We all know the factors that have led to economic success in the industrial era: access to land, labor, raw materials, capital, machinery, and (in many cases, anyway) a good idea.
Today, all of those traditional advantages are falling away except one: the good idea. We are leaving the industrial era and entering the innovation economy, where manufacturing is a commodity and the idea, a.k.a. intellectual property, trumps all.
And those ideas won’t just be limited to the products or services that you sell. Amazon’s 1-click idea (now patented) has nothing to do with the products it sells, only with how they are delivered. Indeed, managing innovation throughout the value chain – from research and design to delivery and aftermarket service – has become the key to success.
Companies that own and take advantage of the rights to innovations – more than those that manufacture, sell, or distribute them – will be the most highly valued.
Think of how that shakes up the status quo.
Take raw materials, historically the key determinant of the wealth of nations, for a start. Non-natural materials, like services and intangibles, are increasingly the source of prosperity.
And labor? China’s labor costs have more than doubled since 2007, according to Ernst & Young. Desperately seeking the next cheapest source of offshore resources isn’t a long-term strategy.
Even capital investment, a traditional advantage for big companies with deep pockets, will matter less when massive, multi-million dollar pieces of machinery are replaced by cost-effective 3-D printers that can fit in a home office.
All of this leaves traditional manufacturers in a tough spot. It’s no longer enough to simply make things well or inexpensively or with high quality (though those are all still important). In order for manufacturers to shift their focus on the primary driver of value – the idea – they must successfully manage a number of key trends:
What do you think? Are the value of things like “Designed in California” going to turn out to be a lot of hype in the long run? Will manufacturing retain its value? I look forward to your comments!
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