As President of Embry-Riddle Aeronautical University, I gave the keynote at the annual banquet for the Volusia Manufacturers Association (VMA) on June 27, 1996. I took that speech and adapted into an appropriate format for a post in June 2019. I updated none of the information, so you can see how my predictions played out.
Abstract
The Industrial Revolution spurred the dramatic growth of the nation’s manufacturing base as a key component of the economy and was reinforced by the World Wars. The Industrial Revolution was generated from the combination of social pressures and technological advances. Aligning resources for mass production has been the goal of manufacturing.
Likewise, the current Information Technology Revolution, in combination with the social pressures of today, is causing a shift in manufacturing toward mass customization. How will these technologies be combined to enhance and change manufacturing? What are the characteristics of manufacturing that will thrive in the not-so-distant future? Steve Sliwa will use his crystal ball to forecast and hypothesize ways that technology can change manufacturing and deliver more value to the consumer.
Volusia Manufacturers Association (VMA)
Annual Banquet – Keynote Speech
Steven M. Sliwa, Ph.D.
President of Embry-Riddle Aeronautical University
Daytona Beach, FL
June 27, 1996
Today, I want to talk about forecasting, globalization trends in manufacturing, information technology growth, and the impact on society as well as companies, in addition to the trends inside our organizations. Then, I will provide my thoughts on the key technologies that I think will impact society, our lives, and our businesses over the next 20-25 years. I will end with a summary of ideas that I think are going to be necessary for success.
We all know that manufacturing is important. Almost every economist agrees that the making of goods is what creates wealth. And the service sector, which is a large and growing portion of our current economy and society, really only redistributes wealth. But the production of goods is what creates the wealth to begin with.
Change is inevitable. It is always upon us.Unknown
Look at this from an economic standpoint. If you have a high-tech company and over the long run you want to maintain the current number of employees with everything else constant, you must grow the corporate revenue at about 10% per year. Maybe even up to 15% per year, depending on inflation. If you want to maintain your corporate size, revenue has to grow just to preserve that. Growth and change have to happen. One way or another, if you want to keep the same revenue, the only way to remain in business is to reduce the labor requirements over time. Particularly in manufacturing ,with competition and efficiencies, it seems like we reduce our costs and ship more product, yet we receive less money. It’s almost like a physics equation. One of our challenges is to spot these changes.
Most people are familiar with S curves in technology, which is where you start a new technology and it’s pretty slow, but then things rapidly speed up and then eventually taper or fall off. And then, a new S curve comes in. We all face this scenario. And because of those S curves, sometimes we get too attached to one particular curve, and the next thing you know, it flattens out, a new curve comes along, and we can be left behind. One of the big challenges in any enterprise is to understand where those S curves are.
Another interesting thing is that technology interacts with society and vice versa. When the Industrial Revolution first started, people didn’t have much faith or confidence in scientists or technologists. At around the turn of the century, it was mostly the same. But now, it’s almost a given that if there is some problem, the question becomes, “Why doesn’t technology fix it?” If we have a problem with AIDS, we insist that more money be spent to fix the problem. Society demands that technology should resolve our issues, whether they are moral or medical. That’s a big change. And as a result, we must look at the impact technology will have on society. Our expectations will determine most of what the future pressures are going to be. In general, manufacturing firms will have to chase to respond. That’s the motivation for why one wants to look into the future. You must position yourself and develop a vision.
My interest is in the future because I am going to spend the rest of my life there.Charles Kettering
Now, there is some danger to focusing on the future forecast. For example, a 1903 New York Times article claimed that they had surveyed the best minds they could find. They determined that it would take 1,000 scientists and 1,000 engineers 1,000 years to develop an aircraft that could lift a man. The next day, a headline ran “Wright Brothers Fly at Kitty Hawk.” In 1950, Tom Watson, Sr. headed this little company that sold typewriters and things, and somebody asked, “What do you think about this invention of a computer?” And the founder of IBM said something to the effect of… “Well, we’ve done extensive market surveys, and we think the entire worldwide demand for computers can be satisfied with three computers.”
Clearly, when you forecast for the future, you can box yourself in. Personally, I’m still going to try and do it, but I want to remind you of what Josh Billings once said, “Don’t lay too big plans for the future. It’s like planting a pigs tail with the expectation of having 6 fattening hogs to slaughter at your next hog killing time.” In other words, you don’t know what you’re going to get.
