The Future of manufacturing
Digitisation will be increasingly important, but it is rarely the main reason for a company thriving.
“The New Industrial Revolution-” author Peter Marsh explains us how networks and niches put manufacturers on a twin track to success.
The head office of Blaze in an old industrial building in London may look unimpressive – but it’s at the centre of a web of relationships that connect the small bicycle accessories maker with collaborators spread globally. Blaze is among the exponents of the manufacturing network, an idea growing in importance as production companies particularly those in niche fields step up ways to link with others. A young company with just over 20 employees, Blaze is a pioneer in novel lighting for bicycles. Its best-known product is a new form of “forward looking” laser illumination that warns motorists a bicycle is moving towards them and so cuts accidents.
Emily Brooke, the company’s founder and chief executive, is a regular visitor to China to check out key component producers. She adds: “We use Japanese batteries, some of the components [in our electronics] are Japanese or Korean, the laser is German and some of the optical components are Taiwanese.” But Blaze’s interest in relationships goes well beyond manufacturers’ decades-old pre-occupation with finding good parts suppliers. Like many companies, Blaze has constructed what amounts to its own ecosystem of collaborators and partners – in Blaze’s case in the burgeoning global bike industry.
The sector has mushroomed in recent years thanks to increased interest particularly among young people in urban cycling, and now encompasses thousands of mainly small businesses in both manufacturing and services. As well as keeping close to some of the big LED light source producers such as Nichia of Japan and Germany’s Osram, Blaze connects via meetings and digital links with a range of diverse and little-known groups including Swedish mudguard maker Ass Savers, Germany’s bike sharing specialist Next Bike and Australian clothing supplier Vegan Athletic.
Blaze illustrates how connections count. Also it has the right sort of products: many of the world’s expanding manufacturers are in a niche field shielded from heavy competition but with a big global market. At a time when many companies and policymakers are interested in new ideas to boost Europe’s manufacturing strength, networks and niches should be put high up the list of concepts that need to be encouraged by governments, think tanks and trade groups. Such thinking should go alongside the usual exhortations – now somewhat tired – to increase investments in digital manufacturing under the broad heading of Industry 4.0.
Driving on the idea that networks and niches are growing in importance are two broad trends – rapid technology development and the opening of the world through globalisation. As technology advances have created more possibilities for variants on products and services, individual sectors can be split into a much greater number of subdivisions than was the case 20 years ago. In this climate companies in narrow parts of a much larger industry can progress. Examples include the US’s crop sprayer maker AirTractor, which occupies a “sliver” of the wider aircraft business, and Cochlear, an Australian leader devices inserted inside the ear to help deaf people, a small segment of the immense medical implant sector. At the same time a company in, say, Spain now has a much wider range of possible partners in many areas from research and development to sales, a result of the emergence of a host of new players from areas including eastern Europe, China and India. Blaze is a good example of a business which combines an interest in both networks and niches – as do many of the other firms inside its own individual ecosystem.
Another company that has used the twin ideas of networks and niches as a vehicle for both improving its products and adding to sales is Goppion, based near Milan. The 50-person Goppion is a leader in a highly specialist field – making customised museum cases to display valuable and historic works of art. Items protected by the company’s cases include the Crown Jewels in London and the Mona Lisa in the Louvre. Goppion’s ecosystem encompasses many of the world’s top international museums in countries from China to Egypt. Much closer to home, it also has close links with a network of about 35 small businesses, mostly clustered close to Milan, and which provide key parts in areas such as lighting, electronics or structural supports. Sandro Goppion, Goppion’s president, calls these firms not suppliers but “co-makers”. He says: “It would be virtually impossible for us to have available inside our company the range of capabilities that our co-makers have at their disposal. Our ability to work with these companies on specific jobs for customers gives us a a wide sweep of options and helps us to do a better job for than would be possible were we to reply solely on what we can do inhouse.”
The interest in ecosystems is shared not just by small businesses but by many big companies. It would be hard to label some of these “niche players”. The electronics giant Apple and the German engineer Siemens are good examples. It is however possible to regard these companies as instances of businesses that either started out in a niche and became a lot bigger – Apple after all started as a small producer of particularly “user friendly” computer hardware – or a business such as Siemens whose activities are split into many small slivers of the business world.
