{"73747":{"#nid":"73747","#data":{"type":"news","title":"Manufacturing Survey Shows Value of Innovation","body":[{"value":"\u003Cp\u003EA new study of nearly 650 Georgia manufacturing companies underscores the importance of innovation as a competitive strategy - at a time when international outsourcing continues to impact Georgia\u0027s manufacturing community.\u003C\/p\u003E\n\u003Cp\u003EThe 2005 Georgia Manufacturing Survey shows that companies basing their competitive strategies on the development of innovative products or processes enjoy higher returns on sales, pay better wages and have less to fear from outsourcing than do manufacturers relying on other competitive strategies.  \n\u003C\/p\u003E\n\u003Cp\u003EGeorgia manufacturers that rely on innovation for their competitive edge reported returns on sales 50 percent higher than companies that compete by providing low cost products - a gap that grew substantially since the last survey in 2002.  Innovative companies paid workers a third more than the average Georgia manufacturer and were 40 percent less likely to lose work to outsourcing than were companies competing on low cost.  \n\u003C\/p\u003E\n\u003Cp\u003EThe survey of Georgia manufacturers, part of a periodic study begun more than a decade ago, was conducted by the Office of Economic Development and Technology Ventures and the School of Public Policy at the Georgia Institute of Technology.  \n\u003C\/p\u003E\n\u003Cp\u003E\u0022Innovation, whether in products or processes, or in organization or services to customers, is one of the main paths through which manufacturers can become more distinctive, secure market premiums, satisfy customers, expand sales, reward workers and improve their bottom line,\u0022 explained Phil Shapira, a professor in Georgia Tech\u0027s School of Public Policy and a study co-author.  \u0022Companies that do not continuously innovate will find themselves under increasing pressure from low-cost producers in the United States and globally.\u0022\n\u003C\/p\u003E\n\u003Cp\u003EOffering innovative products gives companies a competitive edge that provides protection against outsourcing and allows them to charge a premium - which creates higher margins and allows higher wages, notes Jan Youtie, a researcher in Georgia Tech\u0027s Office of Economic Development and Technology Ventures and another study co-author.\n\u003C\/p\u003E\n\u003Cp\u003E\u0022If a company competes on the basis of innovation, that usually means only a few other companies are offering similar products,\u0022 she said.  \n\u003C\/p\u003E\n\u003Cp\u003EAfter launching its iPod music player, for example, Apple Computer was able to charge a premium - and still commands a majority of the market.  And Google has maintained a competitive edge by continuing to offer new products that build on its market-leading search engine, Youtie noted.\n\u003C\/p\u003E\n\u003Cp\u003EBut innovation isn\u0027t limited to products and processes.  Companies can also compete using innovative marketing strategies and organizational approaches, she said.  Aflac\u0027s talking duck, for instance, provided a marketing innovation that helped the company stand out in the crowded health insurance market.\n\u003C\/p\u003E\n\u003Cp\u003E\u0022The benefits to innovation are pretty much across the board for companies in quality of goods, variety of goods, market share, increased capacity, reduced time for product delivery, improved production flexibility - and reduced inputs of materials, labor and energy,\u0022 she noted.  \n\u003C\/p\u003E\n\u003Cp\u003EBut there are barriers to innovation that involve costs, capabilities and risks that may keep some companies away.\n\u003C\/p\u003E\n\u003Cp\u003E\u0022It\u0027s not just a matter of money,\u0022 Youtie said.  \u0022There are also issues with having qualified personnel to undertake the innovation, seeing the need in the marketplace, and overcoming a concern that innovative products cannot penetrate markets dominated by established companies.\u0022\n\u003C\/p\u003E\n\u003Cp\u003EThe relatively low priority placed on innovation doesn\u0027t bode well for the state\u0027s manufacturing community.\n\u003C\/p\u003E\n\u003Cp\u003E\u0022Without more innovation in Georgia, manufacturers abroad will steadily out-compete us by having better products and more efficient processes,\u0022 Shapira warned.  \u0022This is a particular concern for Georgia\u0027s base of small and mid-sized companies.  