Australian manufacturers are experiencing the forces of creative destruction.
Creative destruction is the term used by eminent economist, Joseph Schumpeter, to describe how economies evolve and grow through incessant waves of change that destroy old industries and simultaneously create new ones. The end result is a society that is richer and more productive, but with a price paid in churn and turmoil.
Most of the commentary on Australian manufacturing focuses on the ‘destruction’ aspect—manufacturing’s decline, loss of jobs to automation, erosion of skills and businesses moving offshore. It’s time to focus attention on the ‘creative’ side of Australian manufacturing because signs of a manufacturing resurgence are emerging.
This new wave of creative Australian manufacturing was on display at a recent national manufacturing expo on the theme of Industry 4.0. Industry 4.0, or the 4th Industrial Revolution, is where digital and advanced technologies converge with innovative business strategy and operations to find new and profitable ways to solve problems and serve the needs of local and global customers.
A few case examples to illustrate.
Anatomics is a manufacturer of patient-specific implants for medical use, including cranial, facial, chest and orthopaedic surgical products, and other skeletal and soft tissue parts. These products are made using new materials developed in collaboration with CSIRO, and leading-edge 3D printing technologies and computer-assisted design.
Anatomics has also developed a range of innovative software products to aid surgeons and healthcare professionals in planning surgery. This necessitates close working relationships with surgical teams in real time in the 24 countries into which Anatomics sells.
Operating out of a dedicated manufacturing lab in Melbourne’s St Kilda, their success is dependent on highly-skilled specialist staff, deep-seated continuous research and development, and strong and close collaborative partnerships, not least of which with the end users of their products.
Tinyme is a manufacturer and online retailer of one-off products personalised by name for children’s toys, books, bags, puzzles, stickers and the like. A start-up in a spare bedroom in 2006 by three friends with backgrounds in industrial design and investment banking, Tinyme built and learned its business incrementally, trialling new products in the market through direct customer engagement.
Tinyme is a classic example of mass customisation. It uses automation, digital printing technologies and mass production methods to produce personalised single products co-designed with each individual customer.
Beyond sophisticated machines and equipment, Tinyme credits their success to their constant and direct connections to customers; their great cross-functional staff team and dynamic culture; and their in-house control of the bulk of their functions from web design to logistics. They summarise their performance as “innovation under the hood”—not just in the products and ideas for new products, but what they do to get them made quickly and efficiently.
Textor Technologies, a family-owned business from a management buyout, manufactures moisture-resistant materials for the hygiene and healthcare industries, used in baby nappies, wound dressings and personal sanitation products. Previously, Textor Technologies worked in textiles for the clothing and automotive industries, but made a shift in strategy in 2000 anticipating the decline in Australian automotive manufacture.
Key factors in their successful transformation were their intensive research and development collaboration with CSIRO and Kimberly-Clark on technically advanced, state of the art, ultra-absorbent fabrics; considerable investment in a new highly-productive factory; a flexible manufacturing system; and a skilled workforce and highly competent strategic managers in their leadership team.
But, most importantly, the longstanding, market-expanding partnership between Textor Technologies and its leading customer, Kimberly-Clark has been critical to the company’s ability to access and learn about entering and serving global supply chains. They are now exporting to 13 countries worldwide. Through top class delivery, Textor aims to be the best in the world in their chosen field.
Tomcar is bucking the trend by manufacturing off-road vehicles for the mining, agriculture, construction and defence industries in Australia, when other car makers are leaving. Tomcar’s vehicles are a niche, high value product that competes on performance, longevity and maintenance, not price. They are made to order vehicles designed for harsh Australian conditions.
Tomcar is different from traditional manufacturers on other counts. It describes itself as a “virtual company” built on its design capabilities and smart outsourcing, the legacy of its origins in 2005 as a lean start-up. Tomcar spent seven years in research and design before producing their first vehicle.
Tomcar outsources production in a close partnership to Melbourne manufacturer, MTM, a former supplier to Holden. Locating production and research and development locally is seen as vital for quality and innovation. Tomcar sells direct from its website. IT and other back office functions are hosted in the cloud, not in the company. To Tomcar, being a successful advanced manufacturer is orchestrating the whole process from research to distribution, not just physical production.
Frosty Boy is an Australian manufacturer and distributor of powdered bases for ice cream, frozen yoghurt and beverages, and also provides equipment and a range of business services (such as consumer research, new product development, international marketing and financing) to its clients including fast food chains, cafes, restaurants, clubs and catering companies.
Frosty Boy has experienced strong growth and export sales since 2001. It specialises in short runs and lead times through investment in advanced automation and agile operations, together with a strong market focus. It employs a team of qualified food technologists in a modern R&D testing facility in Queensland. Frosty Boy places a high priority on long term relationships with its clients through customised products, sharing research and development, and commitment to continuous improvement.
It melds products and services seamlessly in its business offerings, and concentrates equally on pre and post-production functions to distinguish itself as a globally competitive, high-value manufacturer, not a simple commodity producer.
Some important themes from these examples for transforming Australian manufacturing:
- Don’t just focus on the production part of manufacturing, but look for opportunities in all seven steps in manufacturing: research and development, design, logistics, production, distribution, sales and after sales service.
- Put the customer and market opportunities at the centre of what you do, not technology, which, though important, is essentially an enabler.
- Know your customer and your customer’s customer directly and thoroughly.
- Employ great people and leaders with the right mix of technical and collaboration management skills, and give them problems to solve which instil an innovative culture and grow the business.
These lessons can help Australian manufacturers ride this latest wave of creative destruction, with more gain than pain.
Michael Cox and Richard Alm, Creative Destruction, 2008, The Concise Encyclopaedia of Economics, Library of Economics and Liberty, at www.econlib.org.
Cara Waters, Clear road for our last car maker, Sydney Morning Herald, 10th-11th June 2017.
Manufacturing. Making It in Australia. Our Advanced Manufacturing Future, 2017, Australian Advanced Manufacturing Council and Australian Industry Group.