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Product Launch and Manufacturing Insights: Cost Reduction Strategies for Injection Molds and Tooling

By on November 5, 2009 | Category: News | Comments Off on Product Launch and Manufacturing Insights: Cost Reduction Strategies for Injection Molds and Tooling

We're currently in the midst of several projects moving through the final design to tooling stages–a very iterative process in which companies are finalizing their product designs based on playing with prototypes, buyer/market feedback, and getting cost feedback from suppliers to make decisions on feature/cost trade-offs.  I thought I would write a post regarding some of the issues that have come up and offering a few insights into addressing the sizable up-front financial investment that building injection molds and tooling can pose to companies launching new products.

Companies can look at several different options to bring mold costs down: from design to financing. 

  • Product Design: A good product designer will design parts for cost-effective tooling, bearing in mind the part will be ejected from the mold, shrinkage rates, and dimensional tolerances.  If you have a source, or sources, that are great with customer service and will work with you to re-quote injection molds based on several design iterations, this can be very helpful in leading the industrial design to the optimal design/cost balance.
  • Mold Material:  Another consideration companies may wish to entertain with respect to lowering injection mold cost, is deciding whether to build the mold out of steel or aluminum.  Aluminum has been considered a low price way to get a production run in the thousands of units completed at 1/3 the cost of steel molds.  This article, Why Offer Aluminum Molds for Production, at MoldMakingTechnology, claims that, with proper creation and care,  aluminum molds can deliver production runs into the hundreds of thousands of units and beyond.  I'll let the engineers haggle it out over the feasibility of accomplishing this.  I can tell you that I've received quotations for aluminum molds from several vendors recently and they all cautioned against the potential corrosion that can occur with aluminum molds and the susceptibility of the material to damage given it's softness.  It's worth noting that fluctuations in the price of steel and aluminum material will obviously impact the mold cost.  Currently, in China, aluminum prices rival steel, and the savings previously found in aluminum molds has essentially been wiped out due to this. 
  • Mold Plan: In addition to material, one could consider different ways to layout a family of injection molds (assuming your plastic product might be composed of an assembly of parts).  Generally, each part cavity has its own mold base.  However, to reduce cost, one can consider a MUD base (sounds like a spa treatment, but MUD means "Master Unit Die"), in which the part cavity is an insert that can be dropped into the common MUD base.  Thus, only one mold base is created for all of the inserts, instead of bases being created for each insert.  This does increase the run-rate and part cost incrementally, but it can offer a notable cost reduction to reduce the up-front financial investment for new products.  Below are some pictures of a MUD base mold with two inserts:

SDC14435

SDC14436

  • Mold Financing: A company should never pay an entire mold fee up-front, and should instead break out the fee according to milestones in the mold building and tweaking process itself.  An up-front payment to begin work, a payment at first shots (the first parts they make off of the tools), and a final payment upon final shots approval (meaning you've approved the parts coming from the molds), is a typical structure.  Occasionally, vendors will be willing to amortize some or all of the mold costs into one or several orders.  The ability to do this will often vary from vendor to vendor, their financial situation, and hunger to obtain the business.  Bear in mind, that until a company has paid all of the cost of the mold, they do not yet own it.

Cutting Costs in Your Company by Spending More to Achieve Operational Efficiency in your Supply Chain

By on September 10, 2009 | Category: Product Sourcing and Strategy | Comments Off on Cutting Costs in Your Company by Spending More to Achieve Operational Efficiency in your Supply Chain

I saw an article in Business Week last week about Sony bringing in Executive Deputy President Yutaka Nakagawa, a proven cost-cutter, to reduce Sony's supply chain costs.  Over the next two years, the company is aiming to halve the number of its parts and materials manufacturers and reduce purchasing costs by 20% this fiscal year.  Sony is hoping to achieve lower costs by buying larger volumes from fewer suppliers.  If the cuts can return the company from what is expected to be its second consecutive year of losses, newly created working capital can be dedicated towards new innovation and product launches.  However, as the Businessweek article points out, if the cuts result in being single sourced when/if demand spikes or quality defects arise, Sony could find itself in a precarious position.  

