Making America an Industrial Powerhouse Again

President Obama's funding of the National Network of Manufacturing Innovation is a needed step to get the country building again, says Professor Gary Pisano.
by Gary Pisano

As part of his administration's strategy to rejuvenate American manufacturing, President Obama has called for the creation of a National Network of Manufacturing Innovation (NNMI) to advance and diffuse novel manufacturing technologies. To launch it, he has allocated $1 billion in the 2013 budget.

Critics have denounced this proposal as yet another government intrusion into the market and a futile attempt to "pick winners." What these critics ignore is that the US government has a long history of investing in research that supports innovation in American industry.

After World War II, hundreds of billions of federal dollars flowed through agencies like the National Science Foundation, the Department of Defense, the Department of Energy, and NASA to pay for the basic and applied research that spawned the semiconductor, computer, software, aerospace, and telecommunications industries. Research funded by the Defense Advanced Research Projects Agency (DARPA) sowed the seeds for the internet and advanced computer graphics. And massive investments by the National Institutes of Health in biomedical research, including the Human Genome Project, helped make the United States the hotspot for biomedical innovation. The lessons from our history are clear: Where we invest in science, we gain enormous economic pay-offs.

“Where we invest in science, we gain enormous economic pay-offs”

In principle, therefore, there is no reason why the same logic should not apply to manufacturing. Just as the National Institutes of Health have pushed forward the frontiers of medical science, so should the NNMI be capable of doing the same for manufacturing. There are many areas of science that underpin advanced manufacturing, including biotechnology, nanotechnology, advanced materials, computer science, optics, and various engineering disciplines. We need to get over the outdated notion that manufacturing is "mature" and unconnected to science. Anyone who believes that should take a tour of a factory that produces semiconductors or biotechnology drugs. In an ever more competitive global economy, US manufacturing can thrive only if it is at the leading edge of knowledge.

History provides some guidelines for making sure the NNMI lives up to its potential:

  • Have a broad agenda: Government-funded research is most productive when it lays broad foundations rather than targets specific technologies for use in particular industries. Consider the difference between the government's successful effort to map the human genome and its failed attempt to subsidize "green energy" companies like Solyndra. The former paved the way for an enormous range of subsequent commercial R&D efforts by pharmaceutical, biotechnology, diagnostics, and agricultural companies. The latter was a very specific commercial bet. Placing these commercial bets requires a depth of understanding of markets and customers that only the private sector possesses.

  • Keep a balance between exploratory research and commercial need: While the NNMI should focus on broad, long-term research, it needs to resist the temptation to develop technologies that the private sector has no interest in. To avoid this, its research agenda should be influenced by industry and by academics with close ties to industry. Similarly, the NNMI itself needs to be run by people who have both strong scientific and practical expertise. The currently proposed governance model-which balances government, industry, and academic representation-is the right one.

  • Don't focus on regional economic interests: Unlike the National Institutes of Health, the NNMI is following a decentralized model, with different institutes to be located in different parts of the US. Decentralization has its advantages (e.g., less bureaucracy), but there is also a danger. It would be easy for each institute to devolve into a regionally focused center, particularly if regional stakeholders become overly dominant, and the implicit goal becomes to support local industries. If this occurs, the NNMI is doomed to failure, since no one region has a monopoly on the expertise needed to develop world-class technology. Regardless of its physical location, each center must engage academic and industrial partners from around the country.

  • It's all about leveraging talent: Global competitive advantage does not come from better machines, better software, or even better intellectual property. In today's world, these are all highly mobile factors that companies located anywhere can access quickly. Talent is a different story. It is much less mobile. To access talent, companies have to be close to it. The National Institutes of Health created a lot of scientific know-how that flowed very quickly around the world. But it also created a talent pool in the US biomedical field that is second to none. And the only way to get that talent is for companies-both domestic and foreign-to do their R&D here. That's why pharmaceutical and biotechnology companies from around the world are putting their key research laboratories in places like Boston and San Diego. Creating new technology is not enough. If the NNMI can build a first-rate talent pool of scientists, engineers, and workers with deep expertise in manufacturing disciplines, it will go a long way toward making the United States an industrial powerhouse again.

About the Author

Gary P. Pisano is the Harry E. Figgie Professor of Business Administration at Harvard Business School and author (with Willy Shih) of Producing Prosperity: Why America Needs a Manufacturing Renaissance (Harvard Business Review Press, 2012).
    • Abhai Kumar
    • Sr. Analyst, ANSER
    I believe it is also about speed.
    There are positive effects for long term competitive advantage, if the ecosystem allows for rapid adoption and execution.
    • Karl H. Vesper
    • Professor Emeritus, University of Washington
    Competitive exploits should be part of the landscape depicted. Wartime wins could be part of it - jet engines, radar, submarine aircraft carriers, atomic weapons, fighters, rockets, torpedoes, optics, and mass production all illustrate wins by different countries. What were the lessons?
    Non-wartime wins such as best passenger jets, turboprops, and avionics, best TV sets, biggest cargo vessels, best go-cart performance parts, best cameras, best chain saws, best motorcycles and cars, best movies, most cost-effective medical care, healthiest food, could be objectively classified and probably traced to manageable antecedents both helpful and fun to examine in designing future industrial policies for the country. Who won when, and how?
    • Barry Shere
    How did the US become the economic, "Industrial Powerhouse" that it was before government's "long history of investing ...?" Why is the US no longer the industrial powerhouse that it was? Why will the NNMI be any better than the administration of obamacare?

