Innovation Key To Manufacturers' Success

Georgia manufacturers that focus on innovation to drive sales have a competitive advantage over companies that rely on other marketing strategies, according to a study conducted by the Georgia Institute of Technology.

The institute's 2005 Georgia Manufacturing Study surveyed 648 Georgia manufacturers to assess the condition of the state's manufacturing industry. According to the survey, companies focused on innovation reported returns on sales 50% higher than companies that compete by providing low-cost products. Innovative companies also paid workers one-third more than the average Georgia manufacturer and were 40% less likely to lose work to outsourcing than companies competing on low cost.

"By offering innovative products, manufacturers can gain a competitive edge that provides protection against outsourcing and allows them to charge a premium, which creates higher margins and allows them to pay higher wages," says Jan Youtie, a researcher in Georgia Tech's Office of Economic Development and Technology Ventures and a co-author of the study. "If a company competes on the basis of innovation, that usually means only a few other companies are offering similar products," she says.

The study found that Georgia manufacturing companies are employing the following competitive strategies:

  • Providing high-quality products and services [53%]
  • Offering the lowest price [20%]
  • Adapting products to customer needs [14%]
  • Providing quick delivery of products or services [12%]
  • Including value-added services with products [10%]
  • Developing product innovations and new technology [8%]

[Totals add to more than 100% because some respondents indicated more than one top competitive strategy.]

Although providing low-cost products still ranks as a high priority for manufacturers, that number declined by 7% from 2002. Youtie speculates that's because many companies using that strategy have gone out of business. "Low price will bring in more sales for a while, but it's hard to keep that up," she says. "You have to compete with companies in countries with even lower-cost structures."

Other survey findings include:

  • 18% of Georgia manufacturers lost work to international outsourcing between 2002 and 2004.
  • About 12% of manufacturers gained insourcing work from facilities elsewhere in the United States.
  • 48% of manufacturers identified concerns with human resources, including the availability of skilled workers.
  • Nearly 40% of manufacturers reported lean manufacturing concerns.
  • About one in five companies reported concerns about energy costs and conservation.

For the complete report, visit

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