Globalization
All economists agree that worldwide GNP is going to grow, and they also agree on where it is going to increase the fastest. In developing nations. Because if you throw a few hundred dollars per person into that economy, percentage-wise, that’s a significant change. Developed worlds have about a billion people. Underdeveloped societies, however, have about four billion people, meaning there’s a lot more of them. Clearly, the big opportunities in the next decade or two are going to be serving those global markets.
The good news for us in the manufacturing arena is that they will have cycles similar to the ones that we’ve already gone through. In other words, as the U.S. population grew and flattened out, we learned how to serve that market, became better and better at it, and made money. That is flattening out in some areas, but there should be an exact repeat of those curves, delayed in time, in some foreign markets.
The challenge, of course, is the cultural barriers, and we must find ways to handle the different ways of conducting business. But, in general, the pressures will be about the same in terms of demand and how the demand grows. We’ve already conquered that here, so we ought to be able to do it there. But it’s going to be delayed. One thing’s for certain, sometime in the future, those delays are going to become shorter and shorter. Remember, it used to be that here where there was quite a delay before products were released, say in New York and L.A. But that delay has really shrunk. And, I predict that’s also going to happen in the global sense as technology moves.
I think it’s easy to say that each of us has to think about how to globalize our business and search for those markets. For example, I’m familiar with the aviation and aerospace industry, and I predict that the U.S. airline business will probably grow about 4-6% a year for the next 15-20 years in the U.S. Currently in mainland China, they’re trying to reduce the annual growth rate for airline services to 22% because they’ve had so many years of over 30% growth that they’re having too many accidents. Thus, they have to try to slow it down.
Obviously, for those in the aviation and aerospace sector, that’s a great opportunity. Our business may no longer be trying to find out how to serve our customers in Macon, Georgia but rather Beijing, China. Incidentally, we have a large group of air traffic controllers visiting from Beijing later next week. That’s an important step forward.
Revolutions
When historians and economists study societies, they find that they start with an agricultural phase and then move to an industrial phase. In current times, we’re in an information phase. What is the impact of these periods? First, we exploited our natural resources, then our labor, and now our information.
The first step in each of those revolutions is quantity. And that’s what we in the manufacturing business have learned to do very well – increasing the supply, decreasing the price, and getting products into the hands of as many people as possible. That’s part of the globalization process and happens every time. When you think about it, each of these phases, trends, agricultural/industrial information age, each time a new generation of activity comes along, the goal is to reduce the number of people required to do the job. It’s always to reduce the labor content to try to get ahead.
One of my favorite first industrial examples involves plain straight pins. Before the Industrial Revolution, when you wanted a straight pin, you went to your pin maker who carved out the pin and worked on it. That was real craftsmanship, very expensive, and took a long time. When industrialization came along, then we started specializing. We had people who put the point on it, another who welded the head on it, cut out the metal, treated it, and put it in the box. We specialized, but we made the process faster, and the percentage of time spent on any one step was reduced so that the labor content went down because of that specialization. And, we kept on until, ultimately, robots can do it.
Another interesting example that shows some of the future trends is looking at the street watch model. We all know you can go to a street in almost any city and buy a fake Rolex watch. You’ll probably pay about $25 for it. To the untrained eye, it’s tough to see any difference at all. Now, it turns out that if you study its operating characteristics, there is very little difference between this cheap watch and the real one that costs thousands of dollars. But if you take apart that street watch and study it, it has many parts that are intricate, small, and carefully balanced. It turns out that manufacturers have gotten better and better. And when you think about it, that’s really amazing. The person selling the $25 watch probably got it for $15, and it was made for maybe $7.
The Swiss company that makes Rolexes also gets involved in making these knock-offs because the actual components come from Asia as well. It always happens … man finds a way to reduce the labor content, simplify it, cut down the parts, and change the costs. As it turns out, having a true Rolex watch with real gold on the outside can be a valuable piece of jewelry. And certainly, its brand name adds extra value, but it had much more value before these knock-offs. But this illustrates the constant pressures on manufacturing.
Manufacturing is going from an internal specialization division of the labor model – the Adam Smith model that lasted for 150 years – to what’s been going on for the last 10-20 years, which is the customer feedback model. We now try to get customer feedback, do total quality management (TQM), total quality improvement (TQI), re-engineering, or whatever the latest buzzwords are. And in the next phase, I claim the trend will be mass customization. That’s where the future is going.
