Innovation, Not Cost-Cutting, Key To Long-Term Growth, Most Manufacturing Executives Say

Although manufacturers might be slashing costs left and right amidst a weak recovery, they readily acknowledge that's not much of a long-term solution.

Ninety percent of manufacturing executives say that innovation, not cost-cutting, is the key to long-term growth in the manufacturing industry, according to a new report.

The report, which surveyed 360 manufacturing executives and was released on Tuesday by its sponsor General Electric, found that although 62 percent of manufacturing executives say that cost-cutting would help in the near term, nearly all of them say innovation is crucial to long-term success.

Overall, 61 percent of manufacturing executives said that ensuring a higher quality of production was the strongest safeguard against competition from emerging markets such as China. More than half of manufacturing executives said that research and development was an important part of their long-term strategy.

Although the United States remains a top producer of advanced technology, its dominance has recently deteriorated, according to MIT President Susan Hockfield. She says the country's former trade surplus in advanced technology products has evaporated into an $81 billion annual trade deficit.

The United States' overall monthly trade deficit in August was $45.6 billion, according to the U.S. Census, which if multiplied over 12 months would translate into an annual trade deficit of about $550 billion.

The White House has professed a dedication to innovation in order to offset the decline of American manufacturing. President Obama announced in June that the government would help fund the Advanced Manufacturing Partnership, a $500 million initiative that would bring together major engineering universities to develop high-powered batteries, bio-manufacturing, and alternative energy, and conduct research in robotics that could help human workers in a variety of different fields.

The President's Council of Advisors on Science and Technology released a report in June emphasizing that the government needs to help "create a fertile environment for innovation" so that the manufacturing industry can succeed in the future. The report recommended "robust support" for research and the training of a "highskilled workforce," among other suggestions.

Meanwhile, some American manufacturers continue to aggressively cut costs in the aftermath of the financial crisis. General Motors has quickly downsized its workforce, offering early retirements to workers in their 40s and 50s, according to The New York Times. Together, GM and Chrysler have shuttered hundreds of dealerships.

At the same time, though, some American manufacturers have expressed a desire to enhance quality. With new designs, GM and Ford are trying to make their case to American consumers that their cars are in fact better than the likes of Toyota, according to The New York Times.

Comments

[jaguar6cy]

04:05 PM on 11/02/2011

Obama should establish a new Federal Department of Innovation funded by taxing any businesses that might still be in business today. He should also sponsor a law requiring an innovation quota on those companies. If sufficient innovation to meet federal requirements are not achieved, Innovation Taxes should be raised on those firms until they meet their societal quota. This will add to tax revenue, increase union jobs in government and guarantee that greedy business and their owners are meeting their obligations to society. What would we do without government?

[banana republican]

06:32 AM on 10/22/2011

When corporate executives talk 'innovation' they're talking about technology that minimizes the need for human bodies to be involved in the manufacturing process, and that does nothing but line the pockets of the investors. If we want to restore manufacturing jobs, we need to eliminate the unions, lower the corporate tax rate, and dump the regulations that drive the product costs up. I realize how distasteful that sounds, but its the only way we can hope to be competitive in the global scheme of things.

[I Think]

12:40 AM on 10/26/2011

Nonsense, we need to educate our kids, and bring North America into the 21st century.
Any time the work that a person performs can be done more efficiently either with help from a machine or replacing the person completely, that frees up the person to perform work that can develop into better products.
Each time I have come up with a machine or tool to improve my work, my life style has improved.
Get out of the Luddite mind set, it did not work 200 years ago and will not work now.

[banana republican]

07:13 PM on 10/26/2011

That sounds good in theory. But what percentage of people laid off from manufacturing jobs would you say actually end up with jobs in product development? I'd guess less than one tenth of one percent.

[uniquindividual]

09:54 AM on 10/20/2011

It would seem that manufacturing growth also benefits when corporations place productive resources in countries that don't recognise the freedoms of speech, association, assembly, press, religion and political choice.

http://1.bp.blogspot.com/_rwVG-aQ1kiI/TES4qd4Rb-I/AAAAAAAAAbA/sxmUmC8Lua0/s1600/Output.png

Of course this comes at the expense of our democratic values and the welfare of the middleclass when we trade freely with totalitarians.

[wish2bfree]

12:43 AM on 10/20/2011

Why waste brain cells innovating for a corporation who would only sell your ideas and product manufacturing to china? And then lay you off because they got what they wanted at the top: money.

Americans mean nothing to these CEOs. It's time for a nationwide strike here.

[sjoberdix]

06:41 AM on 10/20/2011

When you work for a company, master your skills, invest your time, for them to be more cost effective and profitable. Only to be sent to Mexico for $8.00 a day labor. That experience is gone. I'll never work in that area again. My lost, not. Theirs because theres a shortage of skills workers with experience. You can hire a kid out college with a degree but no experience. So I will keep my min wage job for 20 hrs a week with no public assistance. I gave up cable, one car family, second hand stores and cash only has given me my freedom back. Its priceless, The best thing, I'm not the only one taking this path.

[behavingbadly]

10:01 AM on 10/20/2011

((( sound of respectful applause )))

[vetxcl]

11:18 PM on 10/19/2011

Another innovation, urban farming: http://www.smartplanet.com/blog/design-architecture/new-york-city-home-to-worlds-largest-rooftop-farm/1248?tag=content;siu-container
Cuts transportation costs. Repurposes discarded or unused buildings.

