Manufacturing Framework

Last week, the White House released its manufacturing framework and held a meeting of the Middle Class Task Force focused on manufacturing (watch video). The document makes the cases for government policy in manufacturing and describes the actions that the Administration is taking, grouped into seven baskets:

Provide workers with the opportunity to obtain the skills necessary to be highly
Invest in the creation of new technologies and business practices.
Develop stable and efficient capital markets for business investment.
Help communities and workers transition to a better future.
Invest in an advanced transportation infrastructure.
Ensure market access and a level playing field.
Improve the general business climate, especially for manufacturing.

There is much I agree with in the framework. The specific recommendations of the framework are all things I support. For example, the plan to double the Manufacturing Extension Partnership budget is something I have advocated (see previous postings). But, as I have also advocated in those previous postings, there is more that can be done.

The framework outlines a number of challenges facing manufacturing. The discussion of the opportunities, however, envisions toward moving manufacturing into specific new products: biotechnology, wind power, nanotechnology, aerospace, next generation automobiles. Only in the one paragraph on the steel industry is there a discussion of the changes to the manufacturing process. As I have argued earlier, we need a strategy that transforms manufacturing, not preserves the status quo. First, we need to adopt a “high road” strategy that puts its emphasis on all upgrading of the inputs to the production process: technology, worker skills and cooperative/collaborative organizational structures. The framework implicitly accepts the “high road” strategy–especially in its discussion of worker skills. I would like to see the Obama Administration adopt it explicitly and use it as a guidepost for its actions. Second, we need to understand that the line between manufacturing and services has blurred. That means a shift from turning out a large volume of a commoditized product to customization and innovation. But the entire system (and supply chain) is still designed for the industrial age.

The framework does recognize that the nature of the economy has changed. As the document clearly states, “Intellectual capital, such as patents from research and development as well as managerial know-how, is a vital component in determining costs, growth rates and the creation of new industries.” This recognition of the importance of intellectual capital is a very welcome addition. Unfortunately, discussion in the framework limits itself to R&D and intellectual property–although the section on worker skills is part of a larger intellectual capital structure. A successful manufacturing framework must embrace the full range of intellectual assets and intangible, including organizational structure, worker skills and tacit knowledge, and relationships with customers and suppliers (also all part of a “high road” strategy).

While I don’t (yet) have a lengthy set of additional recommendation that could be included in a manufacturing strategy, let me just refer the reader to earlier postings on innovation strategy, including our paper from a year ago, Crafting an Obama Innovation Strategy. But look for more to come (I hope) in the new year.

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