Two key industry government growth centres have just updated their sector competitiveness plans and for those wanting to succeed in manufacturing, it is well worth taking a close look at these. In this post, we summarise what we think are some of the key points.
The Australian Manufacturing Growth Centre (AMGC) and the MedTech & Pharma Growth Centre (MTP Connect) are both not-for-profit organisations separate from but supported by the Commonwealth government. They were both created to deliver growth initiatives in their respective sectors. Initiatives range from educational events and commissioning research to administering grant programs and collaborating with niche sector associations.
The AMGC scope encompasses all sectors including MedTech. In 2017 it first published a ground-breaking study of more than 3000 global manufacturing companies and uncovered one pivotal insight that has driven its activities ever since.
Manufacturers succeed when they adopt sophisticated value chain structures
The insight shifted the perception of “advanced” manufacturing being about “high-tech” products. Its key finding was that: “manufacturers across the developed world succeed not because they make certain products, but because they have adopted sophisticated value chain structures and production techniques”.
This is a long-term trend where the value-add of manufacturing is increasing away from product technologies toward other aspects of the value chain as illustrated by the “smiley curve”, illustrated below.
Source AMGC Manufacturing Competitiveness Plan, adapted from “Interconnected economies benefiting from global value chains – OECD 2103”
Advanced companies today “typically use a combination of three factors to remain competitive: advanced knowledge, advanced processes and advanced business models,” the report says.
In particular, it challenges the notion that competitiveness is all about product cost. While there are opportunities to improve on this around increasing scale, the greatest source of competitiveness comes from what they call “value differentiation”.
Value differentiation arises from things like innovative design, technical leadership, a reputation for reliability and outstanding after-sales service. Another source of competitiveness comes from having a stronger market focus, identifying and targeting underserved export markets and better integration into global supply chains.
The diagram below spells out the sources of competitiveness in manufacturing.
The AMGC findings certainly ring true for Circuitwise. While we invest in the most advanced and automated equipment possible, we know our customers most value the relationship we have with them. They treat us as the manufacturing arm of their company and the value we deliver is that we can be trusted to deliver for them as if we were in-house. All the boxes in yellow above are how we stand out from our competitors.
For medical device manufacturers, there is extra value to be gained from reading MTP Connect’s sector competitiveness plan. Of particular interest is the discussion on key megatrends, illustrated below.
The 2022 update focuses on the impact of COVID-19 which has dramatically accelerated the adoption of digital and telehealth practices in many health sectors, from which there is no turning back now. In combination with other trends like the desire by consumers to track their health and age better, the economic imperative to better manage chronic disease, and the trend toward personalised, smarter medical interventions, we will see an explosion of digitally enabled devices over the next few decades.
These smart devices will mostly be born out of research institutions. However, there will be an increasing focus on “enhanced commercialisation productivity” as illustrated in the diagram below. We particularly laud and support the aspiration for an “increase in companies using onshore advanced manufacturing capabilities”. It’s clear that leaders in the sector must be connected to the tertiary sector and focused on advanced technologies.
As part of the analysis, a number of “knowledge priorities” are identified, which are useful for anyone considering developing products. The areas range from pure science or therapeutic fields to particular device categories such as wearables, point of care diagnostics, implantables and bionics, surgical devices, digital health (software only) and protective equipment.
It also lists the skills/capabilities which are in short supply, including a predictable list of high technology topics such as artificial intelligence, big data and cyber security. Surprisingly, there is also a large number of fairly standard skill sets such as quality management, clinical trials, project management and manufacturing skill sets generally.
Most concerning is the “shortage of industry professionals with end-to-end translation and commercialisation experience” which speaks to Australia’s poor record of successfully delivering innovations. This includes basic commercialisation skills like “identifying unmet market needs”, “securing investment”, and “understanding reimbursement pathways”. These findings reinforce AMGC’s basic premise that successful manufacturing is about excellence across all aspects of the manufacturing value chain.
Our purpose in relaying these knowledge priorities is that they are the focus of grant programs and other support mechanisms. So manufacturers should consider aligning their strategic approach to capability development with these priorities and the megatrends outlined above.
Manufacturers should align capability development with the key knowledge priorities and megatrends
The main focus of the update to the report was around improving resilience, a topical subject following the impact of Covid. Resilient manufacturers are those that “outperform their industries during periods of volatility by displaying higher than average earnings”. Resilience is built through a number of strategies such as greater R&D collaboration and investment, diversification and flexibility in production.
The report notes that Australia now ranks last on the OECD rankings for manufacturing self-sufficiency. Covid has exposed our dependency on offshore manufacturing services and the vulnerability of our supply chains. The only silver lining is that “almost three quarters (72%) of Australians believe manufacturing is either important or very important to the Economy”, a dramatic increase over recent times.
This renewed appreciation of the value of a strong manufacturing sector is translating to grants for the industry and a greater focus on manufacturing during the current election campaign. However, self-sufficiency will only come from manufacturing organisations across all sectors lifting their competitiveness and growing the local industry. These reports are a good place to start.