This reminds me of an article in Purchasing.com, found via Sourcing Innovation, explaining that Cost Reduction Efforts Require More Focus than Sacrifice.  The article's gist harks back to some of my rantings on the importance of strategy in sourcing and long term success.  The article cites a recent survey of private companies by PricewaterhouseCoopers which notes that companies are focusing on reducing costs in discretionary spending such as travel and entertainment, as well as streamlining operations, workforce reductions, and employee compensation.  In many ways, these might be regarded as short-term cost reductions that help financial statements quickly, and in the sphere of public companies, make Wall Street step back from the ledge and decide to live.  The article goes on to point out:

Another piece of research from the Corporate Executive Board, supports this thinking, saying companies need to focus more on reducing cost of goods sold and less on SG&A. "While most CFOs are quick to cut overhead (SG&A) to achieve cost-reduction goals, the companies that are able to maintain cost reductions over the long term spend more on SG&A as a leveraged way to help the business drive operational efficiency and reduce cost of goods sold," the CEB report says. In fact, it says on average, the better cost-cutting companies report cost of goods sold being about 49% of sales vs. 62.8% for average companies. However, the best cost-cutters have slightly higher SG&A.

Let's review that again: "the companies that are able to maintain cost reductions over the long term spend more on SG&A (Selling, General, and Admin expenses) as a leveraged way to help drive operational efficiency and reduce cost of goods sold".  

Michael Lamoureux, of SourcingInnovation, puts it best in his explanation:


You see, when you cut travel, you cut the ability for your people to make, and maintain, relationships. When you cut entertainment, which is typically a very small budget to begin with, you increase stress, which decreases productivity. When you streamline operations, things start to slip through the cracks. Then when you cut workforce, you cut capability, key processes get skipped entirely, critical sourcing events just don't happen, and you keep sourcing off of expensive ever-green contracts and spot-buying at high prices. When you cut training, your staff's skills get even more outdated and your cost reduction efforts miss the mark. And when you cut compensation, your best employees feel unappreciated and trampled on, stop giving 100%, and start looking for their next job.

As the article says, you have much better opportunities, including:

    * transaction processing
    * supplier management
    * health care benefits
    * IT assets (hardware and software)
    * logistics 

Investing in your people to implement good cost controls and look for ways to achieve operational efficiencies, rather than simply going after the quick and easy slashing of fixed costs, results in your people finding ways to lower the cost of goods for the long term.  This is one major method that smart companies use to destroy the competition over the long haul.

Related blog posts:

Developing Mass Market Products: The “Good Enough” Revolution

By on September 2, 2009 | Category: Product Innovation | Comments Off on Developing Mass Market Products: The “Good Enough” Revolution

Flip-cam

The FlipCam, by Pure Digital Technologies.  1 million units sold in the first year.  17% of the camcorder market in approximately 3 years.  Acquired by Cisco for $590mm.  Started by entrepreneurs Jonathan Kaplan and Ariel Braunstein after a failed start-up attempt in the digital camera market.  A consumer product start-up's dream, no?  For such a simple product, what made FlipCam such a wild success?

Wired Magazine has written a fascinating article, The Good Enough Revolution: When Cheap and Simple is Just Fine, on the concept of the "good enough" revolution.  The idea that industries as diverse as camcorders, law, music, the military, and healthcare to name a few, are experiencing a wave of change in the concept of user value.  It might be considered a return to a greater focus on user value, in the ongoing battle between features/quality for the sake of features/quality vs. features/quality for the sake of…the people who actually use the product.  Companies and products which have long built their competitive leads on continually outrunning the competition with the latest high-quality features and technological advances, are continually having their markets disrupted by low-cost, widely accessible, flexible, "good enough" products. 

The article is a great read for many reasons.  Start-ups developing user-centric, disruptive consumer products should be inspired by the success of products like FlipCam.  Being close to the customer and understanding holes in the market are areas start-ups can often outrun large companies.  Large company engineers developing cutting-edge, technologically based features for new products spend more time in the lab and at their desk than interacting with customers.  Not that the cutting edge technologies aren't important, they just generally aren't important to the mass market.  In the words of Wired magazine author, Robert Capps:

Brisk sales combined with a lack of speedy returns destroyed the
company's thin margins, and the camera failed. But the experience
taught Kaplan and Braunstein a lesson: Customers would sacrifice lots
of quality for a cheap, convenient device. To keep the price down, Pure
Digital had made significant trade-offs. It used inexpensive lenses and
other components and limited the number of image-processing chips. The
pictures were OK but not great. Yet Pure Digital sold 3 million cameras
anyway.

