US Manufacturing Needs Innovation, Entrepreneurship and Investment
“Do something!” That’s the cry to governments - Federal, state, and local. Restore the manufacturing economy and its promise of increased numbers of well-paying jobs. But what should governments do? In a series of workshops held by the National Governors Association (NGA) Policy Academy, eight states ( California, Colorado, Connecticut, Illinois, Kansas, Massachusetts, New York and Pennsylvania) have shared, compared, and worked on their strategies. Although it’s not the first time states have made plans and strategies, and it won’t be the last, this meeting signaled some paradigm shifts in thinking about manufacturing and the economy. The story is told in the NGA’s new report, “Making” our Future: What states are doing to encourage growth in manufacturing through innovation, entrepreneurship, and investment.
A Paradigm Shift
Five years ago, states were focused on rescuing manufacturing to bring back desperately needed jobs. Governments often pursued global companies that could build new plants, offering them tax incentives, subsidized workforce training, and more.
Today’s strategies are based on innovation and growth from within. Government leaders understand more about today’s manufacturing. They see new technologies transforming processes and bringing forth new products, and want to support continuing development. While each of the eight states has different approaches, there are some common themes.
States want to spur innovation and entrepreneurship by fostering diverse ecosystems to support manufacturers. They see the importance of aligning industry, university, and government resources, moving toward the same goal: to develop high-value, innovative people and capabilities. By collaborating within new networks, states hope to break through walls between industries, fields of knowledge, and cultures.
Each state recognized that industry must help develop the agenda. Some states have set up advisory councils. Others have met with and listened closely to individual manufacturers. Many have recognized that they have been overlooking small and medium-sized companies (SMEs), including start-ups. What support is available is often fragmented into many agencies and programs. Some states have already started to eliminate confusion, to assemble, improve, coordinate, connect, replicate, and scale up resources already in place.
Educational institutions will play a vital role in building a more robust manufacturing economy. States agree that it’s mandatory to recruit, retrain, and educate the people needed now and in the future. It’s clear that they need educational systems that prepare students with the right skills, able to learn how to learn and adapt to change more easily. University R&D capabilities are vitally important. By partnering with industry, university research departments can learn how to move ideas from lab to marketplace faster, with more business savvy.
The eight states agreed that new, innovative manufacturers need access to capital. While government can provide some of the funding, new ventures need industry and private capital to fund research, as well as to help guide and commercialize scientific work. Some states are structuring entrepreneurial deals and putting up capital for new ideas on the condition that outside investors buy in.
An integrated advanced manufacturing strategy is called for in many plans. “Advanced manufacturing” means many things to many people, however. It can mean developing new industries like alternative energy systems, nanotechnology, or biotechnology. It could also mean implementing advanced manufacturing processes, automation, and production systems in mainstream industries to increase productivity and reduce costs. Whatever the interpretation, the fact remains—changes in technology transform both products and processes.
What to do
Results of past programs like these are hard to assess. If the number of new jobs is the sole criterion for success or failure, the point is being missed. Because advanced manufacturing requires fewer people than in the past, metrics should include not only net new jobs, but also output growth (gross state product), productivity, and return on capital investment. And in a changing world, we are beginning to need social and environmental goals, and metrics such as reducing waste going to landfill, decreasing energy use, and managing carbon footprints.
Leaders who want to strengthen their own state or regional manufacturing ecosystems would do well to read this report, then find out how their economic development agencies are approaching their problems and opportunities. Manufacturing doesn’t need rescue. It does need acceleration to be more innovative, productive, and profitable. Manufacturers need to step forward and support growing partnerships with educational institutions, sources of private capital, and government. Going it alone may result in getting left behind.
Karen Wilhelm has worked in the manufacturing industry for 25 years, and blogs at Lean Reflections, which has been named as one of the top ten lean blogs on the web.