Getting to "yes" in a world of "no"…


This Tuesday (25th January 2011), I’ll be off to rub cheeks [*] with the great and the good of UK manufacturing at a BIS-chaired summit in London. That ultra-lean micro-manufacturers (such as my startup Nanodome) can sensibly share governmental mindspace with über-politicized macro-manufacturers (such as Land Rover, Jaguar, etc) may at first seem paradoxical, but then again we’re all waist-deep in the same financial quagmire, so what the hey. The rationale for the summit is that there’s a government manufacturing review due in time for the coming Budget, hence the question Vince Cable, Mark Prisk et al would like attendees to help answer is simply: what can government reasonably do to assist, preferably without spending any money?

Unlike most mainstream media pundits, I’m a big fan of coalition governments, because they frequently have to iterate and compromise their way towards workable policies, a process which I happen to believe yields better results than traditional high-level, opaque, ideology-driven politics. This oddly mirrors Steve Blank’s “Customer Development” loop, for the ‘customer’ of governmental manufacturing policy is indeed manufacturers: so let’s all raise a glass (not half-empty but half-full) to plenty of positive half-steps forward, rather than the full-steps backwards and sideways we’ve seen for so long.

But, you may say, UK manufacturing, really? Well, few people realize that the UK still produces lots of stuff, with (perhaps surprisingly) global pharma players such as AstraZeneca and GlaxoSmithKline now massive contributors to the manufacturing sector. Even though UK manufacturing has been declining for decades, its position in the world manufacturing tables has slipped from #1 only to #6 (last time I looked). Hence two of the biggest issues are of low national self-esteem (yes, the UK really is a major manufacturer, so why do investors cough politely when I say that’s what my company does?) and lack of skills support (no, a liberal arts degree doesn’t really tick any industrial hiring checkbox, why on earth would anyone think it might?).

Yet over the same period, the UK’s per-worker productivity vastly increased, largely (and unsurprisingly) due to a combination of automation and outsourcing. However, the boom in Far East outsourcing rode on the back of import-favourable currency shifts and a soft bank financing regime at home, both of which are now long gone: to my eyes, the future of manufacturing lies in ‘IDFLA’ (“industrial design for late assembly”, i.e. a middle position between “pure” in-house manufacturing and “pure” outsourced contract manufacturing) and in new ways of financing working capital, because the collapse in access to finance has squeezed most of the inventory out of distribution channels.

People often think of manufacturing as somehow dull: but actually it’s an area that’s full of design challenges, problem-driven innovation and product iteration. Design-driven manufacturers (i.e. with their own Intellectual Property) face the challenge of financing both high-risk technological R&D and low-risk working capital simultaneously, at a time when the European appetite for any kind of funding is extraordinarily limited. Which is why at the summit I’ll be heading for the 3pm breakout session on Access To Finance with Andy Rose, Head of the Infrastructure Finance Unit.

Which is, errrm, where exactly? Well… if you didn’t know, the IFU is the part of HM Treasury in charge of handling Private Finance Initiative (PFI) contracts, such as the (‘achromatic elephantine’) £10bn Future Strategic Tanker Aircraft project: yet quite how governments can lecture businesses about off-balance-sheet financial engineering when PFI has become such an active part of their post-Maastricht funding activities I don’t know, even if the Coalition rightly doesn’t like PFI solutions much. At the same time, the IFU has (in Andy Rose’s words) an infrastructure-funding-related mandate “to get involved where private sector capital is not available”, so seems to cover both sides of this particular funding coin.

Personally, I think funding manufacturing has indeed become an infrastructure issue: for with the disappearance of supply chain inventory, who now funds building things? What all the Just-In-Time supply chain optimization MBAs never really thought through was that in the end, the clunkiest part of the chain becomes the manufacturer – and because nobody else ever needs to hold stock, distribution effectively becomes virtual. And if you then join this up with a fully disintermediated worldview, distribution disappears and the manufacturer then becomes the chain, all the way from banker to retailer.

The long-term trend, then, is surely for manufacturers to become micro-banks: in which case their funding suppliers should be major infrastructural bodies such as the European Investment Bank. (Incidentally, I worked on-site for a week at the EIB a few years ago – it had the best canteen I’ve ever been to, highly recommended!) Nobody now really believes that high street banks will have any serious interest in funding manufacturing companies for the next decade, so where’s it all coming from?

The challenge with policy formulation is, in the words of Wayne Gretzky, to “[play] where the puck is going to be” – that is, to anticipate rather than to Band-Aid, while at the same time not anticipating too far ahead (i.e. to run way ahead of the puck). Trend-wise, my opinion is that macro-manufacturing is dead in the water, and that the big trend is the growth of micro-manufacturing and late assembly: but despite countless quotes from Vince Cable that superficially seem to align with this way of seeing the world, I’m struggling to see how what I do even remotely fits the practicalities of government policy.

My guess is that, for once, the government’s instincts for emerging trends may well be spot-on, but that it has little practical idea how to evolve its current line-up of industrial support into something that will genuinely support advanced manufacturers with their growth plans. Let’s see how the summit plays out!

I hope to see at least some of you there – please feel free to introduce yourself, and/or to leave a comment here.

[*] errm… depending on how spacious the networking area is, I suppose

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Comments on: "Advanced Manufacturing Growth Summit in London…" (1)

  1. […] for good ideas from industry as to how its efforts can stimulate inward investment. I’ll ask Andy Rose at the Advanced Manufacturing Growth Summit this Tuesday, see what he […]

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