Kaplan and Braunstein also learned something important about camera
retailing in general. The market had long been split into two main
segments: point-and-shoots (including disposables) and single-lens
reflex cameras, which use interchangeable lenses and other high-end
accessories. Not surprisingly, the vast majority of cameras sold
then—as now—were the handy point-and-shoots; SLRs tended to attract
only serious hobbyists and professionals.

Oddly, though, there was no point-and-shoot analogue in video
cameras—and that's where the pair saw their next opportunity. Home
videocams were almost without exception expensive, complicated devices
loaded with features like image stabilization, night-vision mode, and
onboard color correction. And even with tools like Apple's iMovie, it
was a hassle to get footage off the cameras and onto a computer for
editing and sharing. In terms of complexity and price, the camcorder
market resembled the SLR market, but with no low-end alternative.
Kaplan and Braunstein suspected that there might be a place for a much
cheaper, simpler video camera. So they decided to make one.

There are ample development opportunities for consumer product start-ups like Pure Digital.  In categories where companies must justify massive R&D budgets that result in over-invented, featured-to-death, costly products that the average person doesn't find value in, there are opportunities for the consumer product start-up to tune into user needs and develop low-cost alternatives that offer users 80% of the value, with 20% of the features and cost. 

Developing and sourcing products like this is also easier, as a development team can often find existing components in the market, and working with a manufacturer in a country like China or India does not involve pushing them to source and manufacture technologies that are far beyond them.  The magic lies in learning from users the combination of features and costs that are good enough to meet their needs.  And that magic only requires eyes and ears.

To Manufacture in China or in the United States? Get Beyond Cost to Strategic Sourcing and Manufacturing of Products

By on August 28, 2009 | Category: Product Sourcing and Strategy | Comments Off on To Manufacture in China or in the United States? Get Beyond Cost to Strategic Sourcing and Manufacturing of Products

When to source manufacturing offshore in a country like China, India, or Mexico?  When to keep manufacturing at home in the U.S.?  Don't start with cost:  start with strategy.

Lowering costs has been the most common and highly publicized impetus for companies to source and establish manufacturing operations offshore in a low-cost country like China.  But there are myriad reasons why a company might expand operations to an offshore country, or on the flipside, choose to maintain manufacturing at home.  Many of them have nothing to do with cost, but can be far more significant to a company's health than the cost of goods.

For many consumer product industries, seeking the cost-savings is a given.  To be competitive on the retail shelf, offshore manufacturing operations in low cost country sources is necessary.  But the strategic planning for sourcing and manufacturing often does not go beyond this perspective of thinking, a practice which often lands companies in trouble by sacrificing the most valuable aspects of their organization, or results in them missing a chance to maximize the value of their supply chain.  

First, consider a company's competitive advantage.  What aspects of the company are most important to the company's competitive position in the market?  Innovation and launch of new products?  Delivery of a consistent, high-quality customer experience with the company's products and services?  Lowest prices on the market?  There are many ways a company can differentiate itself and flourish in the market.  The question is–how will sourcing an offshore supplier in a country like China detract from or augment this competitive niche? 

Business case studies have shown that companies which have sought offshore suppliers to lower costs, at the expense of other important aspects of their company (such expenses were not clearly understood at the time), have ended up losing market share and value.  For example, companies which are leaders in innovation and technology often become so because they have nurtured a culture of strong, horizontal communication within.  Ideas, knowledge, and relationships are built across functional boudaries (meaning engineers eat lunch with marketing folk) which all contribute to the cross pollination of ideas  and the development of new, innovative products.  However, when a VP of operations decides to begin contracting out manufacturing an ocean away, without paying specific attention to developing the proper communication channels, the core strength of the company is sacrificed over time in the pursuit of short-term cost reductions.

A way in which the above technology company may have gone about this in a better way?  Keeping manufacturing operations at home may or may not have been the answer.  But they clearly could have prepared for their move offshore more effectively.  They could have sourced lower cost manufacturing suppliers and developed close partnerships to foster open dialogue.  Perhaps the company makes sure its design team goes over to visit their suppliers several times per year to visit manufacturing facilities, and vice versa.  A company seeking to optimize its supply chain in this fashion, by attaining a lower cost of goods, IN ADDITION to investing the resources to support its competitive advantages with outsourced service providers, can truly maximize value.  Apple computer could be considered a company that has done this very effectively.  Apple knows where to spend and where to save.  For more insight into how Apple does this on a product basis, check out Manufacturing the Ipod Shuffle: How Apple Produces Great Products at Great Prices.

