The growth of manufacturing as a service

 

The rules have changed in manufacturing, and they’re going to keep changing. New customer behaviors, e-commerce, remote workers, emergent technologies and supply chain disruptions will keep rewriting the requirements for growth.

 

Traditionally, many manufacturing processes were hard to change. Changes caused lower productivity, slower innovation and a loss of market share to competitors. 

 

Now, growing manufacturers are re-examining the way they pursue:

  • Customer integration, becoming essential to solving customer problems
  • Disruptive innovation, changing the way they deliver value
  • Workforce generation, recruiting — and developing — the talent they need

“When you take a chance to reflect on where you are in the market today, and the changes that are happening from your customer’s perspective, then that can change the way you prioritize everything — from where you place your bets in your go-to-market strategy, to how you allocate capital in your growth opportunities,” said Grant Thornton Growth Advisory Managing Director Adam Bowen. 

 

Customer integration, disruptive innovation and workforce generation can empower you to build an essential and ongoing relationship with your customers — providing manufacturing as a service that solves problems, rather than as a catalog of products.

 

 

 

Global growth for U.S. manufacturers

5:26 | Transcript

 
 
 

Customer integration

 
 

Traditionally, many manufacturing sales forces approached customers with a relatively static list of products. “We’ve seen a lot of manufacturers who basically said, ‘We manufacture X, Y and Z. Here are my products. Do you want to buy them?’ They structured entire sales forces and organizations around that,” Bowen said. 

 

“From a growth perspective, we're seeing a shift from a product-focused go-to-market strategy, to becoming seen as a solution provider,” Bowen said. This strategy is driven by a change in customer expectations. “We’ve seen that the customers have really changed their buying behaviors significantly in this post-COVID world. For one, the evaluation time that buyers are able to spend is decreasing. There's more pressure being placed upon them, so the amount of time they have to evaluate a solution is less.”

 

“The other change is that the solutions and providers they are evaluating  are becoming more complex,” Bowen said. “There's increasing complexity, and so increasing risk.” As a result, buyers are doing more self-research and self-service purchasing. “They often want to learn and understand how to solve a particular problem,” Bowen said. “The suppliers who take on the role of education are more likely to be chosen for building partnerships to solve those problems. There's this outsized importance placed on suppliers who educate. All of a sudden, it suggests that you are no longer in the product business, you're in the solution business.”

 

Headshot of Adam Bowen

“We're seeing a fairly significant shift, from what I call a ‘consultative approach’ to selling, to a ‘challenger approach’ to selling.”

Adam Bowen

Grant Thornton Growth Advisory Managing Director  

This can require a different sales approach. “We're seeing a fairly significant shift, from what I call a ‘consultative approach’ to selling, to a ‘challenger approach’ to selling,” Bowen said. “What I mean by that is: if I'm a salesperson who’s going to meet with you, I can't just walk into your office, bring my catalog, and ask you a bunch of questions. You're not going to tolerate that. What I need to be able to do is come in and say, ‘When we look at clients like yours, this is what we tend to see.’”

 

The shift toward solution-driven sales connects with customers who have become more educated in many aspects of the solution, including product features, technology, supply chains and market factors. “You're no longer in the reactive product sales business, but you are now tasked with being able to show a partner what the future looks like, how they can get there, and how they can use your products. It’s not just a single product, but a suite of products — that you own, or where you're part of a broader ecosystem that can help them get to a future state. That buying behavior has upended the way in which many companies now are having to go to market,” Bowen said.

 

 

 

Valuable insight

 

For manufacturers, this shift to a more educational or advisory sale can also create new channels of revenue. “If you place a value on the advice, coaching and knowledge that you can bring into a situation, then there’s an opportunity to monetize that,” Bowen said. “What we are seeing is that many mid-tier organizations are standing up advisory services or consulting services. Because it's not just about the product. It's not even just about the solution anymore. It's about the roadmap. How do I get there? How do I get from where I've been to where I need to go?” If a seller can answer these questions, they are providing value beyond a sale.

 

“We've talked about the cost dimension of optimizing the supply chain, and the other cost moves that the industry's been making for years,” said Grant Thornton Manufacturing Industry National Managing Principal Robert Hersh. “As we transition from just cost optimization, the industry's going to have to move to the things that Adam described.”

