MForesight in Harvard Business Review

How the U.S. Can Rebuild Its Capacity to Innovate

Today, Harvard Business Review featured an article on MForesight’s flagship research initiative: Manufacturing Prosperity. The piece examines the challenges facing America’s innovation ecosystem and highlights a range of potential solutions to restore both innovation and production capabilities on US shores.

JETTA PRODUCTIONS/GETTY IMAGES

As the piece points out, the issues are systemic. Innovation potential and manufacturing know-how are increasingly departing the United States:

Many U.S. firms have long had a simple mantra: “Invent here, manufacture there.” But, increasingly, those same companies are now choosing to invent as well as manufacture abroad. From automotive to semiconductors to pharma to clean energy, America’s innovation centers have shifted east, offering growing evidence that the U.S. has lost what Harvard Business School’s Willy Shih calls the “industrial commons”: indispensable production skills and capabilities. It’s not just that virtually all consumer electronics are designed and made overseas. It’s that the U.S. has lost the underlying capacity to make products like flat-panel displays, cell phones, and laptops; nearly half of the foreign R&D centers established in China now belong to U.S.-based companies.

Earlier this year, MForesight hosted roundtables with manufacturing and innovation experts and practitioners in seven cities across the US. Some action-oriented ideas for restoring US industrial innovation emerged. The new article in HBR highlights four in particular:

1. Don’t fear picking winners. The United States needs investment in “translational research.” This means investing in not only basic science, but also the design, engineering and manufacturing work that can turn a promising idea into a valuable product. One idea is to launch a “National Innovation Foundation” to invest in engineering and manufacturing R&D to mature emerging technologies and anchor their production onshore. Right now, there’s no single “focal point” for manufacturing-related R&D in the U.S. federal government. MForesight estimates that with about 5% of the $140 billion federal research budget, the US could create such an institution and significantly increase the return-on-investment from taxpayer-funded research.
2. Invest in hardware startups and scale-ups. Many promising US tech firms have to go to China or elsewhere to scale production up to commercial levels. Over recent decades, venture capital firms have overwhelmingly focused on software and biotech investments over “hardware” investments, closing additional doors to manufacturing innovations. The US can potentially correct this imbalance by building on existing resources to help innovative hardware startups and scale-ups succeed — particularly through domestic government procurement.
3. Mind the Mittelstand. Ask a German businessperson or policymaker about the secrets to the strength of their manufacturing sector, and they’re likely to mention the Mittelstand, their small and medium enterprises. The loss of America’s industrial commons has led to the consolidation, weakening, or loss of many small suppliers. This can be corrected. For example, America’s public sector could help by offering loan guarantees, technical assistance, and expert fellowships to SMMs to speed up the pace of adoption of new smart manufacturing technologies that are becoming essential for process improvements.
4. Power to the people. America’s manufacturing innovation decline has traced a similar decline in practical engineering talent. While American high schools typically require students to dissect a frog, few require students to disassemble a power tool. Exposure to real-world engineering is a crucial and cost-effective way to build interest in manufacturing careers — through either four-year engineering degrees or vocational training.

Real innovation takes time and commitment. With a foresighted strategy to restore the industrial ecosystem, it’s possible for American industry to return to its old mantra: Invent here, manufacture here.