[vetxcl]

11:16 PM on 10/19/2011

Another innovation that is taking hold: http://www.smartplanet.com/blog/rethinking-healthcare/the-mental-health-program-that-may-save-lives/7141?tag=mantle_skin;content
Who can rationally deny that in our stressful economy, this is a good idea?

[vetxcl]

11:12 PM on 10/19/2011

An enlightened expose: http://inspiredeconomist.com/2011/10/17/dylan-ratigan-on-platinum-citizenship/

[vetxcl]

11:08 PM on 10/19/2011

Ore innovation right here in the US: http://ecopreneurist.com/2011/10/06/university-of-arkansas-students-launch-start-up-to-manufacture-biodegradable-plastic/

[vetxcl]

11:13 PM on 10/19/2011

typed More too quickly.

[vetxcl]

11:03 PM on 10/19/2011

Speaking of innovation: http://www.prweb.com/releases/2011/10/prweb8884055.htm

[Andy Osinski]

04:57 PM on 10/19/2011

Many yars ago I did some system design work for a small manufacturer. I convinced him to get away from the "old ways" and try some innovation.
The basic ideas?
1- the products as designed worked well.
2- the products as manufactured were expensive, making it difficult for customers to justify buying from him rather than an overseas source.
3- revising manufacturing methods would make the products less expensive to manufacture, resulting in an increase in profit margin at existing prices. Some of the revised manufacturing methods had the added benefit of improving quality while either maintaining or decreasing costs.
4- if a decrease in existing prices was required to make a sale, the increased profit margin allowed for a decrease in price if needed. However, the improvement in quality made most price cuts unnecessary.
How about that? It worked.
The old concept of "Build a better mousetrap and people will beat a path to your door" comes into play. If you make a better mousetrap, customers will buy it IF you don't raise the price to the point where they can buy more old mousetraps at the same price as your new one. Or, you can just figure out way to make the old mousetrap cheaper.
BTW-- why is General Electric sponsoring this?? Guilt??

[StopMakingSense2]

04:05 PM on 10/19/2011

Come on America hurry up and innovate so we have new jobs and technology to export to the 3rd world. Pity you can't share in the rewards since capitalism is brutal and the good guy doesn't finish 1st..

[Genders]

02:49 PM on 10/19/2011

We need some protectionism, more protection from unfair competition in the form of slave labor, dumping, IP theft, and lax environmental laws. http://kucinich.us/index.php?option=com_content&task=category§ionid=4&id=98&Itemid=48

[BBackSoon]

04:04 PM on 10/19/2011

Yep, I could not agree more.

I would even be OK with removing some overbearing regulations off of business, if we could make penalties that actually encourage compliance as cheaper than the current slap on the wrist fines.

We had a company in my area that quite a few years ago was caught with a hidden pipe that allowed them to dump toxic waste into a nearby lake. This is now a Superfund site. The owner of the company fled the country, and later made amends and paid $500k.

He made millions and it will cost 10's of Millions to clean up his mess and he got off with a half million dollar fine. Why would anyone comply with the law if you still make a profit after the fine?

http://en.wikipedia.org/wiki/Chemetco

[vetxcl]

11:09 PM on 10/19/2011

Yup. NAFTA and "Free" Trade needs to be modified to fair trade. Too many jobs going to other countries.
faved.

[Mister Grumpy]

02:09 PM on 10/19/2011

The problem is that many executives idea of innovation is the hiring of an illegal or alien on a H1B visa that willing to work for half the cost of the employee they fired.........

[vetxcl]

11:10 PM on 10/19/2011

There's a bunch of political money tangled up in keeping defacto slave labor here in this country.
Get the money out!

[wish2bfree]

12:48 AM on 10/20/2011

First, lets find a way to limit executive compensation. How about allowing them to make a max of 4X the average worker, but only if they can turn a profit 7 out of 10 years.

[wisdom67]

01:30 PM on 10/19/2011

The executives are correct it is innovation which leads to sustainability. However, the corporate pay of its CEO's is the greatest stumbling block. What CEO is going to make long term investments that may cause the companies stock to falter because the profits from R&D are in the future. What CEO who is paid is stock going to due that? What CEO is going to spend money for R&D which could be spent on dividends on the stock he or she holds. None. CEO's should be paid just like the workers they govern. Here is your modest paycheck do a great job or see you on the unemployment line. Cutting workers and getting tax and regulatory breaks for the company that improve the bottom line do not entitle the CEO to a substantial raise. When CEO's are paid like that you will see great innovation you will see CEO's making sustainability decisions for their companies.
Most innovation now comes from start-ups and young companies trying to make money not established corporations whose CEO's only see what is best for their paychecks rather than the companies long term sustainability.

[Joseph Joyal]

01:15 PM on 10/19/2011

Getting rid of unequal free trade will be the first thing to help manufacturing. As long as there is in equal free trade the jobs will keep going away.
They fail to talk about how they use NAFTA to send everything WE develop to Mexico to be built.
So end Free Trade and it will be instant jobs.
They don't charge less for what they build in Mexico they just get more profit.