The power of computing continues to grow at an exponential rate. Moore’s Law says that the number of transistors inside a chip will double every two years, and as a result, we’ve had exponential growth in the computing power of our microprocessors. Today, a calculator is about ten times more powerful than the computer that flies the Space Shuttle because of when the orbiter was built. That’s just the way it is. It’s incredible what we accomplished with the Space Shuttle in terms of memory space and other characteristics. But the growth is so fast, and one challenge is that the cost of constructing a manufacturing plant for building those chips is growing exponentially as well.
At the current growth rate, I think they predict that by the year 2015, it will require the entire U.S. GNP to build one of these factories. Clearly, there has to be a new S curve in technology. There will be some changes, but in the meantime, there is no expectation, no belief that this exponential growth in computing power, capacity, speed, and storage is going to let up. Every time people predict it, it simply hasn’t happened. There’s always another technology out there to enable a new S curve.
People talk about information this, information that being the key to the future. In the past, it seemed really simple. Let’s use a bank example. It used to be in the small country banks that we had a cashier who handled everything – the counting, the books, going to the safe, and all those things. Then, we brought in the computer, and it started keeping track of the accounts and passing out the bills instead of requiring a person. As we use more and more computers, such as ATMs that are computer-integrated, no humans are involved. We even have online computer systems where you can do your checking and banking and everything online. You have direct access to it without ever dealing with a person. They are even talking about having little cards that have microprocessors on them that you carry around that will have everything. This is yet another example of driving the labor content out of the system. During this information technology phase, the primary goal is to think about the time it takes to convert information to knowledge. If you can reduce the time it takes to do that, that’s where the real value will come in manufacturing and in any enterprise.
Let’s talk about Walmart. One of the experiments they did over the last couple of years is with Procter & Gamble and their diaper products. Walmart needed to make their business better, so they approached P&G and said, “This shelf space is yours, and you can do what you want with it. We’re not going to intervene at all.” This means there is no paperwork, ordering, accounts payable, or procurement. P&G is responsible for the space, and it is up to them to stock the shelves with whatever products they think will sell. When a customer goes to the checkout counter, the cashier scans the diaper package, and that’s when P&G gets paid. Every day, the computer keeps track of how many products are sold, and ultimately, P&G receives a check.
The advantages aren’t just the payment and managing their inventory, but now P&G can conduct better and faster experiments. In a matter of days, they find out if new products work. They also discover how effective the marketing and advertising campaigns are because online reports are available as soon as a sale is made. They no longer have to wait for the end-of-month reports or for the procurement people to order when they see an empty shelf. It dramatically reduces the time.
With this new approach, we can fine-tune our marketing processes much faster and deliver that value to the customer. And, Walmart gets the benefit that their labor is only placed in a position where it adds value to the customer. They decided that ordering diapers, doing the paperwork, loading them on the shelves, and trying to figure out which ones to order was not the best way to add value to their customers.
In psychology, you learn about Mazlow’s hierarchy of needs theory. He says that we all have basic needs, and if you can satisfy those, then ultimately, you can climb to the self-actualization level where you can do what you want to and not worry about hunger, sleep, warmth, and things like that. And, it turns out that society has something similar. Once the basic needs of society are satisfied and some amount of luxury or time is available, then society itself can reach a higher level of self-actualization.
Of course, in some cases, such as with the Roman Empire, that was their downfall. Our goal is to not fall prey to those same characteristics. This is happening around us today. For example, after World War II, the Japanese became extremely focused on pulling itself up by the bootstraps. They saved all their money and were very conservative. They worked hard, blended in, and didn’t want material things. They encouraged newcomers of society to do that as well.
Fast forward to modern times, and you find young Japanese adults graduating from college having a conversation similar to this:
Graduate: Why can’t I have a house now?
Parent: What do you mean? We didn’t get a house until we were 50 years old. And, we have a 99-year lease on it.
Graduate: Yes, but you’ve been saving 40% of your money in the bank. Why don’t you give that money to me?
Parent: Well, we have to save it. Who knows when there’s going to be another world war.
Graduate: What’s a world war? That’s something we read about in history class, I think.
With the new generation, once their basic needs are satisfied and there’s enough wealth, they want to go on vacations, buy products, and have designer goods. Society’s opinions change and become more materialistic. As we go toward this mass customization, you see this trend popping up everywhere.