Apple has a long-term strategy of forming links with key technology companies whose ideas are important in embellishing its products. Apple’s pockets are deep enough to allow it to have bought many of these businesses, to gain unrestricted access to their development ideas. For instance in recent years Apple has taken control of the US sensor maker Fingerworks; PowerbyProxi , a New Zealand pioneer in power management; Regaind, a French computer vision company; and Germany’s Metaio and Vrvana of Canada, both specialists in virtual reality.
In its data sharing and computerised analysis operations, Siemens has a keen interest in connecting with a range of outside firms, whose specialist knowledge in fields such as sensors and software the German engineering leader finds useful. For instance four businesses of varying sizes and based around the world – Germany’s Evosoft, the UK’s Senseye, Bluvision of the US and Atos of France – are all collaborators in a Siemens’ data sharing platform called Mindsphere that helps to facilitate activities such as connecting up machines in factories to assist maintenance or check on technical failures.
The idea of hooking up with other companies frequently extends to connections concerning manufacturing equipment, especially in specialist areas where machines need to be tailored to meet the specific requirements of one manufacturer. For instance, the Brazilian aircraft maker Embraer has close links with several machine suppliers – whose equipment adorns Embraer’s big production site near Sao Paulo – including Japanese robot leader Fanuc, the US automation specialists Encore, Electroimpact and Bastian, and Norway’s warehouse picking supplier Autostore.
Connections with customers – which clearly belong to the ecosystem of the firm that is supplying them – have always been important. It would be absurd to state that manufacturer/customer interactions are part of a new trend. But in many industries the nature of the dialogue between the maker of goods and the company it sells to has been changed by shifts in technology or consumer tastes. This has increased the importance of the manufacturer/supplier ecosystem through making the interactions much more fluid.
One example is in making cans for beverages – where the business has been disrupted by the entry of many smaller players (for instance in craft beers) which require a range of highly varied containers to differentiate their products from rivals. Erik Smuts, a senior executive at Nampak, a big South African can maker, says: “Our customers now make many more niche products than used to be the case. They need to show what they are selling is different. To fit in with their needs we must make a bigger range of cans. As a result, our [canmaking] machines must switch to creating different products twice as often as happened 10 years ago. That creates some challenges for us. If we are to stay competitive, we must be able to cope with the new requirements.”
What lessons can be learned from this analysis? Companies need to become more fully aware of the opportunities from networks and niches. More case studies are needed of the specific firms – big and small- that have benefited from exploiting these trends, and how they did it. Government organisations should do more to promote the sharing of ideas by getting big and small companies in related fields to talk to each other. One way to do this is to organise “matchmaking” meetings for firms of different sizes but which share similar ideas and are involved with comparable industries.
Finally both policymakers and business groups need to think more strategically about the ingredients needed to create successful manufacturers. They need to shift their analysis from the now somewhat hackneyed rhetoric about the importance of digital technologies – the internet of things, artificial intelligence, 3D printing, smart data transfer and other parts of Industry 4.0 thinking. Digitisation will be increasingly important. Companies that are already good will become better by taking on the new thinking. But it’s rare to find a manufacturer where the main reason for its success is its strength in Industry 4.0. Behind most companies that excel in a specific field of manufacturing are almost always technologies and ideas with only a tangential link to digitisation. The ability to connect with others and to exploit the advantages of niche operations are often key elements. To build the champion companies of the future, these lessons must be absorbed.
Peter Marsh is a writer and lecturer on 21st century manufacturing. His best known book is “The New Industrial Revolution: Consumers, Globalization and the End of Mass Production”, published by Yale University Press. Peter gives speeches on how countries and companies can capitalise on the opportunities made possible by the new industrial revolution. In 2015, Peter started Made Here Now, a website about UK manufacturing. From 1983 to 2013 he worked at the Financial Times where his most recent job was manufacturing editor. His other books have covered microchips (“The Silicon Chip Book“, Abacus), robotics (“The Robot Age”, Abacus) and the space industry (“The Space Business”, Penguin).