Network Innovation is Boosting US Manufacturing

U.S. manufacturers continue to grow thanks to government initiatives, incentives, reshoring from Asia and an improved economy. Part of this growth comes from new products, better technology and so-called networked innovation.

In contrast with open innovation, in which companies seek new concepts and ideas from any available sources, networked innovation utilizes a firm's own network of suppliers, customers, employees and industry leaders to find ways to increase a company's profits. According to the Brookings Institute, researchers at the National Bureau of Economic Research studied 6,000 U.S. manufacturers and service-sector companies from 2007 to 2009 to find out exactly how innovators created new products from new ideas.

They discovered that 18 percent of manufacturers introduced a new product over the course of the survey. Of those, 49 percent reported the idea for the new product came from outside the company, from sources such as customers, suppliers or technology specialists. In other words, the networked innovation came from a person or entity within a company's network instead of from the employees, executives or managers within the business itself. Customers provided the most frequent innovations, but technology specialists created the most lucrative opportunities. Ideas from technology specialists create an average 6.75 percent increase in sales with a 0.18 percent investment.

Collaborative robotics in one area in which networked innovations are often created by technology specialists within a company's network. Instead of having an automated machine perform one specialized task, a collaborative robot can work on several production lines over the course of a run. Tedious, repetitive work can be accomplished faster and more efficiently with the mathematical precision of a machine rather than human hands and eyes that can become strained and tired. A supplier of collaborative robots, working closely with a manufacturer, can become a key innovator within the company's network.

From 2008 to 2013, investment in robotics for manufacturing purposes rose steadily. The number of robots working on plant floors tripled over that span, and as many as 82 percent of manufacturers polled in the 2014 Trends in Robotics Market Assessment planned to put even more of them next to human counterparts in the near future.

Researchers at the National Bureau of Economic Research concluded that without networked innovation, U.S. manufacturing output would drop between 10 to 18 percent. Their study suggested that companies should foster innovation within their networks while taking appropriate security measure and maintaining intellectual property rights. An efficient patent system helps keep transaction costs lower and sales higher over the long term. Innovative labor departments cannot rely solely on a company's internal structure as networks reach additional markets overseas.

Networked innovation may not present the best possible method to create new products when dealing with issues such as patents, cybersecurity and information leaks. However, companies with industry allies have an advantage over competitors that do not have innovative technology specialists working on their side.

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