While 50-70 percent of new product innovations fail, this Deloitte study outlines several steps to success

Chicago, February 23, 2004 — Deloitte will release the most recent installment of its Global Manufacturing Supply Chain Benchmarking Series research, "Mastering the Innovation Paradox," at National Manufacturing Week (NMW) 2004. The latest findings, based on research gathered from nearly 650 leading manufacturers worldwide, reveal that:

• Manufacturers cite launching new products and services as the No. 1 driver of revenue growth, yet also view supporting product innovation as one of the least important priorities.
• 50 to 70 percent of all new product introductions fail.
• New product revenue will jump to 35 percent in 2006, up from just 21 percent in 1998.
• By 2010, products representing more than 70 percent of today’s sales will be obsolete due to changing customer demands and competitive offerings.

"Our research clearly shows that a significant profit barrier exists in the manufacturing industry and this barrier is directly related to the failure of most new products and services, as well as the lack of priority placed on successful innovation practices," says Doug Engel, director of Deloitte's U.S. Manufacturing Industry  practice.

The findings conclude that many manufacturers are unable to profitably bring new products and services to market.  This paradox is the result of several key reasons, including:

• Insufficient information on customer needs;
• Supplier capabilities;
• A reluctance to allocate additional spending on R&D;
• A disjointed approach to innovation across product, customer and supply chain operations.

Deloitte’s new report, Mastering the Innovation Paradox, reveals best practices for driving profitable growth through effective new product lifecycle management. The small percentage of manufacturers that have achieved success excel in three areas:

Managing Innovation  The ability to identify both "sustaining" and "disruptive" innovations, the latter of which are often ignored by companies trying to protect their current products; superior generation of ideas from outside the organization; development of business cases upon which enlightened investment decisions can be made; an understanding of the gap between the performance of current satisfiers of customer demands and proposed new offerings; and the ability to decide upon the best organizational model for putting the innovation into action.

Exploiting Innovation  The ability to turn ideas into growth and profit.  Most companies focus only on the front end of the new product lifecycle instead of focusing on the entire lifecycle. 

Building Innovation Capabilities  In addition to managing and exploiting innovation, four key capabilities drive success and can enable manufacturers to maximize profits throughout the entire product lifecycle. 

• Extensive collaboration with customers and suppliers, and development of better processes to increase flexibility and lower cost.
• Superior visibility both upstream and downstream in the value chain.
• Flexibility with product development, manufacturing and other operations.
• Use of advanced technologies for product lifecycle management (PLM), customer relationship management (CRM), and advanced planning and scheduling (APS).

About this report
Mastering the Innovation Paradox and Deloitte’s previously published Global Supply Chain Benchmarking Series  research can be obtained at National Manufacturing Week in the press room, the Presidential Suite, or accessed online at www.deloitte.com/globalbenchmarking. The research is based on information from approximately 650 companies in industries, including aerospace & defense, automotive, consumer products, chemicals, general manufacturing, pharmaceuticals and high technology and telecommunications equipment.

National Manufacturing Week events with Deloitte
Deloitte's Doug Engel will host a panel discussion focused on effective management of the innovation and collaboration associated with the supply chain. Engel will be joined by Deloitte manufacturing clients and senior level executives from top tier manufacturing organizations. The panel will be held Wednesday, February 25, 10:30-11:45 a.m., Room S501.

In addition to the panel discussion, Deloitte will be hosting a number of events in conjunction with the National Association of Manufacturers including:   

• A live Web seminar from the show floor featuring a discussion of emerging components of innovations, including RFID business transformation.
• A presentation of the full results of Deloitte’s Global Benchmarking Study by Doug Engel.
• A panel discussion focused on The Beneficial Relationship Between New Product Development and Successful Commercialization.

For complete details on all of Deloitte’s scheduled events during National Manufacturing Week in Chicago, as well as an overview of Deloitte partners who will be available for expert commentary at the show, please contact Erica Chomsky. For additional information about the show, visit the National Manufacturing Week Web site.

About Deloitte
Deloitte Touche Tohmatsu is an organization of member firms devoted to excellence in providing professional services and advice. We are focused on client service through a global strategy executed locally in nearly 150 countries. With access to the deep intellectual capital of 120,000 people worldwide, our member firms, including their affiliates, deliver services in four professional areas: audit, tax, consulting, and financial advisory services. Our member firms serve more than one-half of the world’s largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies.

Deloitte Touche Tohmatsu is a Swiss Verein (association), and, as such, neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other’s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names "Deloitte," "Deloitte & Touche," "Deloitte Touche Tohmatsu," or other, related names. The services described herein are provided by the member firms and not by the Deloitte Touche Tohmatsu Verein. For regulatory and other reasons, certain member firms do not provide services in all four professional areas listed above.