Innovation Opportunities Emerging from Responsiveness and
Co-located Manufacturing
Lauri Saarinen*
“University of Lausanne, Faculty of Business and E 1015 L e, 1
lauri.saarinen@unil.ch
Tel.:+41 78 933 94 97
Introduction: In this article we study the link between innovations and manufacturing. We focus on a
specific part of this relationship, by investigating how responsive manufacturing can foster innovations. We
propose that this link is uncharted and undervalued, which can undermine the investment in manufacturing.
Responsiveness through co-locating manufacturing with either the market or with the R&D encourages
innovation: Customer ideas are more easily communicated, and product and process innovatio
s are more
rapidly tested. We develop a system dynamics model of the interaction between responsiveness and innovation
cal observations.
based on mechanisms that link manufacturing responsiveness to innovativeness in our empiri
11936), learning and innovation modeling (c.g., [Anderson and Parker|
'5][2008},
Cla:
ical learning curve models (V
[Adner and Levinthal)2001| [Repenning and Sterman]200)| [Rahmandad]2019 [Frat and Kavadi
Girotra et al.
Link between responsive manufacturing and innovations can be demonstrated by recent developments
are important to the argument that we will present in this paper.
from footwear supply chains. Adidas has been innovating with their future supply chain by investing in a
“Speedfactory” to bring shoe manufacturing close to markets (Bain|2017). “Speedfactory” allows far greater
responsiveness enabling Adidas to bring new and customized products to market by cutting the time from
designer’s idea to finished products from months to days. Customization of products and designs will enable
capturing ideas from users and testing products fast in markets. This enables faster learning and innovation
in materials, technology and designs (Vincent]2017] [Shotter and Whipp]2016).
Research method: Our study is an exploratory research to establish the existence and value of the
proposed responsiveness-innovation link. We use System Dynamics (SD) model grounded to empirical ob-
rvations, Following examples of previous SD studies (Repenning and Sterman|200} Gray et al. 2017]
Burg and van Oorschot]
observing how certain typ
13), we do not begin by identifying factors in our model theoretically, but rather
Our
of innovation consistently emerge from specific types of responsivene
empirical observations are gathered from 11 firm cases. We summarized our main empirical observations into
four mechanisms that link the responsive manufacturing to innovation generation. 1. Responsiveness and
product innovation are linked through specialization, customization and servitization. These innovations are
the product: of three types of responsivene:
time-based, market-based and development-based. 2. Reverse
margin retreat: local and responsive manufacturing encourages innovation at the low-end of the manufac-
turer’s product portfolio. 3. Process flexibility innovation. Responsive facturers invest in finding ways
to lower the cost of responsiveness. 4. Innovation for new use cases for capacity. s to
Finding innovative wa
utilize capacity buffers required for responsiveness during low demand periods.
System dynamics modeling: Our em dynamics model extends the current unde
anding of the
link between manufacturing and innovation by exploring the mechanisms how specific s of responsivene:
Pp
increases the innovative capacity and how the returns of the innovations can create a virtuous
vycle of learning
effects that have been demonstrated in previous re:
Repenning and Sterman|
Responsivene:
arch (see e.g., [Anderson and Parker]2002| [Rahmandad|
s in the Imnovation-
The main modeling for our research questions li
s model. It is accompanied by production and inventory model based on the
p-801) model.
Testable propositions for responsiveness and innovation link for manufacturer: Simulation is
used to capture emerging testable propositions for the responsiveness and innovation link for future research.
1. Innovation returns accumulate over time: “path-depende
esponsiveness of manufacturing gener-
ates innovation returns in product and process development, 3. The higher the returns for innovativeness, the
higher the investment in responsiveness, 4. Misclassifying innovative products as functional leads to missed
learning opportunities, 5. “Pain before gain” of investments in responsivenes
Discussion: The contribution of this research is to explore the link between innovation and manufactur-
ing and identify testable propositions through SD modeling and simulation. We propo’
ch questions
DT
cal ri
for future modeling and empi ch to study. We identified mechanisms linking responsiveness to
increased innovativene:
s, and the following performanc:
gains.
The identi increases
tion of mechanisms linking the innovations and manufacturing responsiven
the value of local manufacturing capacity. While utilizing global value chains for enhancing innovation and
development capabilities as discussed by[Lee and Schmidt
in global value chain networks,
a valuable source of development capa
he responsiveness-innovation link we have explored focuses on the local lev
ements. The value of enk
These different viewpoints are innovation depends on the industry
and the life-c
-ycle of current technology as was proposed by our model. For decision making perspective
our modeling of innovation-responsiveness link suggests that the decision maker should include innovation
and learning aspects to the capacity location deci
ion. This proposition is in-line with previous research on
the learning effects and capability building (Anderson and Parker]2003| [Rahmandad|[2012] [Repenning and]
Sterman]2003| [Repenning]2001] [Repenning and Sterman|2001).
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