Look at what happened when we hit the Industrial Age. I’ll use clothing as an example. At that time, you had the option to make a dress for yourself, but you couldn’t be a good dressmaker and farmer. So, you found a skilled craftsperson to make a pink dress for you. The manufacturing and textile industry came along, and suddenly, you could walk into a store and find an entire row of pink dresses ready-made. All you had to do was select the correct size.
When that first happened, people thought it was great. Can you imagine walking in and seeing the same pink dress in every size? I have a feeling that some in the audience are thinking to themselves, “What?!? You’ve got to be kidding me. If I saw all those pink dresses, there’s no way I would buy one because somebody else might wear the same one. I’m at a higher level in society now. I’m self-actualized. Therefore, I am unique and expect to be treated that way.”
When my daughter was buying a prom dress, one reason she bought it at Nordstrom’s was that they kept a book of all the formal dresses they sold. Each time you purchased one, they wrote down the dress and what dance you were going to. They shared that information with all the stores in the area to ensure that no one else at that dance would wear that dress.
Now, does that sound like something that responds to what mass customization is about? Because of that guarantee, I couldn’t get my daughter to shop at another store if I tried. For mass customization, where manufacturing comes together with the self-actualization demands of society, we should not spend time figuring out how to make everything common and simple because that’s easy. Remember when the first Japanese cars came out, and we only had three options … blue, black, and white?
Future of Mass Customization
The future I see for mass customization is that you go into the showroom, and for each option, you have thousands of choices. In reality, there are over 10 million cars that could come off the production line. As soon as you put in your specifications and swipe your card with a little transistor or microchip in it, your car is ordered, and parts are identified from all over the world. When your parts are manufactured, they stamp your serial number on that part as it comes off the production line. The parts come together to be assembled, and your car is almost guaranteed to be fingerprint-unique.
I have another example. I’m working with a company in California that has a startup that’s creating computer-generated imagery like you see in the movies.
They know how to do the special effects on these things, but what they really want is to build a totally integrated media company to do this. They want to create a website for a movie a year and a half before the film is released. Their goal is for people to interact with this website, and they believe the outcome of the movie will be different because of these interactions.
Not only that, but individuals will have a million different combinations of games, interactivity, brainteasers, and so forth, creating a unique experience for everyone. By buying different products and materials and going to watch the movie, people get a hint for solving the game or problem. Totally integrated, mass-customized, and enthralling is the high level of self-actualization that people will expect for entertainment in the future. If entertainment is going to be that way, certainly our products will be as well. And that’s why you see this trend coming.
What are these trends going to do to our companies and the people in them? I touched on the fact earlier that knowledge is critical. One thing that is very clear to me is that knowing what to do and how to do it better and better is probably the most important thing. The least valuable thing is simply adding labor to material and coming out with a part because over time, someone will always be able to do it cheaper, be it another company or nation. If that’s all you are doing, ultimately that cannot survive in the long term. Find a way to leverage your labor resources so that you are not just making money by dollar per hour. If this is your approach, there’s a limit on how much you can make.
I’ve run many software companies, and most of the people who worked there fit the stereotype – boots on, eating Twinkies, drinking sodas, long hair, and working on the computer 18 hours a day. It turns out that most of them didn’t have the slightest idea what you could use a computer for. They can talk in hexadecimal and move bits and bytes around, but they had no idea what a manufacturing process is and things like that. Yet, they build the tool, and that tool can be expended and used. In junior high, I got my first FORTRAN compiler and started writing programs to design wind tunnels. At the time, it never occurred to me that the person who created the tool didn’t know what a wind tunnel looked like much less what it did. But I used that person’s tool for my project. A tool enables you to build and grow on top of things or where the value is going to be. How do we exploit them as manufacturers?
I once read a science fiction short story that contained an interesting model. The way people were paid was by the amount of time that they saved other people. If you did something that saved someone an hour, then you would be paid an hour. Say you buy someone a drink. That person thinks, “Hey, that saved me because I would have had to go out and get my own drinks,” and gives you half an hour. Hours were the currency. Clearly, the wealthiest people in this society were the ones who figured out ways to save the most time for other people. Those who did an hour of labor barely made money. But the ones who figured out how to leverage their time, energy, skills, and knowledge of how to save people time were the wealthiest people in this society. I think that model works here.
