IBJOpinion

SHOBERT: Could new model save manufacturing?

Benjamin A. Shobert
June 5, 2010
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Benjamin A. ShobertGoing to China is always a mixed experience for me. Not because of the food, or language or the seemingly innumerable opportunities for me to make some sort of awful faux pax; no, because the moment the ferry from Hong Kong slips away from the dock and pushes towards Shenzhen, the muscular manufacturing power of China comes into full view.

On my most recent trip to China, it was not without some heaviness of heart that I again found myself comparing the newness of the country’s infrastructure—and the teeming activity that seems to have enveloped this part of the world—with much of what I see, or do not, around Indiana and the United States.

As much as I want to believe America’s economic future will be built on a technology-based economy, I have a small tug on my mind—memories of growing up in northern Indiana surrounded by manufacturing, the biannual field trip to Chicago that drove us past the hulking steel-producing factories that seemed to dwarf whole parts of the lakeshore, and the family members who then and now rely on manufacturing for their futures.

It can be easy to dwell on abstractions when we talk about globalization. In particular, those of us who have built the skill set to navigate the current form of the world have grown used to casually mentioning how business, workers and whole national economies must change. And while I completely agree that change is necessary and would adamantly defend the good that open markets have done for us, I wonder if we have too easily ejected the role of manufacturing from our state and national economy.

Most responses to this question inevitably draw in politics and the over-arching question of economic nationalism; however, influencing this is well outside my grasp, and I suspect it’s equally outside the ability of our highest state officials or business leaders to meaningfully influence. That leaves me wondering what we, as average businesspeople in central Indiana, can do to become more proactive at protecting and nurturing our local manufacturing.

As a state, we have struggled with this and similar questions before. We possess a strong and diverse manufacturing base, with a constant flow of engineering talent from some of the best schools in the country. And while I respect the need for government to be an involved partner in answering this question, I also wonder what the private sector can do to propel Indiana’s unique manufacturing assets forward.

Could we draw from venture capital an investment model that might make it possible for manufacturing businesses to more aggressively develop products and invest in new technologies, once again becoming job-creating engines? Doing so would be an adjustment not only to how manufacturing traditionally accesses capital, but also how and where VC looks for investment opportunities.

VC firms would bring to the table a unique perspective on what it takes to germinate and vet new products, markets and business models. Manufacturing would bring established distribution channels and infrastructure, along with successful management teams and a highly motivated work force. Yes, VCs would need to accept lower returns on their capital, but their “at-bat” averages would likely go dramatically up.

I have a suspicion that nationally our way forward will actually prove to be a more holistic balance between the high-risk, high-reward technology markets and the “base-running” potential of newly invigorated manufacturing businesses, once again thinking like the entrepreneurs who founded them. Because of this conviction, I believe Indiana is in a unique position to see, respond to and benefit from shifting our focus more toward these traditional, and many times smaller, investment opportunities. Doing so may well pave the way forward for more than just Indiana.•
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Shobert is managing director of Teleos Inc., a local firm specializing in taking products and technologies to market.

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  • Back to the future
    The USA use to be a great manufacture power house. Then as my mother would say " then the 60's wreaked it" People were looking for the easy way. I know people can work hard if they believe in the future. Though I fear a lack of resilients to work hard and take pride is still a hold out from the 60's or whatever reason. Small local business is a future people can believe in.
  • US Manufacturing
    With manufacturing becoming more complex and less labor intensive, one would think that it would be a significant competitive advantage to avoid high transports costs by placing factories in the US close to their markets. Would it not be accurate to say that the US has more efficient capital markets, a more straightforward legal framework, and perhaps cheaper or equal electricity costs? Could over time, more automated and elaborate manufacturing setups overtake the advantages of outsourcing to China? I agree that the VC/PE world might need to look at this sector as a safer play in their portfolios.

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