Recent MIT research evaluates the implications of connecting (or disconnecting) innovation and manufacturing production. This blog highlights the MIT Production in the Innovation Economy Conference, where MIT professors and guests discussed the findings.
On September 20th, I attended the MIT Production in the Innovation Economy Conference. Many recognize the value that innovation holds to the US economy, but not necessarily how critical manufacturing is to innovation and vice versa. Evaluating the implications of the connection between innovation and manufacturing (eg production) was the premise of the MIT research presented at the event and of the resulting book "Making in America". (photo source: MIT PIE website)
After the session kicked off with a welcome from MIT President Rafael Reif, CEO of Dow Chemical, Andrew Liveris, presented his thoughts on building an advanced manufacturing economy. Although Liveris pointed to the recent growth of manufacturing in the USA, he attributed much of it to chance - including currency advantages and recent lows in energy prices. He suggested we need to do more to support manufacturing and to keep this renaissance going by choice.
Liveris' suggestions included developing skills for the new manufacturing employee, incentivizing manufacturing ecosystems, and developing smart regulations and smart energy policies. Oil and gas prices are particularly critical to a manufacturer like Dow, which requires a substantial amount of energy for its operations as well as inputs (feedstocks) for its products. He estimated that for every dollar Dow spends on each BTU, Dow creates eight dollars of output value. (This multiplier isn't exactly the same for other types of manufacturers, but energy is still an important cost for all manufacturers). Overall, Liveris' comments are based on his extensive experience as CEO of Dow and as a supplier to many types of manufacturers around the globe. He's also expanding his influence on the overall US manufacturing industry through his role on the US Advanced Manufacturing Partnership Steering Committee along with CEOs from other major companies such as Alcoa, Applied Materials, Caterpillar, Honeywell, Siemens Corp. and representatives from some of the top engineering universities in the country, including MIT.
Acting U.S. Deputy Secretary of Commerce Patrick Gallagher continued the conversation about manufacturing policy, partnerships, and collaboration that would benefit the U.S. manufacturing industry. Gallagher acknowledged the important role manufacturers play in our ability to innovate. Despite the fact that manufacturing represents just 12 percent of our GDP, manufacturers account for two-thirds of R&D spending; their R&D spending is fundamental to continued innovation. He recognized the need for supportive manufacturing ecosystems, with the best example as the U.S. auto industry - including many suppliers that support the big three OEMs.
In his remarks, Gallagher also discussed administration efforts to support American manufacturing, innovation, and regional economic growth and to work more closely than ever with academic experts and top CEOs to support policies and programs that strengthen U.S. competitiveness in manufacturing. Examples include the launch of Investing in Manufacturing Communities Partnership (IMCP) and investments in innovation centers. (See our February 2013 blog for earlier comments on government commitments). The day continued with many lively discussions from many different perspectives.
While there are many factors that influenced our current state of manufacturing in the USA, I'd identify two of the biggest factors as 1) the shift away from vertically integrated companies that owned the entire innovation to manufacturing process and 2) the ability to seek out cost savings and conduct business worldwide. The implications have been tremendous, and I believe there is significant value in looking forward to understand how we operate in this new world of business. Although the MIT research focused primarily on the need to foster the connection between innovation and production in the US, the research is of value to manufacturing worldwide, related to a broader set of topics that include:
- Considering the role of inner cities and the availability of the urban employee
- Removing waste in the supply chain and addressing gaps in our supply chain infrastructure
- Connecting the necessary skills of manufacturing employees and manufacturing education
- Rethinking the size and capabilities of factories
- Increasing the availability of industry segment ecosystems, including suppliers, universities and community colleges, and government or non-profit agencies, and how the ecosystem is impacted by government policies and regulations (including taxes and incentives)
The MIT research provides some critical considerations for how the manufacturing industry evolves. We think it's worth translating these findings into how manufacturers prioritize IT investments and their expectations for those investments. I can see implications for all of the technologies that impact the way we work, share knowledge, and collaborate internally and externally, in the types of decisions we expect to make in our business process applications (supply chain, manufacturing execution, etc), and the way we interact in those applications with more social and mobile capabilities. To the point that innovation and manufacturing should be connected, we see investments already being made in PLM to acknowledge this very requirement. We'll certainly be keeping the MIT research in mind as we work on our predictions for 2014.