As Dan Harris of ChinaLawBlog points out in his post Manufacturing in China.  Because There Are 1.3 Billion People There, gaining access to China's consumer market is now becoming a significant reason cited by companies for expansion of operations in China.  Following customers to support them in foreign countries might be another reason.  The fact is, there are numerous ways to drive value beyond lower cost goods.

Why keep manufacturing at home?  Some companies may find it more valuable in the long term to keep manufacturing operations at home, despite the opportunities for cost reduction elsewhere.  These companies know that paying more in the short-term to maintain whatever edge their domestic operations gives them, offers greater rewards in the long-term.  An example of this may be a fashion oriented company that creates new product lines several times annually, and has difficulty accurately forecasting which items will sell.  Thus, they may find that the cost of holding inventory for long periods of time and not being able to respond quickly to market trends is more expensive over the long haul than manufacturing their products domestically and gaining very short lead times.  An analysis of the supply chain at the product level may motivate a company like this to choose a hybrid model in which some of its products are manufactured abroad and some at home.  A fashion company like Zara, which can go from product concept to market in 18 days, is a great example of this.  It starts with strategy.

The bottomline is that companies, particularly smaller companies, that are now sourcing contract manufacturers in places like China, India, Vietnam, and elsewhere because of cost pressures, should consider how else manufacturing in these areas will impact their business.  They have the opportunity to advance to a higher level of strategic planning.  In a country like China, they may gain greater access to materials suppliers, they may be able to take advantage of low cost engineering and design talent, they may find an opportunity to sell into China as well.  If their competitive advantage rests upon delivering high quality product, or innovating products on the cutting-edge, they would do well to ensure that they source suppliers that can support these functions and invest the necessary level of resources to optimize them.  Some may find that not outsourcing, and staying at home, serves their purposes better in the long run.  Companies may find that smaller minimum quantities and faster turnaround are the key drivers in their business.  The point is to assess the strategic sourcing circumstances, make an educated decision, and execute it accordingly.

Global Economy on the Rebound? Yet History Predicts a Flattening Out of Economic Growth – And This is OK.

By on August 19, 2009 | Category: International Trade and Political Economy | Comments Off on Global Economy on the Rebound? Yet History Predicts a Flattening Out of Economic Growth – And This is OK.

Reason for Optimism: Panjiva's trade data reports a 7% increase in July 2009 over June 2009 in the number of global manufacturers shipping to the United States. 

July-trade-data-reason-for-optimism-panjiva

However, before we hail the end of the decline, it should be noted that in July 2008, we experienced a similar uptick of 6% in global trade to the United States.  Thus–a suspicion of a seasonal impact is warranted. 

To compliment this in larger global economic terms, Paul Kedrosky's Infectious Greed has posted a familiar graph of the Four Bear Markets, in which the economic declines and recoveries of the major market fallouts of the last 100 yeras are depicted.  Kedrosky notes that the typical pattern after the "We're back!" bounce is a relative flattening out (except for the Great Depression) of economic growth. 

Road-to-recovery-large

I tend to think this is not bad news.  We may not be rocketing back to the bull market of 2006, but flat means steady and stable.  Steady and stable means a return of investor and consumer confidence that conditions will be safe again, or at least more predictable, to…invest and consume.   Manufacturers can begin to create operating plans and hire on workers with relative confidence that they won't have to slash slash slash again in the immediate future.  They may even invest in new manufacturing equipment at good prices.  Investors can begin putting money into further product innovation and growth.  Retailers can begin taking chances on new product lines as excess inventory is finally depleted or liquidated.  Consumers can begin to spend their dollars on some of the latest innovations that will undoubtedly come out of this economic shake-up. 

Selling to Mass Market through Big Box Retailers and Department Stores

By on August 14, 2009 | Category: Product Marketing | Comments Off on Selling to Mass Market through Big Box Retailers and Department Stores

Kathleen at the Fashion-Incubator blog has written a great post on selling to retail chains and department stores for new product developers, and created a list of issues and tasks that will be involved in selling to these companies. 

What might you need to know about before considering the mass market channel?

