A new study published by The Manufacturer and Oracle | Netsuite has revealed the growth expectations of UK manufacturing SMEs and their approaches to breaking into new markets.
The study – The route to smarter manfuacturing for SMES – showed a welcome optimism in manufacturing SMEs’ expectations for growth. A very creditable two-thirds (64.5%) describe their growth targets as ‘ambitious’, and a further 30% see growth broadly continuing along historic lines.
Less than 5% expect business to remain static and just 1.6% anticipate business shrinking.
These figures are welcome because such optimism inevitably influences decision-making when it comes to plant investment, hiring, training, R&D spend and product development.
These bullish attitudes are reflected in SME manufacturers’ approach to breaking into new markets, which were differentiated between developing new products, entering new geographies, or a combination of both.
Two-fifths (40%) are developing new products, clearly the preferred route to growth. Just under a fifth (19.3%) have set their eyes on branching out into new geographies and nearly a third (32.3%) fall into the most ambitious category of going after both new products and new geographies.
As with the growth expectations question, a reassuringly small percentage (8%) are focused only on current products and geographies.
When it comes to business priorities and barriers to growth the responses paint a more challenging picture.
Reflecting their aspirations to develop new products as a route to growth, it was little surprise that product innovation came top of the list – two-thirds of SME manufacturers view product innovation as either their most important or second most important business priority.
Coming a close second is service innovation, a reflection of the rise of a servitization culture and the growing understanding that for manufacturers to flourish they need to offer more than just physical products.
Customers are increasingly looking for product providers to deliver value through the combination of products and services, and canny businesses appreciate that this has the potential to be an important tool against commoditisation, and which can deliver an ongoing revenue stream and increase profitability.
Further down the list of business priorities, the responses reveal some cause for concern.
Management decisions around organisational change, investment in both hardware and software and the collection of data are viewed as much less of a priority compared to product and service innovation.
While it would certainly be unfair to assume that all manufacturers view this quartet of priorities as being secondary, it is hard to see how real improvements in productivity and competitiveness can be achieved through product and service innovation alone.
Indeed, without the right level of investment in IT (information technology) it is more difficult to develop products, and without the right level of organisational change and data collection the ambition to offer meaningful service innovation will be a challenge.
‘Data collection’ is of course a broad term, potentially encompassing everything from shop floor manufacturing data through to purchasing trends, but the ability and ambition of companies to collect, analyse and act on data is increasingly a key benchmark of a company’s future success.
It is not enough for companies to simply be ambitious and have plans for great new products. They need to be flexible and nimble enough to adapt to rapidly shifting customer expectations and have the organisational infrastructure to collect and act on the data that alerts them to the shifting sands of an ever-changing business environment.
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