Industries embracing open innovation and co-creation

12 May 2015

For companies in engineering intensive industries innovation is key for their competitive position. While nowadays firms still predominantly invest their innovation resources into internal R&D programs, a new study from PA Consulting Group reveals that the long term trend will see organisations transition their investment toward more collaborative innovation, with relative spending in collaboration networks to increase 50% by 2025.

Innovation remains a key strategy through which companies are able to outperform competitors. A recent study from Aecus and HP for instance revealed that 91% of managers believe innovation is (critically) important to realising the long-term objectives of their organisation. In a new report from PA Consulting Group and the ESB Business School, titled ‘Innovation for peak performance’, the authors seek to determine the key components of a successful innovation strategy in engineering intensive industries*.


The survey involved 61 participants from 4 industries, with respondents from automotive 17%, consumer goods 22%, high-tech 26% and mechanical engineering 35%. Most of the respondents came from Europe (83%), with Germany providing 38% of respondents – the final 17% came out of the US. 36% of the companies surveyed have revenues of more than €5 billion and 25% have less than a billion.

R&D priorities
In terms of the current trends among companies, the survey shows that most are playing it safe. Between the sectors not a great deal of difference in activity was observed, with innovation generally remaining an incremental process with only a few of the respondents going for the challenge of bringing new products to market. As it stands, the top priority is for existing markets and products, followed by creating new products in existing markets. The lowest priority is in developing new products for new markets, under respondents.

Respondents priorities for R&D Positioning

R&D function remains powerhouses
In terms of the source from which innovation within business springs, the authors note that internal sources – thus without collaboration – remain the driving force for innovation. R&D employees are not surprisingly the main innovators, followed by non-R&D employees, with sales employees the least innovative group selectable. In terms of external partners for innovation, technology partners and academic partners were the most high impact collaboration partners for innovation, with suppliers and social media scoring the lowest – even if social media is rapidly on the rise.

Source of innovation ranked by importance

Long term collaborative success
The long term trend toward 2025 indicates according to PA Consulting Group that externally focused collaborative models – centred around the principles of partnerships and co-creation – will gain terrain, with the level of internal innovation relative to external innovation to have a difference of 23%. Partly collaborative models around intellectual property are forecasted to grow by 12%, while collaborative networks are expected to grow by 50%.

Changes in innovation landscape to 2025

* Innovation itself is a broad term that covers the whole value chain – from idea creation to market introduction. It is thus a term with a wider reach than the concept of R&D which refers to the corporate function of turn promising ideas into economically beneficial technologies, products and services.

** The Ansoff Matrix

Strategic framework - Ansoff Matrix


UK manufacturing sees orders slow amid Brexit anxiety

11 April 2019

Manufacturing in the UK saw negative growth for the end of 2018, reflecting a wider slowdown in the UK economy to 0.2% for the quarter, followed by three months at the start of 2019 which saw continued softening in orders. With uncertainty still hitting the sector ahead of Brexit’s deferred deadline, the industry faces a difficult 2019.

Despite a perpetually changing economic landscape, manufacturing remains a keystone industry in the UK. Optimism in the industry has been riding high in recent years, reflecting the perceived potential of automotive technologies, but last year saw a slight dip in business performance, ahead of what seems set to be a turbulent period for British manufacturing. Ordinarily, the sector might have expected to recover its footing relatively quickly, but with the looming spectre of Brexit making the economy’s future completely uncertain, this has not been the case.

The uncertainties of Brexit have continued to create headaches for companies on both sides of the channel. As contingency planning continues, new analysis from BDO and the Make UK explores how manufacturing – a segment likely to be hard hit by Brexit – has fared in the final quarter of 2018.

Output balance stable

Manufacturing remains a key industry in the UK, generating around 10% of total economic output and supporting around 2.7 million jobs. Yet while the industry has seen a number of years of strong optimism as well as demand, Brexit is set to throw a spanner in the works, with a range of manufacturing companies leaving the UK, or considering it. Indeed, UK manufacturing’s output currently sits at a 15-month low as the industry anticipates a cliff edge Brexit.

In terms of growth for various parts of the UK economy, a slowdown was noted in the final quarter of 2018 compared to Q4 2017. Manufacturing, in particular, saw growth declines coming in at almost -1%, with a similar trend in production. Construction saw a sharp contraction, falling 2 percentage points to below 0% growth in December 2018. Only services managed to have positive % growth in the final quarter. The final quarter as a whole saw growth of 0.2% in the UK economy – the lowest level in six years.

Output across most sectors in the industry remains positive, with the percentage balance of change in output at 22%. The result is the tension quarter of positive percentage balance of change, with stagnation on the final quarter of 2018. The firm is projecting a slight softening of output going into Q2 2019. The firm notes that there is some stockpiling taking place, with orders and outputs unaligned going into 2019.

Order balance remains positive but dips further

While there is a broadly positive picture for output, the firm does note considerable differences between subsectors. Basic metals for instance, saw a net 24% fall to -18% over the past three months. Metal production is also seeing relatively poor performance as demand from the automotive industry enters a period of acute uncertainty. However, most industries are to see improved output on balance, with rubber & plastic increasing from a net 11% to net 56%.

Export trade

Having been buoyed by the lowered value of the pound, UK export orders are up slightly on the previous quarter, but remain well below the most recent peak in Q3 2018. Domestic orders were relatively strong, with a year between the most recent peaks for the segment. However, Q2 2019 looks to see domestic orders fall sharply, to half Q1’s result, while export orders too are set to see declines.

The decline reflects a decrease in basic metals, possibly a reflection of changes affecting the auto industry. Meanwhile, export orders are down due to Brexit cross-border uncertainty – the effect of the sterling devaluation unable to continue to buoy the market. Basic metals and metal products are both in negative territory for the coming three months.

Investment and employment intentions

UK employment figures reached new milestones, with total unemployment down to 3.9% while participation rates hit record highs. Employment planning continues to be in net positive territory, with a net positive balance of 22% in Q1 2019. The coming months are projected to see a slight dip, again, largely resultant from uncertainties around Brexit. Basic metals is the sector most likely to see a negative trend, reflecting the expected decline in orders.

Investment intentions meanwhile continue to be in positive territory. However, again, the now acute uncertainty about Brexit – the UK government has boxed itself into a corner – mean that confidence around investment could wane rapidly.

Commenting on the wider economy, Peter Hemington, a Partner at BDO, said, “Manufacturing firms have been ramping up their preparations for a disorderly Brexit, in large part through the stockpiling of imported goods. This has had the effect of inflating activity levels… It’s too late to do anything about this now.  But a disorderly Brexit would be far worse than the current relatively mild slowdown, possibly disastrously so… We are concerned it looks more likely than ever that we will exit the EU without a deal.”