Download - Ficci tag 2014
FICCI TAG 2014
Theme Presentation
Driving Growth through Innovation
Prashant Agarwal
Joint Managing Director, Wazir Advisors
18th November 2014
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Discussion Points
1. Innovation –The essence of
business
3. Ways to kick-start innovation in our industry
2. Strategic transformation
of Textile & Garment
manufacturing
3
Discussion Points
1. Innovation –The essence of
business
3. Ways to kick-start innovation in our industry
2. Strategic transformation
of Textile & Garment
manufacturing
4
INNOVATION [ˌɪnəˈveɪʃn]
“the introduction of new things, ideas or ways of doing something”
Innovation is “ A new way of doing things that
is commercialized”
Michael PorterEconomist and
Management Guru
Innovation = Invention + Commercialization
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Different types of Innovation
Product
New product to solve consumer’s problems or for their benefit
Process
High productivity, lower costs, service value delivery
Strategy
Challenging existing industry methods of creating customer value for new needs, add value, create new markets, new customer groups
Desi Avatar: Jugaad
The gutsy art of overcoming harsh constraints by improvising an effective solution using limited resources – Harvard Business Review
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Giants of one time which did not evolve with time have vanishedinto thin air
Innovation for manufacturers is NOT an option
1857-2003
Once the 2nd largest steel producer in USA
1972-1984
Pioneer in analogue & digital imaging consumer
products
1867-2004
US video game company credited with evolution of modern video game
industry
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Innovation for manufacturers is NOT an option
The innovative companies are the ones which have changed thecourse of market directions over the years
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Successful Companies have Innovation in their DNA
Some Examples in Textile sector
Turning our unique know how and new ideas into innovative high performance fibre-based materials.
Our Approach: Inclusive Innovation. DuPont is working inclusively with others to find innovative, science-enabled solutions to some of the world’s biggest challenges.
Constant innovation in everything we do is essential for our long term financial success.
Enhancing Life for Global Consumers with the World's Most Innovative Fabric-Based, Market-Driven Solutions.
As reflected in our brand statement, "Human Chemistry, Human Solutions," and with a basis in technological innovations, we are conducting R&D to realize sustainable business growth and creating new businesses globally with the aims of enriching people´s lives and contributing to social development.
…with an ample product portfolio and a commitment to continuous innovation and technological advancement of its weaving machines.
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Discussion Points
1. Innovation –The essence of
business
3. Ways to kick-start innovation in our industry
2. Strategic transformation
of Textile & Garment
manufacturing
10
Shift in Production and Consumption bases
Textile & clothing production as well as consumption were mainly happening in developed countries till 80s
Production and Consumption
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Shift in Production and Consumption bases
Then eastern countries started emerging as major manufacturers and roles got segregated
Production
Consumption
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One of the main reasons behind this shift was high increase in labour cost. Inaddition, high utility costs and overheads lead to unviability of manufacturing“basic products” in these countries
Asia had the presence of strong raw material base to support production inaddition to lower cost. Hence, it emerged as an alternative manufacturingdestination.
Reasons for this shift…
0
5
10
15
20
25
30
1980 1990 2000 2004 2008 2012
Labour costs in textile industry(US$ / hour)
USA
Germany
Italy
China
India
< $ 0.5~ $ 1
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Today the largest textile and apparel exporters are in Asia…
304
40
28 2723
16 14 13 12
Export values (2013, in US$ bn.)
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Country Exports value (2013) Major manufactured categories
Italy US$ 36 billionHigh-end suiting fabrics, premium shirting fabrics, fast fashion, Value added woven garments, textile machinery
Germany US$ 35 billionTechnical textiles, textile machinery, fast fashion, Value added garments
France US$ 16 billionTechnical textiles, textile machinery, high fashion dresses and ensembles, textile machinery
Japan US$ 9 billionPerformance fibers, yarn and fabrics; high end denim, other technical textile products
However, production is not totally dead in western world
Actually, manufacturing has only changed its face…
While Asian countries are manufacturing basic products; developed nationsare focusing exclusively on high-end, high-technology, value added or
INNOVATIVE products
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Several large T&C companies still produce in these countries
Turnover: US$ 8 bnJapan
Aramid
Fibres
Carbon Fibers & Composites
Performance Fabrics
Airbag
Yarns
Tire reinforcement
Technical fabrics
Acoustic
Non woven
Flame retardant non woven
Filtration Fabric
KevlarFiltration & Separation fabric
Medical fabrics
Glass fiber reinforce-ment
Medical nonwovens
Liquid filtration
Turnover: US$ 2 bnNetherlands
Turnover: US$ 2 bnGermany
Turnover: US$ 36 bnUSA
Turnover: US$ 2 bnFinland
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Businesses look for growth and profits
The Strategic Shift…
A simple financial statement
A. Sales
B. Expenses
C. Profit (A-B)
A company in basic product like cotton yarn, power loom fabric,
t-shirts etc.
A company in innovative product line e.g. technical textiles
Focus on expenses to maintain profits
Limited growth because of cost undercutting by competition
Depends on expense management
(approx. 6 - 8%)
More expenditure on R&D and market development
Growth depends on how you help grow the market
Better profitability(approx. 15 - 20%)
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Discussion Points
1. Innovation –The essence of
business
3. Ways to kick-start innovation in our industry
2. Strategic transformation
of Textile & Garment
manufacturing
18
What leads to innovation?
Market forces
• Consumers
• Buyers
• Suppliers
• Competitors
Non-market forces
• Economic
• Political
• Social
• Cultural
But most importantly…
• Inner motivation
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4 pronged approach for industry
Funds
Funds• Funds are usually the initial point of innovation
process
• Company’s deploying funds are the one’s reapingbenefits later on
• Leading innovative players spend 2 to 3% of theirrevenue on R&D
• But, funding is never of the utmost importance.“Kaizen” process itself is a small, gradualimprovement, without significant moneycommitment
Steve Jobs, perhaps the greatest innovator of recenttimes, once said “When Apple came up with the Mac, IBMwas spending at least 100 times more on R&D. It's notabout money. It's about the people you have, how you'reled, and how much you get it.”
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4 pronged approach for industry
Funds
Organization’s vision• Or the inner drive to innovate for excellence… A
key ingredient
• The same is true for individuals (or even acountry) as well. The greatest of innovations arenot only outcome of an organizational effort;individuals sometime outpace the industry andcommercialize their inventions which no bodyever thought of.
Organization’s vision
Chinese president Hu Jintao said “capacity for independentinnovation core of our national development strategy”
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4 pronged approach for industry
Funds
Exploring newavenues
Exploring new avenues• Market growth and profitability in traditional
products is limited
• Focusing on areas hereto unexplored is importantfor entities to realize a “niche” for themselves.
• This niche can be• A product• A process• A technology• A market• A strategy
• Blue Ocean strategy:• Create uncontested market space• Make the competition irrelevant• Create and capture new demand• Break the value-cost trade off
Organization’s vision
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4 pronged approach for industry
Funds
Grooming the innovators
Exploring newavenues
Grooming the innovators• Most important!
• There are specialized institutes globally whichtrain in innovation and innovate themselves, aconcept which is yet to find large acceptance inIndia
Organization’s vision