Design-Based Innovation for Manufacturing Firm Success in High-Cost Operating Environments

• Design is one of several paradigms necessary for successful innovation in manufacturing.
• Global trends are reshaping the manufacturing industry but increasing its importance as a basis for national wealth creation.
• Manufacturing firms are seeking to maintain a basis for success in high-cost operating environments.
• Design contributes to both value creation and value capturing innovations in manufacturing firms.
• Innovation must integrate approaches from science and technology with design, art, and hermeneutical inquiry.
• Common confusion between Art and Design.

The manufacturing sector is increasingly looking to innovation to ensure productivity growth, especially in high-cost operating environments to achieve non-price based competition. The paper begins with an overview of regulatory, technological and consumer trends and developments impacting manufacturing. It considers the shifting balance between fragmenting and concentrating forces of global supply chains, and how manufacturing firms themselves are changing. This overview is followed by a discussion of the pivotal constituents of success for firms operating in high-cost environments, and concludes with the fundamental importance of innovation as a basis for success.The paper then discusses value creation, value appropriation, and design-based innovation, and argues that manufacturers need to understand key differences between these paradigms. In particular, the difference between art and design is articulated, to avoid an otherwise common confusion between the two. The importance of an inter- and trans-disciplinary approach to innovation is emphasized, including the use of four value creation strategies—science and technology, design, art, and reverse-hermeneutic innovation.The paper concludes that the design-based innovation paradigm is increasingly important within the manufacturing industry, but that its benefit can only be maximized if it is integrated with the other three value-creating approaches to innovation.