Everyone dealing with the electronics supply chain knows that speed is critical for success. Customers wanted their parts yesterday, making just-in-time delivery seem slow by 2013's high-paced standards.
But what if speed — or resilience or flexibility, if you prefer — were not only a requirement, but also the secret weapon for supply chain innovation? What would the high-tech sector look like if companies spent even a portion of their R&D dollars on developing speedier supply chain solutions or, if not speedier solutions, at least ones that better address inventory management and forecasting analytics (which if properly addressed would make the supply chain more responsive and therefore faster)?
In this day and age, shouldn't innovation go beyond a product design upgrade or opening a new market segment?
I got to thinking about this while reading a recent article in the Financial Times called “Three Innovation Myths” (you may need to register to access the story). Booz & Co. partners Barry Jaruzelski, John Loehr, and Richard Holman debunk some commonly held business perceptions, namely, puncturing holes in theories that say:
- More spending equals better performance. They argue that throwing more money into the R&D pot doesn't guarantee that companies will have breakthrough innovations. But, they say, companies can spend too little, and that does impact innovation. Their point, though, is that innovation improvements are more determined by how companies spend R&D funds, not the amount they necessarily budget.
- Smaller is better. The three partners claim that smaller companies aren't necessarily more nimble than larger ones. They say just because smaller companies spend more on R&D as a percent of sales, it doesn't always follow that they have better financial results compared to their bigger counterparts.
- The more patents, the better. Booz & Co found that there was no relationship between patent activity and sustained financial performance. And, while it may be the case that companies that spend more on R&D as a percentage of sales produce more patents, the major consideration related to financial performance isn't about the volume of patents — it's about the patent's quality and impact on customers.
These three points play out in another significant way. In its most recent “Global Innovation 1000” report, Booz & Co. asked survey respondents to name the companies they thought were the world's most innovative. Not surprisingly, look who ranks among the top 10: Apple, Samsung, GE, Toyota, IBM, and Amazon.
These companies aren't famous just for their fancy-schmancy products that “delight customers.” What makes them so remarkable are their world-class supply chain practices — practices they invested a fortune in over an extended period of time. The investments these companies made in building superior supply chain capabilities have made them more resilient, more responsive, and yes, faster than their closest competitors.
If we accept that as true, maybe the supply chain's secret weapon has nothing to do with things like new software platforms or bigger teams of people doing repetitive tactical activities. Maybe the most innovative way to advance supply chain strategies is to put some R&D muscle into it.
So today's question is: How is your company spending its R&D money this year?