While we have many excellent small firms in the state, we lack the large base of innovative, specialized and flexible small manufacturers seen in some other advanced industrial economies.\u0022\n\u003C\/p\u003E\n\u003Cp\u003EFewer than 8 percent of companies responding to the survey chose to compete on innovation.  However, a much larger percentage applied innovation to products and processes that were part of other strategies.  The survey found that nearly half of Georgia manufacturers had introduced a new or significantly improved product between 2002 and 2004.  Branch facilities of companies headquartered outside the state had the highest rate of new product introduction.\n\u003C\/p\u003E\n\u003Cp\u003EThose new products can quickly become important.  The average manufacturer introducing new-to-the-market products reported that those products accounted for nearly 20 percent of sales.  Nearly 12 percent of innovators reported that their new products accounted for 50 percent or more of sales.\n\u003C\/p\u003E\n\u003Cp\u003EWhile innovation has traditionally been considered the business of large high-tech companies, Youtie noted that firms of all sizes - and in all technologies - can benefit. Traditional industries such as food processors can innovate in product packaging and marketing, while apparel and carpet firms might apply new finishes - perhaps based on nanotechnology - to differentiate their products.\n\u003C\/p\u003E\n\u003Cp\u003EThough small companies may lack the innovation resources and networks of larger competitors, they can often make decisions and implement changes more quickly, Youtie noted.  \n\u003C\/p\u003E\n\u003Cp\u003EThe study found that returns on sales ranged from more than 6 percent for companies competing on innovation to less than 4 percent for companies competing on low cost.  The breakdown of competitive strategies chosen included:\n\u003C\/p\u003E\n\u003Cp\u003E\u0095 Providing high quality products and services (53 percent);\n\u003C\/p\u003E\n\u003Cp\u003E\u0095 Offering the lowest price (20 percent);\n\u003C\/p\u003E\n\u003Cp\u003E\u0095 Adapting products to customer needs (14 percent);\n\u003C\/p\u003E\n\u003Cp\u003E\u0095 Providing quick delivery of products or services (12 percent);\n\u003C\/p\u003E\n\u003Cp\u003E\u0095 Including value-added services with products (10 percent);\n\u003C\/p\u003E\n\u003Cp\u003E\u0095 Developing product innovations and new technology (8 percent).\n\u003C\/p\u003E\n\u003Cp\u003EThe percentage of companies competing on the basis of low cost declined from 27 in 2002 to 20 percent in 2004.  Youtie and Shapira speculate that\u0027s because many companies using that strategy have simply gone out of business. \n\u003C\/p\u003E\n\u003Cp\u003E\u0022Low price will bring in more sales for a while, but it\u0027s hard to keep that up,\u0022 Youtie noted.  \u0022You have to compete with companies in countries with even lower cost structures.\u0022\n\u003C\/p\u003E\n\u003Cp\u003EFor decision-makers, the study\u0027s implications are clear.  \u0022Firms, industry associations, universities and state and local policymakers all need to be involved in new efforts to stimulate many more of our small, mid-sized and larger industrial enterprises to invest in the innovative strategies that will help them not only to survive, but also to grow,\u0022 Shapira said.\n\u003C\/p\u003E\n\u003Cp\u003EOther findings of the 2005 Georgia Manufacturing Survey included:\n\u003C\/p\u003E\n\u003Cp\u003E\u0095 18 percent of Georgia manufacturers lost work to international outsourcing between 2002 and 2004.  \u0022Outsourcing is a real concern now, and I expect it will continue to affect Georgia manufacturers,\u0022 Shapira said.  \u0022Some of the firms that took part in our 2004 survey will not be in businesses in the state, or will have fewer employees, when we repeat our survey in 2007.\u0022\n\u003C\/p\u003E\n\u003Cp\u003E\u0095 About 12 percent of manufacturers gained \u0022insourcing\u0022 work from facilities elsewhere in the United States.  While that shows Georgia continues to be competitive within the nation, it raises concern if that competitiveness stems only from low wages, Shapira cautioned.\n\u003C\/p\u003E\n\u003Cp\u003E\u0095 48 percent of manufacturers identified concerns with human resources, up significantly from the 2002 study.  While earlier surveys found concern about availability of skilled workers, more than a quarter of the 2005 respondents had problems finding workers with basic skills - up from just 11 percent in 2002.  Despite the concern, however, 20 percent of the respondents made no investment in worker training.