    Are Americans less smart? Do they work less hard? Or is the government the wrench in the gears?
    • AdeloVant
    • Technology Innovation Analyst, retired
    'Government and academia must develop sciences and technologies that the private sector has no interest in, because eventually the private sector will want to exploit the free science and technology discoveries [Examples: NASA, L/FOSS ...]. Avoid research agendas that are overly influenced by narrow industry interest or academic parochialism. The NNMI must be staffed by people who have both strong scientific ethics, methods, and practical expertise, then the business interest can take it to market products and services. The currently proposed balanced governance model may need to be flexible over time and global situations. The NNMI should always be academically directed; with government management, and entrepreneurial (leading-edge) science and technology industry participation.

    Talent is far less mobile almost homebody. To access talent, national education (K...PhD) must develop the talent, and companies must be close to available talented People and Communities. Creating and sustaining a lot of science and technology talented People and Communities quickly is not possible. National education (K...PhD) must develop new, Open and Agile, and innovative learning models, technologies, methods, and materials for sustaining talented People and Communities lifecycle changes with autodidactic learning. Talented People and Communities will gain synergy from companies both domestic and foreign doing their R&D in the USA, Canada, and Mexico. Creating new technology is not enough. If the USA, Canada, and Mexico national education (K...PhD) can build a first-rate talent pool of scientists, engineers, and workers with deep expertise applied sciences and technology disciplines, it will go a long way toward making the United States an industrial powerhous
    e again.'
    • Will Wilkin
    • Co-Owner-Operator, Made In USA Solar LLC
    I read this as a companion article to "The Long-Term Fix to US Competitiveness" by Michael Porter and Jan Rivkin. Mr. Pisano in this article shares the same blind spot: the destructiveness of America's so-called "free trade" policies overwhelms any positive suggestions we read here.

    When globalized corporations with zero loyalty to any nation are allowed to import their products after offshoring operations to chase the world's lowest wages and regulations, there is very little that a "manufacturing innovation" program can do to compensate. America lacks any national economic strategy, which would include a strong trade policy that has a goal of MADE IN USA achieved, for example, by a law to effect BALANCED trade.

    We could do this with an Import Certificate (IC) system, allocating ICs in the same value as our exports. It would guarantee balanced trade and thus divert $600 billion annually from imports to American -made products. This would create directly millions of manufacturing jobs and many more millions through the multiplier-effect.

    Once we require the globalized corporations to invest and employ here if they want to sell here, we can then move on to the next step of improving the environment and infrastructure for innovation and manufacturing excellence. But in the context of so-called "free trade," no other programs or policies will reverse the profitable dismantling of America's manufacturing economy through offshoring and outsourcing.
    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited
    Of late, manufacturing has not received deserved priority leading to the market being overtaken by goods from China and elsewhere; this is undesirable. " Made in USA" products need to flow within and outside the country and the competition from abroad met boldly. For this to happen, various practical suggestions have been given which need serious thought and action.
    Yes, talent is an issue but this is universally so. Diverting youth to manufacturing by providing adequate avenues for vocational trainings has got to be prioritized. Let them feel manufacturing is a well paying proposition providing as good job satisfaction as the other professions.
    • Ray Tapajna
    • Editor and Artist, Tapsearch Com World
    The Federal Government sponsored the moving of factories outside of the U.S. starting in 1956. It was the same year that the Suez Crisis exposed a money crisis with England being the major victim. This is was the beginning of the globalization of money itself where it took on its own entity of value as product and not just a means for transacting business.
    Investments were divorced from production and production was made into a portable tool for investments to gain value at the expense of the value of workers. Production was moved from place to place anywhere in the world for the sake of cheaper and cheaper labor.
    This destroyed geopolitical balances throughout the world and left burn out communities behind every time a factory was moved. By 1992, more than 2,000 U.S. factories were moved to Mexico alone. After free trade was passed by President Clinton and a Democrat controlled Congress who locked hands with the Republicans in 1994, the number of factories moved to Mexico doubled quickly to more than 4,000.
    Cities like Cleveland Ohio which were power house of industry and high technology were destroyed as if it was war. For years, our leaders did the talk but never did the walk in the fields of broken dreams during the most massive dislocation of jobs in U.S. history including even the Great Depression.
    President followed in the footsteps of his predecessors and had to bail out big money, the investment community and the "too big to fail" companies while ignoring the suffering of all who lost everything due to free trade. To talk about restoring our manufacturing base without getting into the cause and effect of what happened is nonsensical.