Can Advanced Manufacturing Help Spark an American Industrial Renaissance?

Over the past few decades, the dominant strategy among most manufacturers has been to shift production to lower-cost countries such as China. Flip over your Apple iDevice of choice and you are likely to see: "Designed by Apple in California. Assembled in China." However, an important shift is occurring as so-called advanced manufacturing creates the possibility for an American manufacturing renaissance.

Advanced manufacturing typically refers to next-generation manufacturing techniques using sophisticated materials and production technologies (such as robotics), and new products resulting from these techniques.

Typically, labor makes up a smaller component of costs in advanced manufacturing, decreasing the production advantages of lower-wage countries. As wages in these countries continue to rise, the economic rationale for distributed production is decreasing. Further, a rapidly changing world increasingly demands locating production closer to end markets.

What should U.S. corporate and government leaders do to accelerate this shift? In an award-winning 2009 Harvard Business Review article ("Restoring America's Competitiveness"), Harvard Business School Professors Gary Pisano and Willy Shih offer a number of useful suggestions.

The professors urged government leaders to ramp up spending on basic and applied research, focus on "grand challenges,"and let ailing giants falter. They suggested that companies should rebuild foundational R&D capabilities, embrace new financial tools such as real options to ensure that they appropriately prioritize risky projects, and increase the technological competency of their Boards of Directors.

Beyond those well-thought-out suggestions, leaders should consider two critical questions.

1. Is our strategy grounded in yesterday's world or tomorrow's? Many companies look to history to predict the future. Instead, they should imagine the future to prepare for the present. It starts by developing a shared understanding of what the world might look like in five or 10 years. Then, step backwards to highlight signposts that indicate the direction and pace of change. This approach can help leadership more confidently begin its strategy shift.
   
   
2. Are we approaching advanced manufacturing in an integrated way? Innovation almost always occurs at the intersections, when different disciplines and mindsets collide. For example, Georgia Tech's H. Milton Stewart School of Industrial and Systems Engineering (ISyE) brings together complementary research related to advanced manufacturing, such as computer-integrated systems, manufacturing systems design, analysis and simulation, performance measurements, and more.

Advanced manufacturing has the potential to arrest decades of decline in America's manufacturing capacity - if leaders work to rebuild capabilities that they historically hollowed out in the race to cut costs.

Scott Anthony - Scott Anthony leads Innosight's Asian operations. His fourth book on innovation, The Little Black Book of Innovation, is now available (HBR Press, January 2012). Follow him on Twitter at @ScottDAnthony.