  1. Vendor compliance standards
  2. EDI -electronic data interchange
  3. Getting paid -Factoring needed.
  4. Discounts and returns
  5. Penalties for non-compliance (chargebacks)

Check out the fashion incubator blog for a discussion of each of these.  Whether your product is in the fashion apparel category or not, your company will address all of them at some point in the process (although factoring may not be relevant to other categories, financing may be). 

These issues also remind me of some topics I covered with Barbara Carey, a friend and mentor of mine who has turned her own successful method of developing and marketing products in the mass channel into a formula for others to follow.  Check out the 3 parts of the interview: Interview With Barbara Carey, Part III: Working with Buyers, Team Members, and Other Third Parties, Interview With Barbara Carey, Part II: Pricing Your Product, Interview With Barbara Carey: A Woman With Something To Teach You About Successful Products and Business

7 (not 5 or 6) keys to Quality When Working with Chinese Manufacturers: Sourcing

By on August 12, 2009 | Category: Product Sourcing and Strategy | Comments Off on 7 (not 5 or 6) keys to Quality When Working with Chinese Manufacturers: Sourcing

Easy Bake

Is this your factory?

An article by Andrew Reich from ChinaSuccessStories (h/t Dan Harris of Chinalawblog) highlights five straightforward but oft missed steps in assuring the quality of product from your China manufacturer.  Dan Harris, added a sixth point, and Global Sourcing Specialists is chiming in to add a seventh key to quality when when working with chinese factories: Source a quality manufacturer

First, it should be noted that these steps need to be taken together.  Accomplishing one or a few of them will not suffice to assure your product quality, and will likely only delude you into a false a security about what is coming off the production line and potentially making its way into the hands of your customers. 

ChinaSuccessStories's first five points:

  1. Detailed documents: The number one key to quality when working with factories in China
    is documentation. Having bi-lingual, detailed, factory agreed upon
    checklists in place that document an item’s specifications and the
    criteria for inspecting the product before shipment, is essential to
    controlling product quality. One can not say for sure, but I would be
    willing to bet that the factories responsible for products recently
    recalled for lead paint did not have bi-lingual documentation on hand
    from their customer stating the type of paints that could and could not
    be used. Sure, this type of documentation takes time and hard work to
    create, but putting such processes in place is the first and most
    important step in avoiding quality issues. QC Checklists should describe in detail:

    a)     Item Packaging

    b)    Item Defect Classification (what is considered an defect and at what 
            severity)

    c)    Item Size and Other Specifications

    d)    Item Functionality and How it is Checked

  2. Factory Presence:  Having a presence at the factory ensures that both factory staff and
    management really know who you are. Either through a 3rd party QC
    company or your own staff, ensure that you are being represented at the
    factory in person on a regular basis, and that the factory clearly
    connects your presence there with your production. Success in China is
    all about relationship (Guanxi), and dealing with quality is no
    different. Work towards a state where the factory has a personal
    commitment to you and your products.
  3. Inspection:  Perform regular product inspections (either with your staff or a via
    3rd party), not only on the final product shipment, but also during
    production (otherwise knows as DUPRO). Ensure these inspections are
    consistent and based on clear inspection criteria. Always review the
    inspection results with factory management and their own QC team.
  4. Keep Approved Samples:  Some say that a picture is worth a thousand words. I say that a sample
    is worth a thousand headaches! Items often get revised and modified
    several times in the sourcing process, and then again after production
    begins. Keeping an approved sample in your office, and also one in the
    factory that can be used to verify the production product by the QC
    team, is essential in seeing eye to eye with your Chinese suppliers.
  5. Take Responsibility:  Nothing will alienate your Chinese suppliers more than a mistake on
    your side for which you take no responsibility, and blame their
    misunderstanding. I’ve seen hard-headed buyers make this mistake more
    than once, to the demise of their hard earned factory relationships.
    So, make sure you have all the facts before you start to blame.
    Recognize when it’s possible that a mistake or production issue may
    have been caused by your own fault, or your own team’s
    mis-communication. Take responsibility when this happens, even if it
    means a financial loss. If you are working with the factory on a long
    term basis, the credibility you will gain will outweigh what you have
    given up.

    The message here is don’t take anything for granted. You and your
    suppliers most likely come from two vastly different cultures, have
    different values, and see quality differently. By making sure quality
    standards and procedures are in place and clear to all parties you will
    definitely avoid costly production issues.

