We observe that even on the historical offer-driven markets as consumer electronics, the demand side is now imposing the pace, not the offer. Consumers expect better products everyday and even the market leaders may be trapped in the offer-demand pitfalls. Remember the annoucement of iPhone 4s back in 2011 ? The blogs and newpapers reported a massive disappointment (a Google search on: ‘iphone AND 4s AND disappointment’ will give you near 2 million pages!). Many similar examples can be found in the automotive industry where new car models are expected to outclass previous ones on: security, fuel consumption, pollution standard, quality, connected equipement, GPS, phones, music, park distance control,… the list never ends.
People got used to being offered new products and new features over the past decades, this has turned into a strong demand for the Better and Better.
But competition also imposes that these new models be delivered at a faster pace.
An exemple: in the early 2000’s the mobile phone industry was based on standards as: a product lifetime of 2 to 3 years and a given model availability (the time it is marketed) of 2 years. These figures have decreased to respectively 18 months and 12 months in average, a two-fold acceleration. The replacement rate of the product mix is even more impressive in the computers’ industry today as models are replaced every year.
This trend in consumer electronics applies to many other sectors as clothing, food and even services like banking and insurance who package new offers almost on a monthly basis.
Competition imposes that products be delivered Faster and Faster.
What does this mean for manufacturers ?
On one side products complexity increases at an unpreceeded pace to answer the need for innovation. Think about the technologies embedded in a car (a car embbeds around 30 microprocessors and a million lines of code), in a smartphone (GPS, movement detector, NFC, displays, battery, camera, processors…). And these technologies must be developped, integrated, tested and delivered always faster. And, last but not least, each of them as they become more sophisticated, as they get smaller, also become more and more capital intensive to produce, leading to concentration and reduced competition.
No single company on earth can master all these technologies. Of course each one specialises and becomes part of an integrator/supplier relationship chain. But even then, there are always many highly specialized areas where a company cannot maintain a state-of-the-art level knowhow for its own products. This is particularly acute for SMEs who suffer from a real SME innovation syndrome.
The design and R&D teams mission is becoming Harder and Harder.
This is where Open Innovation comes into play. Leveraging external know-how, integrating other companies’ and research labs’ innovations is the only way to go to keep up with or surpass competition. In particular when your R&D engine places you as a challenger in your own market. SMEs I said…
In our experience with Open Innovation we have met many exemples of this:
– a pan manufacturer needs expertise on how to obtain certain colors on aluminium
– a medical instruments manufacturer needs a cheaper process for ceramic grinding
– a phone manufacturer needs a smaller antenna design
They were under high market pressure, R&D budget constraints, their suppliers did not have the right answer to the technology challenge but we found together that researchers or other SMBs, far from their initial ecosystem, had already solved the problems.
The detection of solutions, the implementation of OI as a practice, the integration of third party IPs in your product, the collaboration with new partners inside your R&D process are all difficult questions that we will discuss in other Blog posts.
But I hope that this one has demonstrated that opening the R&D box much wider is the only option in this Better, Faster but Harder world.
* courtesy of the Daft Punk