\n\u003C\/p\u003E\n\u003Cp\u003E\u0095 Nearly 40 percent of manufacturers reported lean manufacturing concerns, an increase from 2002 statistics.  \n\u003C\/p\u003E\n\u003Cp\u003E\u0095 Nearly one in five companies reported concerns about energy costs and conservation - even prior to the recent storm-related energy cost increases. \n\u003C\/p\u003E\n\u003Cp\u003EThe survey was sent to approximately 4,000 Georgia manufacturers that had 10 or more employees.  Completed surveys from 648 manufacturers were weighted to reflect employment and industry distributions.\n\u003C\/p\u003E\n\u003Cp\u003EThe Georgia Manufacturing Survey is conducted periodically to assess the condition of Georgia\u0027s manufacturing industry.  In addition to the authors already named, Georgia Tech School of Public Policy graduate students John Slanina, Jue Wang and Jingjang Zhang provided research assistance in the 2005 study.\n\u003C\/p\u003E\n\u003Cp\u003EThe project was supported by the U.S. Department of Commerce\u0027s NIST Manufacturing Extension Partnership, the U.S. Economic Development Administration, the Center for Paper and Business and Industry Studies at Georgia Tech, the Georgia Department of Labor, and the QuickStart Program of the Georgia Department of Technical and Adult Education.\n\u003C\/p\u003E\n\u003Cp\u003E\u003Cstrong\u003EResearch News \u0026amp; Publications Office\u003Cbr \/\u003E\nGeorgia Institute of Technology\u003Cbr \/\u003E\n75 Fifth Street, N.W., Suite 100\u003Cbr \/\u003E\nAtlanta, Georgia  30308  USA\u003C\/strong\u003E\n\u003C\/p\u003E\n\u003Cp\u003E\u003Cstrong\u003EMedia Relations Contact\u003C\/strong\u003E: John Toon (404-894-6986); E-mail: (\u003Ca href=\u0022mailto:john.toon@edi.gatech.edu\u0022\u003Ejohn.toon@edi.gatech.edu\u003C\/a\u003E)\n\u003C\/p\u003E\n\u003Cp\u003E\u003Cstrong\u003ETechnical Contacts\u003C\/strong\u003E: Jan Youtie (404-894-6111); E-mail: (\u003Ca href=\u0022mailto:jan.youtie@edi.gatech.edu\u0022\u003Ejan.youtie@edi.gatech.edu\u003C\/a\u003E) or Phil Shapira (404-894-7735); E-mail: (\u003Ca href=\u0022mailto:ps25@prism.gatech.edu\u0022\u003Eps25@prism.gatech.edu\u003C\/a\u003E)\n\u003C\/p\u003E\n\u003Cp\u003E\u003Cstrong\u003EWriter\u003C\/strong\u003E: John Toon\n\u003C\/p\u003E","summary":null,"format":"limited_html"}],"field_subtitle":[{"value":"The 2005 Georgia Manufacturing Survey shows how companies can compete; reports effects of outsourcing"}],"field_summary":[{"value":"A new study of nearly 650 Georgia manufacturing companies underscores the importance of innovation as a competitive strategy - at a time when international outsourcing continues to impact Georgia\u0027s manufacturing community.","format":"limited_html"}],"field_summary_sentence":[{"value":"A new study shows the importance of innovation"}],"uid":"27303","created_gmt":"2005-11-14 01:00:00","changed_gmt":"2016-10-08 03:03:34","author":"John Toon","boilerplate_text":"","field_publication":"","field_article_url":"","dateline":{"date":"2005-11-14T00:00:00-05:00","iso_date":"2005-11-14T00:00:00-05:00","tz":"America\/New_York"},"extras":[],"hg_media":{"73748":{"id":"73748","type":"image","title":"Chart showing outsourcing","body":null,"created":"1449178012","gmt_created":"2015-12-03 21:26:52","changed":"1475894678","gmt_changed":"2016-10-08 02:44:38"},"73749":{"id":"73749","type":"image","title":"Chart of average return","body":null,"created":"1449178012","gmt_created":"2015-12-03 21:26:52","changed":"1475894678","gmt_changed":"2016-10-08 02:44:38"}},"media_ids":["73748","73749"],"related_links":[{"url":"http:\/\/www.spp.gatech.edu\/","title":"School of Public Policy"},{"url":"http:\/\/www.edtv.gatech.edu\/","title":"Office of Economic Development and Technology Ventures"},{"url":"http:\/\/www.cherry.gatech.edu\/survey\/","title":"Full Text of 2005 Georgia Manufacturing Survey"}],"groups":[{"id":"1188","name":"Research Horizons"}],"categories":[],"keywords":[],"core_research_areas":[],"news_room_topics":[],"event_categories":[],"invited_audience":[],"affiliations":[],"classification":[],"areas_of_expertise":[],"news_and_recent_appearances":[],"phone":[],"contact":[{"value":"\u003Cstrong\u003EJohn Toon\u003C\/strong\u003E\u003Cbr \/\u003EResearch News \u0026amp; Publications Office\u003Cbr \/\u003E\u003Ca href=\u0022http:\/\/www.gatech.edu\/contact\/index.html?id=jt7\u0022\u003EContact John Toon\u003C\/a\u003E\u003Cbr \/\u003E\u003Cstrong\u003E404-894-6986\u003C\/strong\u003E","format":"limited_html"}],"email":["jtoon@gatech.edu"],"slides":[],"orientation":[],"userdata":""}}}