Be Reasonable With Innovation Initiatives

"Innovation is vital to long-term growth and capturing customer desire. However, it must be balanced with the organization's ability to accurately forecast demand and deliver these innovations at a profit," explain authors Michael Burkett, Kevin Mixer and Nigel Montgomery of AMR Research. In an Aug. 10 article entitled "Don't Innovate Yourself Into the Financial Red" they make the point that companies need to be reasonable in pursuing this manufacturing credo.

Some companies have struck a balance; they have produced both innovative products and profits. The article cites Porsche's Cayenne SUV that will boost the bottom line for 2005. While other companies delayed product launch and took a financial hit. Renault, for example, delayed launch of its Twingo city car replacement -- which resulted in financial setbacks. The problem, according to the authors, is that manufacturers "struggle to continuously and quickly validate designs with market opportunity and supply at a profitable price that the market will accept. Because information flow is slow, designs are often frozen to satisfy supply readiness, but at the sacrifice of meeting evolving customer needs." The solution, according to AMR, is to co-ordinate three key components: demand forecast accuracy, product innovation and supply chain readiness.

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