Dan Harris' 6th Point: Legal Contracts

I agree with all of this, but I also vehemently believe that a well
crafted contract is also key. My own experience and that of
manufacturers with whom I speak tell me that a good contract can itself
help to maintain quality. How? Simple. Chinese companies, like
companies everywhere, do not relish being sued. A good contract means
incorporates the key quality requirements and also sets up the Chinese
company for liability for failing to meet those requirements.

Our 7th Point:  Sourcing of Quality China Manufacturers

Really, this point might be placed first, only because the sourcing process takes place before any of these other steps are taken, AND, if you work with the wrong China factory, or any factory for that matter, these other steps may be very difficult to accomplish and/or ineffective.  It's similar to following all of the cooking instructions with great meticulousness to bake a world-class cake, and then baking your cake in the Easy Bake Oven.

Thus, to ensure supplier sourcing sets the other 6 steps up for success, one would do well to locate several potential sources, receive manufacturing and cost feedback from each of them, and select one or two that seem best able to support the project's and company's needs based on qualifications, engineering and QC support, product lines, and customer service.  Assessing a supplier for these qualities will likely, and should, involve auditing the factory production line, as well as meeting with management and key personnel.  Do this–and the rest will be much easier.

DripTech: Solving Some of the World’s Water Challenges Through Product Development for Extreme Affordability

By on July 21, 2009 | Category: Product Development | Comments Off on DripTech: Solving Some of the World’s Water Challenges Through Product Development for Extreme Affordability

Waterdrip Watering plants may be as easy as filling a glass or turning on a hose for Americans, but for 600 million small farmers in developing countries, it's not so easy.  If they can't simply turn on a faucet or a spigot to get water to their crops, how could it be done in a way that they can realistically use?  And, who is going to develop a product that might change the way they irrigate their plants?

The San Francisco Chronicle has covered the story of DripTech, a company that is developing an affordable drip irrigation system for farmers in developing countries.  According to the International Water Management Institute, 600 million small farmers lack irrigation water and are therefore mired in poverty.  

Conceived in the Stanford graduate class, Entrepreneurial Design for Extreme Affordability, Driptech founder, Peter Frykman, began tinkering with off-the-shelf water timers and tube components from stores like Home Depot, to see if he could develop a system that solved irrigation challenges for farmers who were not able to grow crops during long dry seasons.  Of course, given the target market, cost was a major constraint to work within.  Not only did Peter need to solve the challenge of creating a system that would achieve crop irrigation in a simple fashion, but he needed to develop a product that could be manufactured easily and sold cheaply, to spur widespread adoption. International Development Enterprises had already developed a system over the last ten years that provided an irrigation system for poor, developing country farmers, and had successfully sold their system to 85,000 farmers in India.  However, an added layer of complexity in IDE's system has hindered them from reaching a wider consumer base.  

DripTech's technological breakthroughs have resulted in a reduction of total parts and installation time by over 80%.  Given their improvements, they are now setting their sights on the 100 million poor, rural farmers in India, as well as other possible customers in other countries and contienents.  DripTech's product development success is also helping them to gain media attention and investors are beginning to take notice.  The company has been featured in BusinessWeek, Forbes, and Red Herring, and they have advanced to the finals of the Draper Fisher Jurveston & Cisco Global Business Plan Competition.  

DripTech is a great example of how working within extreme constraints to develop products can result in simple, elegant solutions, that could help to solve major, world challenges.

Want to see how others are creatively solving water challenges?  Check out PlayPumps International to see adevice that combines play on a merry-go-round and water pumps.  Also, Charity: Water is another interesting organization that uses it's PR and marketing prowess to connect companies and people in developed countries with communities in Africa that need water solutions.

Innovating Innovation: Old Metrics Failing to Capture New Curves?

By on June 5, 2009 | Category: Product Innovation | Comments Off on Innovating Innovation: Old Metrics Failing to Capture New Curves?

Time Mag Picked up a great blog post on A VC, Fred Wilson (highly regarded VC and principal of Union Square Ventures) about Steven Johnson's Time Magazine cover story on How Twitter Will Change the Way We Live.  Fred's exuberance for the article stems from the article's final few paragraphs.  In his words:

It's the finish of Steven's piece where he talks about "end user innovation" that is so brilliant. He makes this "larger point about modern innovation":

When we talk about innovation and global competitiveness, we tend to fall back on the easy metric of patents and Ph.D.s. It turns out the U.S. share of both has been in steady decline since peaking in the early '70s. (In 1970, more than 50% of the world's graduate degrees in science and engineering were issued by U.S. universities.) Since the mid-'80s, a long progression of doomsayers have warned that our declining market share in the patents-and-Ph.D.s business augurs dark times for American innovation. The specific threats have changed. It was the Japanese who would destroy us in the '80s; now it's China and India.

