Book: Makers- The New Industrial Revolution
Author: Chris Anderson
If you have been following studies by Economist, McKinsey and other consultancies, and other publications, you’d not be surprised by what is touted as the likely savior of manufacturing in advanced countries–3D printing that will enable customized products, high value products that are hard to manufacture outside/have little labor content and thus less labor arbitrage opportunity, and finally “things that we can’t even imagine yet”. This book is not very different in what it lists as the things that will bring back significant parts of manufacturing to the developed economies. But, it is still very good at describing how these things could actually play out in real world and gives several examples of how it is already being played out. Following are some of the themes that I thought were most interesting –
Democratization of entrepreneurship: Anderson talks about how an inventor could invent a prototype but had to depend on a large corporation to produce something, which involved giving up a lot of IP and control (and thus, often, money). But, now there are factories around the world that can build something for you at a reasonable unit cost even at small volumes if you provide them the appropriate design. This means that the better mousetrap kind of inventions by individuals could actually be manufactured easily. It is not mentioned in the book, but this also means that corporations who specialize in better mousetrap kind of products can face sudden competition.
Complexity is shifting from “atoms” to “bits”: Another corollary to the above point is that the complexity is shifting to software, which is easier to understand if you know the language in which it is written, and is more scaleable as a platform–you don’t have to be at the factory to understand the complexity, and the complexity can be easily replicated at multiple manufacturing locations if the complexity resides in the software. He talks about how GM’s Volt took six years and $6.5B to develop while Tesla took the same time but about $250M. This means that more and more traditional manufacturing companies will need to be valued as software companies, unless manufacturing is extremely complex (e.g. leading-edge semiconductors). For basic manufacturing, the winners may be “shovel-makers” such as KUKA robotics that supplies robots that can do a number of tasks and can be customized.
“Open” Organization: If not for Linux, I would have laughed at this idea, and I still think it’s a stretch, but Anderson talks about how people who are just enthusiasts can work for a company as unpaid volunteers because they love the product or the idea so much. The broader points is that the internet allows people like this to come together and collaborate, and hacks away at the reasons a corporation as we know today exists in the first place–to reduce transaction costs of time, communication, strategy etc. Something to keep an eye out for; I believe this would become more true, but don’t think that this would be so popular and mainstream as Anderson hopes.
Volume-based outsourcing: Anderson talks about outsourcing of production to a foreign land depending on the complexity and volume. Prototypes: outsourced, small mass-market with needed customizations: custom factory, truly mass-market with hundreds of thousands of units: outsourced.
Finally, Kickstarter, Quirky are interesting funding models that one many want to keep an eye out for.