Another impact of these trends on our companies is that information technology has been integrated into manufacturing in ways that we all appreciate now, but it’s going to continue. First, our goal is to reduce cost. The second is to get feedback on customer issues. But ultimately, if mass customization really happens, everything will be customer-driven. We’re going to give customers the chance to say exactly how they want to do it, give them the tools to do it, and where we receive value isn’t by billing dollars for hours but by building the tools so that our customers can get what they want.
Everyone talks about quality, but the truth is, quality is expected, and that’s a given. Zero defects. Therefore, mass customization is where the added value will come from. Led by the auto industry, the Japanese have made significant gains in quality and productivity over the last 20 years. Do you know who is number one in productivity right now in the world? The U.S. We are by far the most productive, and we’ve had a pretty good growth rate recently. But you know where our primary source of productivity growth is. It’s in distribution and transportation right now. So, I get a huge kick when our federal government decides to help us get our fair share of dollars out of Japan. We insist that the Japanese government spend hundreds of millions of dollars improving their transportation infrastructure because we might get some contracts. This example shows how politicians sometimes can get in the way of infrastructure and, for a few folks, paying off our future.
U.S. engineers are mostly trained for performance. We’re taught from the beginning to design and engineer for the most performance. But when I interact with Japanese engineers, they only know zero defects, and that’s all they understand. Somewhere in between those two extremes is where mass customization is going to come to bear. The creativity of the performance, one with the quality and the cost-driven aspect of the other engineers, is what we’re going to have to do to come together. And then, we’ll ultimately get that shop full of independent dresses and that car the way we want.
The Harmony Era
In terms of impact on our companies, there’s an interesting book, Harmony, written by Arno Penzias, who won a Nobel Prize. He talks about the quantity era, and then the quality era, which we already know. He thinks this next period is going to be the harmony era where everything comes together. The name isn’t great, in my opinion, but the trends he predicts, I believe, are pretty meaningful.
The quantity era emphasized mechanical technology, and in the quality era, we focused on programmable control. But in the harmony era, it’s going to be direct information access. We’re going to be economy of scale, economy of speed, and economy of convenience. That’s what we want now, convenience – advanced planning emphasis, customer feedback, and mass customization. We start with hierarchical organizations, and then we transition to team-based ones in the quality era, and in the future, we’ll have unusual architectures with each one built for every project. We’re going to put value and volume in the first era, there’s going to be value from performance and quality in the second era, and then add value and the coherence of bringing things together. And, making that network function is going to be in the next era.
Large changes in the employee hiring model will occur because we will not be able to hire people for a particular job since jobs change. In fact, as companies become larger, all their employees have to grow. In the original model, one hires someone for a particular skill set, and if they grow, they expect to be promoted and receive a raise.
But in the future, we must hire people and tell them that their job is to grow. They have to grow faster than our growth rate to get those promotions and compensations. That growth rate is going to be important in this next era of mass customization because making the tools for giving the customization powers to our customers is more important than just turning out the same thing. It’s going to be critical to pull these teams together. Our employees have that talent, and they are going to be the tool makers. Continuous training and education are going to be vital.
This message is for K through 12, higher education, Daytona Beach Community College, and all of us working together as well as training programs inside companies. Education is learning how to learn, and training is getting the specific skills for a particular project. The future will see considerable changes.
In the past, it seemed like it was always easy for manufacturing plants to get several million dollars to make technical improvements to the factory. But trying to get $1,000 for a new training program was a real struggle. The source of competitive advantage in the future is not going to be how we are going to mass produce. It’s going to be how quickly one can change the line, implement new tools, and respond to that mass customer need. That source of competitive advantage is not going to be on how big your equipment is but rather on how competent your workforce is.
“It’s going to be education or extinction!” is a quote I frequently encounter in terms of the way you need to treat your workforce. This applies to the people themselves because, just like these products keep moving and the S curves come faster, people must market themselves just like companies. Companies that don’t respond to the S curves die, and people who don’t look for new S curves of opportunities in terms of technologies, capabilities, and skills are going to be left behind. Our society hasn’t fully grasped this yet. We talk about it, even fear it, so one of our jobs is to get on top of it.
