Innovation on watch industry product Life Cycle

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The pressure to innovate

• Digital Equipment • Nortel Networks• Data General• Lucent• Kodak• Chrysler• GM*• Polaroid• Xerox*

• Palm• RCA• Motorola*• And others

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Lack of product innovation and excessive asset allocation to manufacturing during the latter part of the “growth life cycle” drove these former leaders out of business:

Advanced Manufacturing: Product and Process timelines

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Where Process Innovation Occurs

Product form factor innovation

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Why a career in Manufacturing?

• Not for the faint of heart• Complexity and intensity• Hard skills/soft skills• In the center of all the

action• Diverse set of skills and

knowledge a requirement:• Technical excellence• Financial knowledge• Ability to lead people and teams• Communication skills

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THANK YOU

Vah Erdekianerdekian@mit.edu

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