Interesting to see three unrelated articles about manufacturing in Wired’s recent issues: “Made in America: Small Businesses Buck the Offshoring Trend” and “In the Next Industrial Revolution, Atoms Are the New Bits”.
The basic premise of the first is that the decreasing cost benefits of outsourcing to China, combined with the problems of the long supply-chain and the difficulties in innovating and quickly launching new products to market, is decreasing the benefits of offshoring and bringing some small manufacturers back to the US. For many small manufacturers the quality, control over IP, and flexibility can lead to higher per-unit profits even if the per-unit manufacturing cost is 50% higher.
The second is about how the technology to invent, draft and build physical products is improving to make it increasingly possible for entrepreneurs to test and create physical products flexibly, quickly, and cost-effectively. One of the key technologies highlighted is 3D printing, which isn’t new, but is finally becoming inexpensive and practical enough for the masses to pay attention to it.
Chris Anderson glamorizes the trend a bit:
If the past 10 years have been about discovering post-institutional social models on the Web, then the next 10 years will be about applying them to the real world.
… Transformative change happens when industries democratize, when they’re ripped from the sole domain of companies, governments, and other institutions and handed over to regular folks. The Internet democratized publishing, broadcasting, and communications, and the consequence was a massive increase in the range of both participation and participants in everything digital — the long tail of bits.
Now the same is happening to manufacturing — the long tail of things.
The opportunities for the hardware entrepreneur have never been better.
Granted, obstacles exist: hardware businesses have a range of functions and responsibilities that software businesses simply don’t have. Fulfillment, stocking, customer service, etc., all of these are competencies that most software companies have never had to address in the same way. Designing and manufacturing are getting easier, but the rest of the functions still require a lot of work for entrepreneurs to manage growth.
Managing scaling will be one of the most difficult problems for the hardware entrepreneur. But on the flip side, it’s also an opportunity for entrepreneurs to build the outsourced platforms and systems for hardware entrepreneurs to use. Blogging didn’t take off until WordPress, Blogger, TypePad and the like created the platforms for bloggers to start a blog simply, quickly, for free. Companies like Appmakr will soon make it incredibly simple for anyone to make mobile apps.
Hardware entrepreneurship will be the same. The first companies to build the combination of free product development software and easy “upload and build” outsourced hardware manufacturing line will make it easy for anyone to make physical products. Hardware entrepreneurship has it’s own brand of difficulties, but they are risks that entrepreneurs and venture capitalists will learn to take.
The eventual winners? The platforms, the mass hit products, the successful niche products in the long tail, and the investors that bet on them. As always.