Manufacturing executives say innovation and value-added services for existing products will fuel growth at their companies in the next two years, according to a survey released Monday by KPMG International.

Of the 241 senior manufacturing executives responding to the KPMG survey, 44% of U.S. executives and 36% of global respondents said they plan to increase investment in innovation and research and development in the next year to two years.

Tax and advisory services firm KPMG surveyed 50 executives from the United States for its 2012 manufacturing outlook report.

Three-fourths of the respondents said they're optimistic about their business outlook in the next two years. The United States is expected to lead the growth, according to 40% of the respondents.

But executives responding indicated they will turn their attention to investing in innovation while continuing to seek cost-management and operational-efficiency opportunities.

"After several years spent cutting costs, many manufacturers realize that they can't afford to sit back and wait," said Jeff Dobbs, KPMG's global head of Diversified Industrials and a partner in the U.S. firm. "As such, companies must continue to seek opportunities to optimize business operations and squeeze costs out of the process to maximize revenue and profits."

Many new innovations will involve collaborative efforts with suppliers, customers and partner companies, KPMG reported.

More than 60% of respondents globally said they plan to work with customers for customized product development and with suppliers for product design.

"Customer and supplier collaboration in the earliest stages of product development allows for cost and risk sharing and lets manufacturers focus on what they do best by leveraging the expertise of external partners, accelerating speed to market," Dobbs said.

One example of this is a joint venture between General Electric Co. (IW 500/4) and Microsoft Corp. (IW 500/16) aimed at transforming the global health care system, Dobbs said.

See also:

New Celanese Chief Pushes Customer-Facing Strategy

The Keys to Making 'Customer-Facing' Strategies Work