One company that handles this well is Intel. They do a lot of specific job planning, discussion planning, and have an entire system for career and education planning. They want employees to develop their own plan and, hopefully, market themselves to other areas inside Intel, horizontally or vertically. Otherwise, someplace else in Silicon Valley because they know that if the people aren’t growing and moving, if there isn’t some vibrancy, they’re going to be left behind.
We must get our people and ourselves to understand that. Companies have to learn how to make jumps from one S curve to another. Railroad companies define themselves as being railroad companies instead of transportation companies. When trucks and cars came along, they said no, “We define ourselves as using metal rails.” And now, they’ve been left behind. Think of steel companies. We currently manufacture steels in big plants. If they had defined themselves as materials companies, it would have been easier to find new S curves to jump to. Some of the big companies from 50 years ago would still be the big companies today had they not thought of themselves in such narrow fields.
People do the same thing. When computers came along, if they didn’t get on that bandwagon and their jobs required that skill, they were left behind. If there are new management files required for this new environment with mass customization, if workers don’t pick up those skills and run with it, they will be left behind. It’s just as crucial for people as for companies.
Future Technology Predictions
Before presenting my recommendation, I’m going to talk about some of the exciting technologies that I think are going to come up in the next decade or two that will have significant impacts on society. Some of them are rather obvious. I’ve already mentioned that computing power will keep growing. Today, we wouldn’t even sell what was the most powerful computer 10 years ago. There’s no reason to expect that trend to slow down in the future.
My favorite new technology is where they put chips on top of each other and assemble them vertically rather than horizontally on boards. It’s complicated and involves electrons and electron matching of silicon wafers. I’m involved with a company that’s working on that. I don’t know if they will be the winner, but I think there are going to be real opportunities. Also, optical computing using light. We won’t even have to have electrons in the future. Some really good circuits are coming out. The building blocks are all there, and now we just need to shrink it. These are the new S curves.
Of course, networks are amazing – the Internet and World Wide Web. Those are really taking off. But what’s really going to explode is when we bring broadband access into the home. We don’t know if it’s going to be the cable or phone company or some other new satellite delivery. They’re all fighting over who’s going to be the first, and they’re betting $20B, $30B, $40B to be the first to get it out because they know that’s going to be the major access in the future.
Another technology I think will be a big change is something called nanostructures. A nanostructure is something that’s built out of building blocks that are a nanometer in size, which is a billionth of a meter. If we can create items on the scale of a nanometer, then you can build something the size of about five microns, which is equivalent to five thousand nanometers, five-millionths of a meter, or roughly the size of a red blood cell. A robot that size can do highly specialized missions. Obviously, the medical possibilities are unlimited.
For example, I would like to inject some and have them get out all my fat cells.
But we can use that technology in other areas like cleanup problems, issues behind walls, or with nuclear waste. Maybe these structures would last for only 24 hours. These structures are starting to be built now. I visited a lab at Princeton, and the scientists are beginning to piece together ways to get these crystalline structures going and getting the shapes they want.
One area that’s just starting to catch on that’s going to be amazing is in positioning, such as GPS satellite positioning. It’s going to be suitable for cars finding their way around, but it has broader applications. For example, they have these golf courses now where you drive around, and it tells you exactly where the hole is. It gives you hints on what club to use and things like that, even taking the wind into account.
But think about it from the manufacturing side. Imagine that you have a small chip that would ultimately know where it is down to the microscopic positioning. Imagine what that could do for you. They’re just starting to think of ways of doing quality control, tracking things, building things, and moving things around. It’s not that far away.
Also, the Department of Defense (DoD) finally agreed to turn off their signal. I don’t know if you know, but two signals were coming down, one that was jammed a little bit while the other was clean. What happened, however, is that we all developed technologies that ended up having the same accuracy. During Desert Storm, they didn’t have enough military receivers, so they had to buy things like Trimble and Magellan from the stores. Since the military needed the most accurate signal possible, they had to turn it off. The one time the DoD had the chance to use it, they couldn’t. Eventually, we put enough pressure on them that they turned the signal off.
But there are some interesting other DoD spin-offs. For example, stealth has some manufacturing benefits. Northrop was building stealth airplanes like the B-2, and they had all these sensors. Each aircraft had prints, like fingerprints of an airplane. One time, a new airplane came in, they scanned it, and it didn’t match. They knew they must have equipment failure. After a visual scan, however, everything looked fine. As it turned out, one of the hatches was put in backward. This technology is so sensitive that they can do a scan, match the fingerprint with what’s expected, and find any manufacturing defects that no one was able to catch. There’s some interesting technology that’s a combination of signal processing taking advantage of other technologies – the idea of sensors and computing.
