General Electric is establishing FirstBuild — a “micro-factory” — where it promises “to create a new model for the manufacturing industry.”

Value Beyond Performance

May 6, 2014
The emphasis of manufacturing is shifting from skill to intellect; manufacturers need to identify new value propositions. Today’s manufacturing class America’s “new manufacturing soul”

Everyday, manufacturing executives and managers drill themselves to understand the objectives and variables in their operations and business, to keep track of performance indicators and to be aware of risks. Because most organizations now are reasonably lean, there has emerged a class of individuals who are well suited to perform in such an atmosphere: they can understand the multiple functions that comprise a production processes; they manage different disciplines like finance or process control effectively, or – just as important – assign them appropriately to associates they rely on; and they maintain the balance needed to keep suppliers, customers, and owners satisfied.

In short, manufacturing today is overseen by a class of men and women who have apprehended that their task is to manage all the activity that converts raw materials into finished products. They coordinate the technology, data, and skills that elevates the former into the latter, and they do this with efficiency – which is the basis on which they are rewarded.

This is changing fast.

In the next few weeks General Electric will inaugurate what it calls a “micro-factory” at the University of Louisville, where it promises “to create a new model for the manufacturing industry.” Called FirstBuild, this venture follows an earlier agreement between GE and an entity called Local Motors, which is an open-source forum where individuals propose practical ideas and other collaborators join in their effort as-needed or as-available, to drive those concepts toward reality. Going forward, they develop prototypes, and then locate technologies like additive and subtractive manufacturing, among others, to accelerate the idea into commercial availability.

“Today, America is searching to define its new manufacturing soul,” according to CEO Jay Rogers of Local Motors. “Many people assume this industrial reinvigoration will come out of the tech hubs of San Francisco, Boston or New York. Trends such as micro-manufacturing powered by co-creation, however, as well as the industrial Internet are showing us that cities like Louisville can again be leaders in the Third Industrial Revolution. FirstBuild is showing us that it is happening right now.”

The standard notion of a factory is rather extraneous to all this, but that’s GE’s point of entry: the conglomerate wants to provide a venue and more resources for all this innovation, and collaboration, and is betting that the enthusiastic innovators will be attracted to the high-tech resources it can make available. It’s no stretch to see that GE also will take its cut in the form of licensing rights or intellectual property.

There is nothing wrong with this. It’s a low-cost way to encourage creativity in practical matters, and to identify economic growth opportunities even where market demand is not yet clear.

But, it’s also a direct challenge to the way manufacturing is done now, and to the managerial types who have guided the industrial supply chain to its current state of prosperity. Their success, their function as they have perfected it, depends on coordinating the means of production. They may have particular techniques and resources, but the work they do centers on processing and finalizing designs dictated by customers. The program now proposed by GE would compress all this — from concept to delivery — and the marginal costs typically allocated to manufacturers would be eliminated.  

I have no expectation that such a supply chain can be arranged so as to eliminate the obvious need for engineered goods like forgings — but does it really matter what I expect? If such an development and organizational strategy takes hold for an industrial powerhouse like GE, the incentive will be set for others, including investors and lenders, for similar compressions of production time and cost. 

It would be wise for manufacturing execs and managers to begin engaging a new performance factor, one that not only manages activity but captures value.