Middle market manufacturers in the USA face a distinct challenge when it comes to innovation. Unlike startups with room to experiment or large corporations with hefty R&D budgets, these manufacturers must navigate with limited resources and a lack of tailored guidance. The gap in knowledge on how they innovate and grow is glaring.
A recent revival of an archived growth and innovation benchmarking study, originally conducted by the Pennsylvania Industrial Resource Center (IRC) Network and validated by Catalyst Connection this past spring, sheds new light on this issue. The study emphasizes a crucial insight: there is no one-size-fits-all approach to growth and innovation in middle market manufacturing. While manufacturers may have numerous ideas, as Thomas Edison famously said, an idea is just 5% of the journey to a final product.
History teaches us that there are only four fundamental growth strategies, each with its own level of risk and methodology:
| Growth Strategy | Risk | Tactic | Research Method |
| Market Penetration | Low | Existing Product to Existing Market | Customer Cloning & Inside Sales |
| Product Development | Moderate | New Product to Existing Market | User-Centered Design & 2D/3D Prototyping |
| Market Development | High | Existing Product to New Market | Market Assessment & Demand Forecasting |
| Diversification | Highest | New Product to New Market | All of the above + M&A Licensing, New Business Models |
Notable examples of companies effectively implementing these strategies include DMI companies (formerly Ductmate) and Kurt J. Lesker with diversification, MECCO and Swank Construction with product development, BOSS Controls and International Cybernetics Corporation with Market Development, and Coherent and MEPPI with market penetration. These companies have successfully navigated the complex landscape of innovation by leveraging tailored growth fundamentals to their unique circumstances.
Nevertheless, the journey for middle market manufacturers is riddled with obstacles. Besides costs, the most significant barrier is the lack of dedicated resources for innovation. In these companies, no one holds a full-time role solely focused on innovation or product development.
In a world of shared responsibilities and limited time for innovation, the gap in knowledge surrounding market assessment, demand forecasting, and rapid prototyping poses a significant challenge. Manufacturers must master the art of turning ideas into well-defined opportunities on a tight budget, a process that is much easier said than done.
Pennsylvania Industrial Resource Center’s Study on Manufacturing Growth Benchmarking: A Closer Look
Recognizing the lack of knowledge among middle market manufacturers, the Pennsylvania Industrial Resource Centers (IRC) embarked on a groundbreaking benchmarking study over a decade ago. Through 14 insightful focus groups with small and middle market manufacturing (SMM) company owners and executives, as well as an extensive telephone survey gathering 800 robust data sets from manufacturers across 15 industry sectors.
This study led to the development of a specialized benchmarking tool tailored for SMMs, emphasizing seven core business processes crucial for achieving consistent and sustainable growth. Consistency was defined by a proven three-year track record of growth in sales and profits, ultimately enhancing their competitive edge. The elite top 10% of companies, recognized as Innovation Learning Companies (ILC), exemplified the success of this model.
For those seeking to benchmark their growth strategies, a user-friendly version of this study is now accessible as a DIY Online Benchmarking Tool. This tool offers valuable insights and practical guidance for manufacturers striving to close the innovation gap and reach sustainable growth.
In conclusion, middle market manufacturers face the challenge of navigating a complex innovation landscape with limited resources. By embracing diverse growth strategies, utilizing benchmarking tools, and investing in innovation, these manufacturers can unlock their potential for sustainable business growth. While the road may be tough, with the right tools and strategies, middle market manufacturers can not only innovate successfully but also thrive in a competitive market.