An inspirational presentation from Professor Goran Roos, an expert on mid-size manufacturing excellence in Auckland recently focussed on how and why mid-sized manufacturers across Europe are so successful – despite the fact that they are not manufacturing in a low cost environment.
Professor Roos says part of the reason that Australian manufacturers are finding the going so tough, is that they are still operating like they are in a low cost manufacturing country.
That may have been true once, but it has obviously changed and unless manufacturers also change their mind-set, they will go out of business. These lessons from Europe are equally applicable to New Zealand.
In a nutshell the European mid-size manufacturer is very successful and profitable because they focus at the high value, high quality end of the spectrum, they are also highly specialised on a niche market which they aim to dominate globally.
They do this with a single minded focus on innovation and investment in R&D to keep ahead of the competition and their whole purpose is to serve their customer better than anyone else.
They take the view that they can manufacture in their high cost environment because the advantages of having their R&D and innovation close to their manufacturing capability outweigh any advantages they would get by outsourcing to a lower cost manufacturing country. Because they have the attitude that they can manufacture, they have a very rich manufacturing eco-system to call on. They also have a very high level of management skills.
One of his simple messages was that in a high cost manufacturing country you need to innovate, in a low cost country you compete on price.
A competitive advantage we have in New Zealand if we chose to use it is the ability to think laterally or ‘outside the box’ which some of our competitors in Asia and India may not have. Finding a problem that matters to somebody with the ability to pay equates to higher margins. Professor Roost says it is harder to find the problem and often relatively easier to find the solution once the problem has been identified.
He also had some good information on the importance of the manufacturing sector to an economy, and some good ideas about how governments can foster a successful manufacturing ecosystem.