I predict that biological engineering will be significant. Obviously, ethical concerns exist, but the potential of engineering things that have those building blocks is just totally phenomenal.
I also think virtual reality simulation is going to catch on. We’ve all seen the helmets you put on and the gloves. You’re sitting there, and you can almost see where you are reaching out using the devices. In Star Trek: The Next Generation, they have the Holodeck. Whenever they have a big disaster, they make a Holodeck version of whatever they were studying and look at various scenarios with a computer until they finally understand it, and then they implement that solution. That’s precisely what’s going to happen in the future as we develop manufacturing processes. We’ll build virtual reality models for it and see how things fit, how it works. And once we get that done, it can be quickly applied to the process.
I think voice activation is coming a long way. Even in the manufacturing environment, it won’t be long before you won’t just compute with your keyboard or use a pen or pencil. You’ll actually do it the way we would normally want to do it, which is in language. I don’t think that’s going to be too far away, meaning during the next 25 years.
Long-Term Positioning
How do we position ourselves for the long term? Initially, global market penetration is needed. Everyone should be able to figure out ways to take advantage of the fact that there is going to be double-digit growth in many developing nations, and that’s going to continue over the next couple decades.
But to really build for the long term, and be ready for this next trend, we must focus on knowledge and information, reducing the time to change information into knowledge. We have to find ways to ensure that we aren’t just billing people for labor and parts because that won’t be a long-term winning solution. That battle will be tough to win in the long run.
I love observing lawyers. Even though they bill incredible amounts of dollars per hour for their labor, it’s still not enough. They want to have a percentage of deals, such as percentage contingency fees. They want to be able to take shares of stock. They want more leverage into the agreement so that they can earn more than just their plain dollars per hour because that’s a limit, and they don’t want to be limited. In fact, law firms that were really big but didn’t figure out how to remove the limit ended up becoming much smaller later.
The leverage is the know-how to do things faster, cheaper, and better and build those tools for mass customization and building that branding. I mentioned that education and training are going to be incredibly important because the adaptability of the workforce will be your chief competitive advantage, so it’s going to be education or extinction.
The key aspect that will enable mass customization is exploring information technology. The networks that are going to be built are critical – the connections with your banker, customers, stakeholders, and other important people. If you haven’t started thinking about how you’re going to do that, you’re delaying getting onto this new curve. That mass customization with customer focus is going to be really important.
Always be looking for those S curves. It’s going to happen, it will be out there, but you never know which curve is going to be the right one. Therefore, treat it like an investment portfolio where you’re always positioning yourself to be ready because the curves start flat, but when they go fast, people start going out of business quickly. Continually look for ways to position yourself on those curves. IBM got so big that at one point, the government was thinking about breaking them up because it was just becoming too powerful and influential. That’s no longer the case. In fact, one of the little rinky-dink companies that they gave a contract to, Microsoft, ended up with a larger stock capitalization. This was a totally new S curve, and IBM didn’t see that coming. Plus, they couldn’t fight the battles on as many fronts.
Diversify your investments. New partnerships are vital because they help you go faster and reduce the risks. Finding the right global partner is essential for penetrating the global market. It’s also necessary for getting exposure to new technologies and S curves and identifying those new markets.
One interesting observation I make about partnerships is what I call the piece of the pie analogy. That is, everybody is always worried about their piece of the pie. That’s their nervousness about doing a partnership because they want the biggest piece possible, maybe even the entire pie. But it’s interesting. If you compute the area of your piece of the pie, it’s proportional to pie radius squared times the angle. Everyone is worried about the angle. But if you double the angle, you only double your piece of the pie. If you double the radius, you quadruple the size of your piece of the pie. I suggest giving up some of that angle by partnering up and going faster to get part of a larger deal. Having better markets and penetration provides an opportunity to get onto a new curve and accelerate growth. Yes, you might have to give up some of that ownership, but I’d rather have 10% of billions of dollars than 100% of thousands of dollars.
As we look to the future on how manufacturing will impact what we do and how we set up our businesses, I’ll end with one of my favorite quotes.
Vision without action is dreaming. Action without vision just passes the time. Vision with action can change the world.Joel A. Barker, Nelson Mandela
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