In the age of rapid changes within healthcare, technology, bio-tech, and other dynamic industries, the sometimes forgotten Manufacturing & Distribution (M&D) sector continues to look to carve out new ways to produce existing consumer and industrial products more efficiently and/or to bring new products to the market. Despite being considered a stagnant industry in the minds of many, M&D firms must continue to innovate and to seek and accept change at a similar rate to newer industries. Additionally, industry lines are becoming blurred as technology, in particular, makes its way into M&D (look no further than the technology in your car, on your phone, or in your implanted med device to see clear manifestations of this cross-industry movement).
The opportunity to selectively expand beyond your core industry was brought to mind upon reading about Lexmark International’s acquisition of Acuo Technologies right here in my backyard in Minnesota earlier in 2013. At its core, Lexmark is a manufacturer of laser printers; however, with a prior acquisition of Perceptive Software, Lexmark began to provide technology solutions to the healthcare sector. With the Acuo acquisition, Lexmark now offers better patient care, enhanced clinician experience, and cost savings through an enterprise-wide platform for clinical content viewing (accessible by any electronic medical record system as a “Universal Clinical Platform”). It’s incredible to think that a printer manufacturer is changing and improving the way we are being cared for as patients, all the while returning 50% of FCF to shareholders.
What does this mean for manufacturers? If innovation and external-industry insights lie outside of your organization, it may be time to look at M&A to capitalize on these opportunities. This is not a suggestion for more standard horizontal or vertical integrations, but rather cross-industry acquisition leading to innovation. This is *gasp* a recommendation to look beyond your core competency and to how your company’s product(s) could fit a customer need if converged with another company’s core capability.
Who should be thinking of industry cross-over within your organization? While identifying M&A opportunities often falls within the responsibility of a classic Corp Dev or strategic CEO role, cross-industry insights will likely require input from various functions within your org. One of the powerful impacts that WMP’s cost-to-serve work delivers to its clients is simply opening the communication lines between supply chain/ops and sales/marketing, and I believe the same philosophy of cross-function communication can be of value here. If you start with the voice of the customer (what are your sales and marketers hearing in the market?), and then work back to product features from your operational leaders, you can use that perspective to discover alternative and potentially disruptive solutions which might fill a need for current or future customers. This collaboration within your org can provide insights to drive outside-the-box prospecting and targeting of potential collaborators beyond the limits of your industry as defined today.