 

Headshot of Robert Hersh

“You need to continue to build growth and margin, because it's not just a cost takeout or cost optimization anymore. It's adding that value, and then monetizing the value that you're adding so that the customer will pay for that value.”

Robert Hersh

Grant Thornton Manufacturing Industry National Managing Principal

“You need to continue to build growth and margin, because it's not just a cost takeout or cost optimization anymore,” Hersh said. “It's adding that value, and then monetizing the value that you're adding so that the customer will pay for that value. Understand where they're going to take their products, and how they're innovating, and become part of that discussion.”

 

But you can’t just re-label sellers as consultants — you need to be driven by data. 

 

“You need to have an insights engine,” Bowen said. “Some manufacturers are fielding research. They're creating points of view on the industry. They're gathering knowledge to be able to arm their sales teams so that when they go to market, they are able to upskill the buyer. They can teach the buyer how to buy a solution,” Bowen said. “In many cases, manufacturing contracts go out for RFP. The ideal situation is that your firm was the one that taught the buyer how to do what they need. You had an impact on the way the RFP was written, and you’re the one that’s ready to fulfill it.” This isn’t about giving your customer a biased opinion — it’s about making yourself an essential player in today’s increasingly complex solutions. Because I understand your industry, because I've done the research, because we've put solutions into this industry, I'm able to bring immediate value to the conversation by sharing insights, sharing how other people like you have solved similar problems.”

 

Whether you offer consulting services, or just a challenger approach to selling, it’s important to think about your conversation in stages. “It typically comes in three parts,” Bowen said. “You share the insight, you introduce impact, and then the last piece is to define the solution.”

 

Headshot of Adam Bowen

“It typically comes in three parts. You share the insight, you introduce impact, and then the last piece is to define the solution.”

Adam Bowen

Grant Thornton Growth Advisory Managing Director

“Only after you have demonstrated your understanding of their business, and you've educated them — you've dimensionalized it by suggesting that there's an urgency or there's a financial benefit — do you then presume to say here's how I can help you solve that problem,” Bowen said. 

 

Customers are seeking creative and agile strategies to navigate through a constantly changing business climate. Manufacturers that quickly provide a tailored yet stable solution can make themselves essential to the customer’s world.

 

 

Takeaways

 

Study and document the customer’s evolving needs, behaviors and success patterns:

  • Spend less time focused on product, and more on delivering solutions.
  • Identify key differentiators and competitive advantages. Seize opportunities by educating buyers and giving customers a constant source of insights and ideas.
  • Ensure that your growth leaders, sellers and marketers are all playing from a coordinated, well-orchestrated narrative and playbook.
 

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Disruptive innovation

 
 

Customer-driven solutions can never stand still. They need to innovate, to solve new problems, and they need to do it before the competition does.

 

In recent years, some manufacturers have focused on cost controls over innovation. “We have seen innovation come and go,” Bowen said. “It's been a cyclical event. It plays a big role in growth, and then it's diminished. We recently saw a shift to incremental innovation.”

 

“The problem with incremental innovation is that it's adding very little value and it's taking a lot of time from any other product development cycles,” Bowen said. “Just creating line extensions or adding another solution to what you're creating — it might add a limited amount of value, but at the same time, the true winners in the market are actually creating disruptive innovations. They're making big bets that have big levels of return.”

 

Headshot of Robert Hersh

“Innovation doesn't necessarily mean product innovation. It could be creative delivery. It could be a re-optimized, re-shored supply chains where you're closer to the point of consumption for your products. It could be how do you deploy your workforce and technology in a more creative way, or a more efficient way, to drive value.”

Robert Hersh

Grant Thornton Manufacturing Industry National Managing Principal

Those bets don’t have to be based on your products. “Innovation doesn't necessarily mean product innovation,” Hersh said. “It could be creative delivery. It could be a re-optimized, re-shored supply chains where you're closer to the point of consumption for your products. It could be how do you deploy your workforce and technology in a more creative way, or a more efficient way, to drive value.”

 

“Sometimes, we fall into the trap of limiting ourselves to product innovation, but it's more than that,” Hersh said. “It's how you come up with the solutions that Adam outlined, and how you deliver them in a way that is creative, effective and valued by the customer.” It’s important to develop your risk management and forecasting. You can’t have accurate insight without an accurate understanding of your future.

 

“There's going to be a revisiting of what disruptive innovation looks like,” Bowen said. “When you think about innovation, what is the input to it? It's insight. It's understanding the customer. You have to understand customer behavior before you can create a solution. You have to understand the jobs that the customer is trying to do before you can actually reimagine your solution.”

