Summit ’17: Rethinking the Role of Manufacturing in the Economy
Harvard Business School’s Gary Pisano on evolving US industry
For all the disagreements in Washington, both Democratic and Republican leaders have been united on a crucial question for the future of the US economy: we need more focus attention on expanding of manufacturing.
“For generations, manufacturing provided a ticket to the middle class….America thrives when we build stuff better than the rest of the world. I want us to make stuff here and sell it over there.”
– President Obama, 2012
“We want our products made by our workers in our factories stamped with those four magnificent words — made in the USA.”
– President Trump, 2017
While manufacturing comprised about a third of the economy in the 1950s according to either GDP or employment measures, it comprises less than 10% of the economy by most measures today. With deep challenges in many of the nation’s industrial areas as well as large and persistent trade deficits — including in advanced technology products — more sustained focus is needed.
Speaking at the 2017 MForesight National Summit, Professor Gary Pisano of Harvard Business School addressed what it might take to unleash a long-awaited manufacturing renaissance.
For starters, Pisano recommends changing how we think about the scope of manufacturing. Increasingly, he sees manufacturing, the service economy, and the knowledge economy as inextricably linked — in some cases, even indistinguishable.
For example, a dentist, a quintessential service-provider, may frequently use important tools of modern manufacturing — CAD software and CNC machines — to design and create crowns in her own office. Thom Crosby, the CEO Pal’s Sudden Service, a regional fast-food company, described his “aha” moment when he realized his firm was not really in the service industry but rather in manufacturing: “We take in raw materials and semi-finished products and we convert them into physical product. The only difference between us and many other manufacturers is that we manufacture everything to order.” Indeed, according to Pisano, many traditional manufacturing are becoming more like traditional service firms by taking on a range of new roles — including making customized products to order.
As the sectoral boundaries shift, so too do the policy and management needs. Nearly all firms are increasingly reliant on big data and on advanced tech knowledge. Reputable studies show that competitiveness is closely linked with levels of innovation. Accordingly, Pisano argues that we need long-term investment in tech development and high-end skills. The United States has proud traditions of public education and training as well as a tradition — illustrated by DARPA — of catalyzing experimentation without picking winners.
A renaissance, after all, requires innovation.
Rather than fixating on tired old fights like in trade policy, Pisano argues the US needs focus on fundamentals — whether we’re investing in the requisite knowledge and skills to compete globally in the first place. We should be focused more on basic and applied research and on human capital. These factors are essential to strong industrial commons, which, like physical ecosystems, are difficult to restore once they’re degraded or destroyed.
MForesight is focused — through conferences, fact-finding projects, and reports — on identifying and sharing promising practices for the innovation pipeline, workforce development, and other fundamental aspects of economic competitiveness.
It’s good news that figures across the political spectrum are focused on strengthening manufacturing. Now, as Pisano makes clear, it’s time to start thinking about manufacturing as part of the knowledge economy.