But what actually happened to American innovation during that period? We came up with America Online, Netscape, Amazon, Google, Blogger, Wikipedia, Craigslist, TiVo, Netflix, eBay, the iPod and iPhone, Xbox, Facebook and Twitter itself. Sure, we didn't build the Prius or the Wii, but if you measure global innovation in terms of actual lifestyle-changing hit products and not just grad students, the U.S. has been lapping the field for the past 20 years.

That's the thing that gets me so excited to get up and get going every day. Technology has reached a point where anyone can get involved with innovation. Patents and degrees matter a lot less. Imagining something and then coding it up is what its all about these days.

We are engaged in what Eric von Hippel calls "end user innovation" and it is a fundamental shift in the way society innovates. The Twitter founders are a perfect example. They built a simple tool to share short messages and it has become something entirely different.

The tools we are creating are allowing a much greater population to participate in the innovation process.  Opensource.  Crowdsource.  All new terms that describe an interconnectedness and an intellectual leverage unprecedented in history.  This should make for much more rapid, powerful, and unpredictable sources of new growth.  Google came alive about 10 years ago, captured a space, and quickly rose to become a goliath.  But just as quickly as Google rose to predominance, another rival could come and beat them at their own game, invent a new model, change the rules of the game, or the playing field altogether. 

I very much agree with the point that those decrying the U.S.' falling stature as the center of world innovation, are pointing towards metrics that described previous generations' sources of and success in innovation.  PhD's and patents are no doubt important, but perhaps new metrics describing the interconnectedness of a society, or the mass, quality, and rate of information transferred between members of a society at any given point, will better describe innovation power.  Of course, because this new curve has only just begun, we're far from being able to fully understand it and thus, measure appropriately. 

Stanford University’s Responsible Supply Chains Conference Recap

By on May 27, 2009 | Category: Product Sourcing and Strategy | Comments Off on Stanford University’s Responsible Supply Chains Conference Recap

I attended Stanford University's third annual conference on socially and environmentally responsible (SER) supply chains last Thursday, May 21.  The conference has doubled in size every year since 2006 and promises to be larger next year.  A full day of presentations and panels from executives at leading companies such as Cisco, Intel, Safeway, Disney, HP, Verite, and more made for a multitude of perspectives and approaches to the topic of sustainability in supply chains. 

A few general observations from the conference:

  • The realm of social and environmental responsibility in supply chains is still very nascent.  It seems each company, industry, and the business world as a whole is still establishing definitions for what it means to be socially and environmentally responsible.  This dialogue, of course, is very important and will likely set the stage for a future platform to act from. 
  • It seems greater success can be had when companies address issues of social and environmental responsibility in their supply chains from an industry approach.  This leads to a greater probability of standardization and leverage in the supply chain, which in turn, based upon presenters' comments, seems to foster faster and more widespread change in the supply chain as a whole.  Some critical factors for success gleaned from many of the presentations, despite the industry of a given company, are the following:
    • The involvement and commitment of top, C-level, management
    • The combination of efforts across companies within a given company
    • Honest and free communication within companies and with competitors (a very scary and challenging proposition for many companies)
    • A sharing of best practices and communication amongst shared suppliers within the industry (meaning–get your suppliers to talk and share with each other to benefit everyone as a whole)
    • Outside and independent verification to create transparency and accountability

A few other interesting takeaways:

  • Cooperation amongst several companies within an industry to acheive industrywide social and environmental responsibility seemed to be easier to accomplish in B2B industries, and industries that did not generally "face" consumers or receive consumer and/or watchdog scrutiny.  Those companies that had more of a B2C orientation viewed supply chain SER as more of a competitive differentiator, and thus were less inclined to share information and resources with others. 
  • I expect the conference will double in size and notoriety next year.  This is an issue the business world has only begun to explore.  I found myself wanting more nitty gritty dialogue from the conference, but as companies move down the path from the general questions of definition and the surface levels of implementation, I am sure the dialogue and topic will become much more comprehensive, heated, and fruitful.

 By Ashton Udall

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