 

Headshot of Adam Bowen

“I think that we're going to see a renaissance in disruptive innovations certainly in the next five years.”

Adam Bowen

Grant Thornton Growth Advisory Managing Director

“I think that we're going to see a renaissance in disruptive innovations certainly in the next five years,” Bowen said.

 

 

Takeaways: 

 

Fuel disruptive innovation with insight:

  • Pandemic uncertainty caused many manufacturers to limit innovation pipelines and focus on incrementalism. Provide or participate in insight engines that fuel long-term value. For instance, think about disruptive manufacturing processes, rapid prototyping, accelerated product-to-market timelines.
  • Consider how you can add adjacencies, adopt new business models, rethink supply chains, and find new routes to market like growing online “marketplaces.”
  • Challenge conventional thinking, like shifting from energy as a cost to energy as a revenue driver, examining the role of battery storage and decarbonization roadmaps.
 

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Workforce generation

 
 

To achieve customer integration and disruptive innovations, manufacturers need superior talent… the same talent their competitors want.

 

Headshot of Robert Hersh

“Talent is a huge issue for the industry in general, and it's up and down on the chain. It's not just shop floor people. It's not just the analytics. It's not just the technical talent. It's all of the above.”

Robert Hersh

Grant Thornton Manufacturing Industry National Managing Principal

“Talent is a huge issue for the industry in general,” Hersh said. “And it's up and down on the chain. It's not just shop floor people. It's not just the analytics. It's not just the technical talent. It's all of the above.”

 

But the challenge isn’t just that manufacturers need technology. Manufacturers also need skills that have become harder to find. “Tool and die talent has atrophied tremendously,” Hersh said. “You still have to make it physical. You still have to press parts and bend parts — that stuff doesn't go away in the physical world. That's still required. It's just become more sophisticated. You need all of those skills to keep the product innovation and the growth going.” 

 

“I think what we will see as a driver of innovation is a war for talent,” Bowen said. “We're already seeing this, right? You certainly need to have the engine for insights, but one of the biggest constraints on being able to deliver solutions — especially in a re-shored environment — is the access to technical talent.”

 

“Think about how you can find that talent or help re-establish technical programs,” Hersh said. “The combination of public and private organizations working together to train and retrain talent is going to be a huge trend,” Bowen said. “Thinking one step — or two or three steps — ahead, in order to gain access to young well-trained talent. That is going to be another big challenge, opportunity and growth driver.”

 

 

Takeaways: 

 

Solve workforce gaps with new ideas:

  • Hire for talent, skills and potential — rather than just fit on an immediate need.
  • Consider the mindset — winners want to spend time with winners, so ensure that your new hires share a growth mindset and others can inspire by example.
  • Train for tomorrow by making sure that your training programs keep pace with the speed of business. Retain talent through regular training and upskilling options, internally or with partnerships that might have state or local funding.
 
 
 

And then tomorrow…

 
 

Manufacturing changes every day, so be ready. Be ready to re-evaluate your business in terms of your customers, your products and your workforce. 

 

“I ask people a simple question: What business are you in?” Bowen said. “Are you in the tool and die business? Or, are you in the technical staffing business? Are you in the cloud computing business, or are you actually in the data management business? Depending on the answer to that question, the roadmap going forward should vary significantly.”

 

In a market with chaotic change, the biggest drivers for growth are not new. It’s about strong customer relationships, superior solutions and better workers. 

 

The ultimate goal might not be to sell thousands of units, but to build a trusted partnership with the customer that guides them into leveraging your product in their production line or workflow. “You need to think of yourself as not only a solution provider, but also part of an ecosystem. Honestly, the buyer is not that concerned about whether you built, borrowed or bought a component, but that you are bringing them an end-to-end solution — and that you're able to help them understand how to get there,” Bowen said.

 

Ultimately, today’s manufacturing company customer wants to know that you will help them achieve their goals. You can provide education, guidance and strategic advice that all have value and should be baked into the complete solution.

 

“Step one is to get closer to your clients and understand their needs,” Hersh said. “And you have to start asking your customer about their customer. What are they seeing? What demands are your customers' customers putting on them, to perform, to innovate, and to grow? Understand that, and think through that roadmap to understand how you integrate with that process, so that you become indispensable.”

 
 

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